Obama chooses income equality as next battleground

Obama chooses income equality as next battleground

WASHINGTON - US President Barack Obama can claim credit for bringing the economy back from the edge of catastrophe.

But on Tuesday he turned his focus to a glaring failure of the recovery: While the wealthy are now wealthier than ever, the average American has not seen any rebound in his wages since the 2008 crisis.

In his annual State of the Union address, Obama vowed to take on rising income equality, two months after frustrated voters dealt his Democratic Party a resounding defeat in Congressional elections.

Obama called for higher taxes on the very rich, more tax breaks for middle class families, an increase in the minimum wage and better workplace benefits to strengthen household incomes.

Touting a new "middle class economics for the 21st century", he demanded: "Will we accept an economy where only a few of us do spectacularly well, or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?"

The issue has long been on the boil. The rebound from the 2008 to 2009 recession has put the United States at the forefront of all major economies.

Last year job creation was the strongest since 1999, and the unemployment rate fell to 5.6 per cent, enviable within the G20 group of leading economies.

And yet tens of millions of Americans still need soup kitchens and social handouts to survive.

Workers in fast food chains and huge retailers like Walmart are increasingly taking to the streets to protest bottom-level pay that forces them to work two jobs to make ends meet.

Wages flat for decades

In theory, American workers should be able to demand more money. But the reality is that paychecks have barely risen. In constant dollars the average hourly salary today is barely higher than that of 1964.

Meanwhile, the ultra-rich have steadily accumulated wealth. At the end of the 1970s, the top 0.1 per cent of Americans controlled seven per cent of the country's wealth. Today they control 22 per cent.

The racial divide is equally stark: white families are on average 14 to 15 times wealthier than blacks and Latinos.

"The fruits of the economic recovery unreasonably go to the very rich in the United States," said economist Justin Wolfers of Peterson Institute for International Economics.

It "is not just the poor getting clobbered; it's the very rich doing extremely well." Economists say that the low jobless rate hides the fact that millions of working age Americans have given up seeking jobs, and won't return unless they can get higher pay.

Until they do, there will not be the tight supply of workers needed to force wages up.

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