What Obama Should -- and Shouldn't -- Say in State of the Union Address

This article originally appeared at the website of the Economic Policy Institute.

At the Economic Policy Institute (EPI), we have argued that raising wages is the central economic challenge. It is terrific news that the president will address wage stagnation in his speech. After a year of strong job creation but continued stagnant wage growth, many economists and commentators—not to mention the American people—are beginning to focus on wages. Even the new GOP-controlled Congress is paying lip service to the middle class squeeze (but is offering no program to address these challenges). So we are now entering into a great debate about what can be done to raise wages. Ross Eisenbrey and I offered our solutions in a recent interview in The New Republic.

Given congressional obstruction, the president has done his best to address our most pressing economic challenges through executive action:

• He has taken steps to regularize our undocumented workforce, which means that U.S. workers won’t be undercut by easily exploited immigrant labor.
• He strengthened labor standards among federal contractors by raising the minimum wage they must pay to $10.10 an hour, making it illegal for them to punish employees for discussing their wages (i.e., transparency that will erode gender and race discrimination), saying that employers who repeatedly violate labor laws will not win any more federal contracts, and banning forced arbitration (which limits workers’ ability to access the courts to remedy wage theft and discrimination).
• He directed the Labor Department to raise the salary threshold under which all workers are guaranteed overtime, which could provide more than six million workers such protections.

I’ve said before that these moves constitute an “Obama wage initiative” that he should get credit for and build on, as there’s more he can do. I hope the president makes a strong case for why Americans need faster wage growth, delineates the package of executive orders and actions already underway that look like the start of a wages initiative, and announces further actions to fuel wage growth.

Here are a few forward-looking items I would like to hear President Obama discuss:

Set the overtime threshold at least $51,000 a year. EPI’s Ross Eisenbrey first recommended that the president raise the threshold under which all workers are guaranteed overtime seven years ago. The Labor Department is finally on the verge of making a change, but it is rumored that they will set the threshold as low as $42,000. This isn’t high enough. If the threshold had kept up with inflation, it would be $51,000; and there’s good evidence that it should be even higher. I hope the president makes a case for why.

Raise the minimum wage to $12.50. Two years ago, the president called for a $9 minimum wage in his State of the Union address. Later that year, he joined congressional Democrats and activists in calling for a $10.10 minimum wage. While Congress has done nothing to raise the wage floor for working Americans, inflation has continued to erode their purchasing power. To keep up with inflation, the minimum wage should be raised to $12.50.

Support collective bargaining. In the past, the president has said, “If I were looking for a good job […] I’d join a union.” He’s right. Unions are the best way to ensure that workers see wage increases and safe workplaces. As union density has declined, so have wages. President Obama should keep up his full-throated endorsement of collective bargaining, which shouldn’t be limited to union audiences.

There also needs to be a recognition that tax breaks for low and middle-income households can serve to support these households but if wages continue to stagnate or fall then we would continuously need to do what cannot be done: continuously expand these tax breaks. Therefore, the ultimately solution to wage stagnation has to be to generate broad-based wage growth.

There are also some things the president shouldn’t say.

The Obama administration has been working to pass trade agreements—namely the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership—which will drive up U.S. trade deficits and depress wages for U.S. workers. This stands in opposition to all of the good work the president and his administration have done to boost the living standards of working Americans. President Obama should rethink his stance on trade and Congress should refuse to grant him the “fast-track” authority that he has asked for.

Lastly, there have been discussions recently of corporate tax reform as being one area where the president can work with Republicans in Congress to get something done. But in the past, the GOP has insisted that tax reform be revenue neutral, which defeats the point. We desperately need more revenue for, among other projects, rebuilding our crumbling infrastructure. Revenue-neutral tax reform won’t cut it. It’s bad policy, and shouldn’t be pursued simply for the sake of compromise. In the past, the president has sought some revenue from tax reform for infrastructure, and he should continue to insist on that.

President Obama has much to be proud of, especially considering the vehement congressional opposition he’s encountered at every turn. There is still more he can do—and more he should not do—to address our most pressing economic issue and ensure that Americans feel our nascent recovery in their paychecks.