The American Dream Being Tested in 2016
Published in Les Échos
(France) on 11 January 2016
by Elsa Conesa (link to original)
(France) on 11 January 2016
by Elsa Conesa (link to original)
Translated from
by Bora Mici.
Edited by Matthew Boyer.
A few weeks from the election kickoff, the situation of the American middle class, exhausted by the crisis, is at the center of attention. The debate on the minimum wage, which remains one of the lowest in the industrialized world, has resurfaced.
The countdown has begun. In exactly three weeks, voters in Iowa will be the first to choose their champion for each party. Will Hillary Clinton completely vanquish her very left-wing rival, Bernie Sanders? Who among Donald Trump, Ted Cruz or Ben Carson will represent the Republican camp? The meeting is expected, but not necessarily for the reasons you can imagine. The first signal sent by this “purple state,” neither really Democratic nor clearly Republican, will surely shine a light on what’s to come in the race. But it will also say, implicitly, whether the nice economic recovery showing up in the employment or growth numbers, month after month, has become a daily reality for Americans.
With nearly full employment in the labor market (with 5 percent unemployment), a GDP that has grown by more than 2 percent over five of the last six trimesters, with rising productivity, the U.S. economy is indeed showing all the signs of an acceleration. Last month, the Federal Reserve decided, after months of hesitation, to increase the interest rate for the first time in nearly 10 years. But seven years after the crisis, the country still has the scars of what Americans have christened “the great recession.” The middle class, an inalterable symbol of American prosperity and the focus of all the candidates, has emerged exhausted by the “subprimes” episode. Very vulnerable to the real estate sector, it has not reclaimed its median income of the 2000s. Above all, inequality has risen. According to a large study published in December by the Pew Research Center, in 2015, the middle class has surpassed the symbolic mark of 50 percent of the adult U.S. population, which is a first since 40 years ago.
This numeric erosion, which took place to the benefit of two extremes, is both good and bad news for the country. It reveals that the number of the richest Americans has increased faster than that of the poorest. But also that part of the middle class, the least well-trained, has gotten poorer. According to the same source, 20 percent of American adults today live near or under the poverty line, half of them since 2011. And many of these new poor are active: three quarters of Americans who rely on social assistance programs, including for daily food, are part of a household where at least one person works, according to a study by the University of Berkeley. “It’s the hidden cost of cheap labor,” explains the study’s author, who puts the cost of these poor workers at $150 billion per year for society.
In this context, it is not surprising that the debate on minimum wage has resurfaced. A little bit like the ability to carry weapons or have an abortion, the subject tears apart the U.S. at regular intervals. But it has become more acute since the crisis. At $7.25 per hour, the American minimum wage is indeed one of the lowest in the industrialized world. Despite several attempts by President Barack Obama, it has not increased since 2009, to the point that the general director of the IMF, Christine Lagarde, has advocated an increase, which “would establish the foundations for ... sustainable growth.” Certain economists have reduced the minimum wage to the GDP per capita in OECD countries, and they have concluded that the American minimum wage should, in theory, be around $12.
The terms of debate in the U.S. are nearly the same as those in Europe: The advocates of an increase in the minimum wage assert that it is impossible to live decently by earning $7.25 an hour, even while working full time, even in the poorest states. On the contrary, opponents fear that a higher minimum wage might lead ultimately to job reductions, which would affect the least qualified populations and therefore the weakest. “I hate to say it, but we have to leave it the way it is,” said Donald Trump in the fall. “At all costs, we must make sure that people do not cost as much as machines,” said his rival Sen. Marco Rubio, going a step further.* While the Democratic favorite, former Secretary of State Hillary Clinton, remained prudent, The New York Times for its part without hesitation made the case for a minimum wage of $15 in its Dec. 26 editorial. Curiously, while the national debate seems paralyzed, local officials have taken the reins. These last few years, more than half the states, including Republican ones, have adopted a minimum wage above the federal level (of $8 to $10). And certain big cities like Seattle, San Francisco and Los Angeles, plan on getting to $15 in five years. Many companies have also chosen to be better bidders: in Silicon Valley, of course, but also in less prosperous industries, like delivery or food service, where the labor market is starting to become strained. Walmart, Costco, Gap or even McDonald’s modestly offer more than the minimum wage.
The account of these measures is as debated as the subject of the minimum wage itself. But the movement could continue in 2016: Four states, among them New York and California, as well as nine big cities will be deciding about the establishment of a $15 minimum wage, which will certainly not make them the new standard, but should animate the debate for another year — in Iowa and beyond.
