Robert Reich on the Fast Food Strike and Obama’s Inequality Speech

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As fast food workers protest in cities around the country calling for higher pay and an increase in the federal minimum wage, former US Secretary of Labor Robert Reich gives context to the conditions leading some workers to walk off the job and join the picket line. In this video from the activist group Low Pay Is Not OK, Reich says higher pay could actually boost the bottom line at chains like McDonald’s and encourages all Americans to support the movement. (Be sure to check out the cranky dollar clad “Ronald McDonald” at the end.)

Today, Reich also wrote about Obama’s speech on Wednesday addressing inequality in America on his blog, which we are publishing here with his permission.

One Answer to Low-Wage Work: Redistributing the Gains

The president’s speech yesterday on inequality avoided the “R” word. No politician wants to mention “redistribution” because it conjures up images of worthy “makers” forced to hand over hard-earned income to undeserving “takers.”

But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else and often at more than one job.

Yet they’re still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing — while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).

Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going.

Better education and training for those on the losing end is critically important, as are several of the other proposals the president listed. But they will only go so far.

The number of losers is growing so quickly and so much of the economies’ winnings are going to a small group at the top  – since the recovery began, 95 percent of the gains have gone to the richest 1 percent – that some direct redistribution of the gains is necessary.

Without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs).

Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.) And without some redistribution, America’s growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.

One way we already redistribute is through the Earned Income Tax Credit (EITC), a wage subsidy for the working poor, which, at about $60 billion a year, is the nation’s largest anti-poverty program. It’s like a reverse income tax — larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).

The EITC subsidy should be enlarged and extended further up the wage scale before tapering off. How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages.

In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.

Video of President Obama’s Speech

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  • Mike Havenar

    Hope you have the tolerance and patience to watch and listen to this the best speech that President Obama ever has given in my opinion. It is long and he is not using a teleprompter, and it goes to the heart of what I think with him is the gravest domestic problem of our time. This ranks with anything that Franklin Roosevelt ever said about poverty and opportunity.

  • Anonymous

    We have tried trickle-down economics for over 30 years. It didn’t work – it floated up instead.

    Australia has a capitalist economy and their min wage is $15/hr + universal
    healthcare. Why can’t we do it here?

    “McDonald’s dollar meal would be $1.25,” if the minimum wage was raised to
    $15 an hour, said a spokeswoman for the restaurant industry.

    I would absolutely pay $1.25 for a “dollar” meal in order for that franchise’s employees to earn a living wage of $15/hour. Wouldn’t you?

    Increase min wage would stimulates the economy by putting more money into consumers hands. Also, it would strengthen social security and medicare rom
    the additional FICA taxes.

    I would rather have a society with higher minimum wage and less welfare. Raise it !

  • Anonymous

    The meme is NOT “Redistribution”. I keep having to stress this. Following Napoleon I insist that you strike this word from your dictionary (in his case it was the word “impossible”).
    It is : “We are asking the strongest shoulders to bear the heavier burden.”
    That is fair and nobody could with any credibility bring an argument that this is an inequitable request.
    Remember this: strongest shoulders, heavier burden. Repeat it over and over again until you mumble it in your sleep.

  • Anonymous

    The effective corporate tax rate has declined from about 33% in 1990 to about 12% in 2011, while corporate pre-tax profits have gone from about $550 billion in 1993 to over $2 trillion in 2012. Corporate taxes as a share to total federal revenues has declined from

  • Adel Gresham

    Have you heard of the the enormous gap between the 1% and the 99%…Do your home work and and check some facts and quit watching Fox news for you information.

  • JonThomas

    I’m watching and while it seems an interesting and important speech, at 8 mins in, so far he is definitely reading from the teleprompters.

    At 13 mins in, while still using the teleprompters, I’m encouraged that he does seem reassuringly comfortable with the subject.

    Watch as he never looks towards the center of the screen. There are 2 teleprompters, one on his left, and one on his right, and as every media savvy personality is trained to do, he is going back and forth between them.

