Daily Updates

May 8, 2013

Obama pressed to do more on jobs, stagnant wages

WASHINGTON — The nation’s slowly improving jobs picture hides problems like stagnant wages and fewer working hours that strike directly at President Barack Obama’s base of support — young people, racial minorities and the less affluent.

As the president launches a new focus on jobs, his traditional allies contend Obama has put too much of an emphasis on a deficit-cutting grand bargain with Republicans at the expense of creating jobs.

New college graduates face a downbeat labor market. The unemployment rate for workers under age 25 with at least a bachelor’s degree has averaged 8.2 percent, compared to 5.4 percent in 2007. The government’s April jobs report showed a decline in average weekly hours worked, and much of the growth was in predominantly low-wage sectors such as food services and drinking places and retail trade. And a new study found that nearly 2 million private-sector employees paid with taxpayer dollars earn wages too low to support a family.

“My point is that we’ve got to shift the national mood toward high wage and investment in America as opposed to cutting every federal program and having this austerity-based deficit-reduction thrust,” said Rep. Keith Ellison, a Minnesota Democrat and co-chairman of the House Progressive Caucus.

On Thursday, Obama is traveling to Austin, Texas, to draw attention to his administration’s effort to boost jobs and wages and promote his efforts to bring jobs back to the U.S. from overseas. Last week he spent three days in Mexico and Costa Rica, in part to highlight trade relations that he said would help increase employment back home.

The economy has created 6.8 million private-sector jobs over the past 38 months, but nearly 12 million remain unemployed. The unemployment rate edged down to 7.5 percent from 7.6 percent in March and has fallen 0.4 percentage point since the start of the year, though it remains high.

For the White House, creating jobs is as much a political as it is an economic challenge. Republicans have long resisted any further spending that would prime the economy, arguing instead that Obama’s regulatory regime and his new health care law are hindering job growth.

What’s more, Obama has tried to take a two-pronged approach to the economy, looking to boost the economic recovery with up-front spending while at the same time proposing deficit-reduction measures that would kick in later as the economy strengthens.

“That’s like a textbook economic response to the current economic situation,” said Michael Greenstone, who was chief economist at the White House’s Council of Economic Advisers during Obama’s first two years in office. “And that’s not where there is political agreement.”

Indeed, Obama’s jobs proposals have stalled in Congress and have been met, instead, by immediate budget cuts that by most accounts have begun to create a drag on the economic recovery. After winning a tax increase on the top 1 percent of income earners, Obama has insisted against unified Republican opposition on more tax increases to help close deficits. The resulting stalemate has limited Obama’s response.

“With aggressive fiscal stimulus we can bring the unemployment rate down rapidly; Washington has gone entirely in the other direction,” said Heidi Shierholz, an economist at the liberal Economic Policy Institute.

Job growth in this recovery has lagged that of previous economic upturns and has been especially hurt by job losses in government employment and a weak construction sector.

Though unemployment has hit across demographic groups, the hardest hit have been young workers, workers with low levels of education, and racial and ethnic minorities — the very same Americans who made up much of Obama’s winning political coalition.

The average unemployment rate in the first quarter of this year was 7.7 percent. But for African-American workers that rate was 13.6 percent. For Latinos, it was 9.5 percent.

And among those who do have jobs, wages are not rising.

Take Natividad Lucinda Ramirez, a 55-year-old janitorial worker at Washington’s Union Station. She makes $8.75 an hour as an employee of a janitorial firm under contract by the federal government to maintain the historic train depot. She holds down a second job, working about 60 hours a week. She has no health care benefits. She is married and cares for six nephews.

“I’ve never asked for anything from the government,” she said. But she joined a number of other workers Wednesday to call on Obama to issue an executive order mandating federal contractors to pay a higher wage.

A study by the public-interest organization Demos, which advocates for workers, concluded that nearly 2 million workers who have jobs paid by taxpayers earn less than $12 an hour, or the equivalent of $24,000 a year for fulltime work. Critics argue that any mandate to increase pay will result in higher costs to taxpayers. But Demos analysts argue that higher wages help save money by reducing employee turnover and save taxpayers by lowering the number of workers who obtain food stamps and other government benefits.

Still, among the bright spots in the economy is the growth of manufacturing jobs. Since February 2010, the manufacturing sector has added a net of about half a million jobs, compared to a loss of 1.7 million manufacturing jobs during the 46-month recovery that began in November 2001.

Alan Krueger, chairman of Obama’s Council of Economic Advisers, credits the 2009-2010 rescue of the auto industry for much of the turnaround in manufacturing. But Krueger cites current budget cuts, caused by the sequestration of funds that kicked in March 1, as drag for the economy in the short run and the long run.

“Every week the sequester stays in effect, the more adverse the effect on the economy,” he said. “It’s a headwind we don’t need right now.”

 

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