* Editor’s note: This quote, while accurately translated, is a paraphrase of comments made by Sen. Rubio.
The countdown has begun. In exactly three weeks, voters in Iowa will be the first to choose their champion for each party. Will Hillary Clinton completely vanquish her very left-wing rival, Bernie Sanders? Who among Donald Trump, Ted Cruz or Ben Carson will represent the Republican camp? The meeting is expected, but not necessarily for the reasons you can imagine. The first signal sent by this “purple state,” neither really Democratic nor clearly Republican, will surely shine a light on what’s to come in the race. But it will also say, implicitly, whether the nice economic recovery showing up in the employment or growth numbers, month after month, has become a daily reality for Americans.
With nearly full employment in the labor market (with 5 percent unemployment), a GDP that has grown by more than 2 percent over five of the last six trimesters, with rising productivity, the U.S. economy is indeed showing all the signs of an acceleration. Last month, the Federal Reserve decided, after months of hesitation, to increase the interest rate for the first time in nearly 10 years. But seven years after the crisis, the country still has the scars of what Americans have christened “the great recession.” The middle class, an inalterable symbol of American prosperity and the focus of all the candidates, has emerged exhausted by the “subprimes” episode. Very vulnerable to the real estate sector, it has not reclaimed its median income of the 2000s. Above all, inequality has risen. According to a large study published in December by the Pew Research Center, in 2015, the middle class has surpassed the symbolic mark of 50 percent of the adult U.S. population, which is a first since 40 years ago.
This numeric erosion, which took place to the benefit of two extremes, is both good and bad news for the country. It reveals that the number of the richest Americans has increased faster than that of the poorest. But also that part of the middle class, the least well-trained, has gotten poorer. According to the same source, 20 percent of American adults today live near or under the poverty line, half of them since 2011. And many of these new poor are active: three quarters of Americans who rely on social assistance programs, including for daily food, are part of a household where at least one person works, according to a study by the University of Berkeley. “It’s the hidden cost of cheap labor,” explains the study’s author, who puts the cost of these poor workers at $150 billion per year for society.
In this context, it is not surprising that the debate on minimum wage has resurfaced. A little bit like the ability to carry weapons or have an abortion, the subject tears apart the U.S. at regular intervals. But it has become more acute since the crisis. At $7.25 per hour, the American minimum wage is indeed one of the lowest in the industrialized world. Despite several attempts by President Barack Obama, it has not increased since 2009, to the point that the general director of the IMF, Christine Lagarde, has advocated an increase, which “would establish the foundations for ... sustainable growth.” Certain economists have reduced the minimum wage to the GDP per capita in OECD countries, and they have concluded that the American minimum wage should, in theory, be around $12.
The terms of debate in the U.S. are nearly the same as those in Europe: The advocates of an increase in the minimum wage assert that it is impossible to live decently by earning $7.25 an hour, even while working full time, even in the poorest states. On the contrary, opponents fear that a higher minimum wage might lead ultimately to job reductions, which would affect the least qualified populations and therefore the weakest. “I hate to say it, but we have to leave it the way it is,” said Donald Trump in the fall. “At all costs, we must make sure that people do not cost as much as machines,” said his rival Sen. Marco Rubio, going a step further.* While the Democratic favorite, former Secretary of State Hillary Clinton, remained prudent, The New York Times for its part without hesitation made the case for a minimum wage of $15 in its Dec. 26 editorial. Curiously, while the national debate seems paralyzed, local officials have taken the reins. These last few years, more than half the states, including Republican ones, have adopted a minimum wage above the federal level (of $8 to $10). And certain big cities like Seattle, San Francisco and Los Angeles, plan on getting to $15 in five years. Many companies have also chosen to be better bidders: in Silicon Valley, of course, but also in less prosperous industries, like delivery or food service, where the labor market is starting to become strained. Walmart, Costco, Gap or even McDonald’s modestly offer more than the minimum wage.
The account of these measures is as debated as the subject of the minimum wage itself. But the movement could continue in 2016: Four states, among them New York and California, as well as nine big cities will be deciding about the establishment of a $15 minimum wage, which will certainly not make them the new standard, but should animate the debate for another year — in Iowa and beyond.
* Editor’s note: This quote, while accurately translated, is a paraphrase of comments made by Sen. Rubio.
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