President Obama Hits the Right Notes

President Obama hit all the right notes in his speech today addressing income inequality. I was pretty tough on him last July in a similar speech where I said he was better at the diagnosis of the problem than in proposing solutions. In particular, I pointed out he failed to acknowledge that to generate expanded opportunity and a broader middle class requires broad-based wage growth. After all, a good working definition of the middle class is people and families that rely almost exclusively on the income from work—wages and benefits. They don’t have income from owning stocks or other financial assets and don’t receive much ‘transfer income’ from the government.

Today, the president did better; he said “growth alone does not guarantee higher wages and incomes” and said, “the third part of this middle-class economics is empowering our workers.” He followed this with recommendations to strengthen collective bargaining, achieve pay equity for women, rebuild manufacturing and raise the minimum wage. I appreciate that. He noted the need to continue to combat racial discrimination while also asserting the increased prominence of class as a determinant of well-being. Providing more skills and better education is always critical for social mobility and improved productivity. He urged a strengthening of our social safety net, including retirement savings and Social Security. He called for maintaining the unemployment benefits needed to protect the long-term unemployed. And, he said that the Affordable Care Act was an important cornerstone in providing economic security, which it surely is. These are the basic ingredients needed to generate a different set of outcomes than the disheartening ones produced over the last few decades. Bravo!

It was nice to see the President use our research on the pay disparity between CEOs and typical workers (273:1) and the wealth disparity between the top one percent and the median household (288:1).

Sure, there are a few misguided distractions in the speech—more exports, but nothing about trade deficits which involves imports, the need for corporate tax reform—but no reason to dwell on those items at this moment. You always want to see improvement and this speech definitely improves on the July speech. It’s great that he said ”our number one priority is to restore opportunity and broad-based growth for all Americans” and an A+ speech would have inserted ‘wage’ before growth.