    Sorry, but if you are naive, then I excuse your miss-thinking. If you are a Democratic apologist, then please don’t insult our intelligence.

  • JonThomas

    I think I should apologize. I’ve been getting upset at people who are commenting in a manner which twists material in insincere ways. It looks as if I brought that frustration to this comment. Although I feel as I wrote, I was probably a bit strong in my reply, and at the very least, I could-have/should-have been much more polite in my wording.

  • D. Scheinhaus

    Matt, wages are only one small part of economics. A discussion of wages is one that actually is about being able to feed a family. For young people who you consider “entry-level workers”, we’re talking about being able to pay for school, food and a place to sleep. What is important to an employer is profit, not some vague idea of “value to an employer”. What’s of value to an employer is having workers who are content with their ability to contribute to their households so that they come in to work and are more productive than they would have been if they were preoccupied with rent or mortgage worries, concerns about the health and welfare of their children. At the same time, those workers will also be better customers, since they have enough money to buy what their families need. Better and more customers make happier employers. There’s your economics.

  • GregoryC

    Obama is gifted at reading from a tele-prompter and delivering populist oratory, but his policies are pro-corporatist. Trans Pacific Partnership is the proof. Bailouts for Wall Street not Main Street is the proof. I’m glad my grandparents didn’t have to suffer with a president like Obama during the 1930s or else they would have been left waiting for the trickle down from corporate America and remained jobless without the WPA.

  • Anonymous

    Who bailout Wall Streets during W. Bush administration? You might want to do your research again before you post.

    Who crashed the economy in 2008 and 1930? You might want to do your research again.

    The American Job Act has been passed in the senate since 2 years ago, but John Boehner has refused to bring it for a vote in the house. The Act would create 2-3 millions jobs and fix the infrastructure. However, your party prefers to sabotage the economy instead of American lives.

  • Anonymous

    The EITC is one of the most perverse tax credits in the United States. Because the benefits available to childless workers are so small, it increases their vulnerability to periods of unemployment. Work is subsidized so for people at the bottom of the pay and hours scale, the effect is regressive. Subsidies for low wage work also make low-wage work cheaper, doing two things: Delaying automation and innovation in low-wage sectors, and getting captured by big, monopsonistic, employers. 27% of the EITC, according to incidence studies, ends up not in the pocket of the workers, but the owners.

    Why would we support a regressive tax that delays capital formation, discriminates against people who practice sensible family planning, and is captured by big business? What, other than an overriding belief that the idleness of the poor is their own making, could cause people to support this program? The EITC is one of the most perverse programs available to those who want to improve the lot of the poor. Strengthening income supports, indexing minimum wage to productivity, or for that matter, introducing a basic income, are going to do far more to improve the income and autonomy of the poor.

  • Anonymous

    >I have It’s called an understanding of economics. Not emotional feelings.

    I’m a trained economist, no you don’t.

  • William Smith

    I agree matt if you work for a high profit established company 100,00 would be a fair wage you seem to be fond of the term entry level job I would imagine you think talk of asking the wealthy to pay there share of taxes is class warfare the jobs you call entry level were usually held by young people working for small locally owned businesses that supported one family and paid a few employees a decent wage those jobs have been lost along with the businesses to large corporations they can not hope to compete with combine that with automation and offshoring and what is left for workers but service jobs how can you claim these people have no value to corporation making billions paying ceos millions while your entry level worker receives thousands in government assistance to feed their families

  • William Smith

    maybe we should tie wages to profits or ceo pay I know that business and government understand that higher wages for all would benefit all in the form wore tax revenue and more goods sold but the cycle of greed is as addictive as any drug

  • Matt

    What a worker makes in relation to the CEO’s compensation is apples and oranges. What seems fair to you or a worker is not relevant in economics. It’s what an employer will pay and what an employee will agree to work for.

    if your product or service costs more than what people are willing to pay for it your business declines or closes.

    How did those large businesses you reference start? Microsoft, Walmart, Apple all started as small businesses. Where does Apple have it’s products made?