The Recession
The Recession

Growing Income Gap Could Keep Economy from Full Recovery

| by AFL-CIO

The federal stimulus package is a good way to jump-start our economy, but it is not enough to solve the deep crisis of inequality that has been building in this country for decades. A recent article says the government needs to act quickly to start addressing the growing income gap.

In an article in The Nation online, Christine Owens and Annette Bernhardt, executive director and policy co-director, respectively, of the National Employment Law Project (NELP), say working families were struggling to survive even before the current recession.

Although U.S. workers are more productive than ever, they are faced with stagnant wages, disappearing benefits and little job security. The Bureau of Labor Statistics reports that eight of the top 10 occupations projected to generate the most jobs by 2016 are low-wage jobs in the service sector.

Owens and Bernhardt write:

Policies focused only on job growth will simply put us back on the path toward greater inequality. If we truly want to rebuild a good jobs economy to “create jobs that sustain families and sustain dreams,” as President Obama recently put it—we have to act now to lay down the institutional and regulatory framework.

According to Owens and Bernhardt, there are four low-cost things the government can do right now to put more money into the pockets of low-income families:

Fully enforce minimum wage and overtime laws. Growing numbers of employers are ignoring even these most basic laws and retaliate against workers for reporting violations. The reports cites the example of Wal-Mart, the nation’s largest employer, which announced in December 2008 that it would settle 63 cases in 42 states charging unpaid wages, totaling at least $352 million and involving hundreds of thousands of current and former workers.

Kim Bobo agrees. In her book, Wage Theft in America: Why Millions of Working Americans Are Not Getting PaidAnd What We Can Do About It, Bobo, executive director of Interfaith Worker Justice says wage theft is “an epidemic” in the nation, especially in the low-wage labor market.

“Wage theft is a national crisis,” she writes. “As many as 2 or 3 million workers are not being paid minimum wage; millions are denied overtime pay.”

Owens, Bernhardt and Bobo all say the Department of Labor must return to its core mission of safeguarding workplace standards by increasing the number of inspectors, targeting industries with high rates of violations, protecting workers who file complaints and cracking down on employers that misclassify their employees as independent contractors.

Recommendations in the NELP article include:

  • Raising the federal minimum wage. A recent study by the Federal Reserve Bank of Chicago found that an increase in the minimum wage boosts consumer spending more than tax cuts, as families spend their paychecks at local businesses. The NELP article calls for an increase in the federal minimum wage, starting next year and phasing in over multiple years to make up lost ground.
  • Using federal contracts to create living-wage jobs. Every year, our government spends $400 billion on contracts with a wide range of companies for goods and services, financing more than 2 million jobs. But significant numbers of these jobs pay low wages and provide no benefits, in industries such as utilities and housekeeping, property maintenance and repair, clothing and apparel and food preparation. NELP says federal contracts should favor employers that pay living wages, provide health benefits, offer quality training and obey labor laws.
  • Enacting the Employee Free Choice Act to guarantee that workers can form unions and bargain free of intimidation and abuse. They say the unions transformed manufacturing into a middle-class industry after World War II; today, it is doing the same for low-wage workers such as janitors, child care workers, home care workers and hotel room cleaners.

Owens and Bernhardt conclude that continuing on the path of rising inequality is not inevitable. Saying our country responded to the Great Depression by putting into place the policies that formed the basis for several decades of strong economic growth and shared prosperity, we can do the same today.

We now face another deep economic crisis, and another opportunity to set the bar higher. Let’s not just stimulate the economy; let’s rebuild it with good jobs.