Action Alert

Responding to Inequality: the American Jobs Act and Growing Opportunity

Responding to Inequality: the American Jobs Act and Growing Opportunity

“Without a doubt, the most urgent challenge that we face right now is getting our economy to grow faster and to create more jobs,” said the president as he announced the American Jobs Act in October of 2011. Improving the economy by providing incentives for businesses to create more jobs has been one of the highest domestic priorities for President Obama’s administration. Furthermore, creating more jobs will allow families to achieve economic security and ensure that parents can provide healthy lives for their children and that women have a fair shot at succeeding in the workplace. The policies Obama set forth through this act include cutting taxes to help small businesses hire more workers and grow their profits, offering tax credits to businesses that hire unemployed veterans, and reforming unemployment insurance benefits. By creating more jobs and supporting small businesses, the president hopes to strengthen the middle class and provide it with more security.

As of January, 2014, according to the White House and the Bureau of Labor Statistics, the private sector has added 8.5 million jobs in the past four years. Additionally, the February jobs report reveals that private sector jobs have increased by an average of 191,000 per month for the past year. However, the White House regards the rate of unemployment for the country to be “unacceptably high, reflecting more than 3.6 million long-term unemployed.” The National Alliance for Partnerships in Equity reports that, “Although they represent half of the workforce, two-thirds of women work in only 5 percent of occupations, most of which are among the lowest paying.” With the current Congressional standoff on the extension of long-term unemployment insurance benefits, here is an extra economic strain on women and children.

The jobs report released by the Bureau of Labor Statistics in April revealed an increase in the average number of jobs created per month, from 191,000 to over 200,000. As far as specific work industries are concerned, the biggest increase in jobs was in the professional and business services category, followed by the construction industry. A New York Times interview with the chief executive of a trucking company called YRC Worldwide, James Welch, discussed the effect of the jobs report and warming weather on the trucking industry. Mr. Welch indicated that his company had added 600 workers so far this year, and that he could potentially add 1,000 more positions by the end of the year if the economy continues to improve. The New York Times author wrote that, “Positions like these are especially important if the recovery is to benefit all Americans, especially since a majority of workers lack a college degree.” In May, the ADP National Employment Report showed that 179,000 jobs were created, demonstrating a consistent yet sluggish speed of job creation, according to the president and CEO of ADP, Carlos Rodriguez.

The report also noted that: “even a sharp drop in the nation’s unemployment rate, to 6.3 percent from March’s 6.7 percent, provided little cause for celebration, since it was primarily because of a large decline in the number of people participating in the labor force rather than an increase in the number of Americans telling government survey workers that they had found a new job.” In May, the workforce participation rate continued its decline to 62.8 percent, the lowest it had been since 1979, despite the fact that the economy added more than 200,000 jobs for the fourth month in a row. The editorial board of the Washington Post noted that, “declining labor-force participation implies a rising ‘dependency ratio’ of workers to recipients of social assistance.”

In his 2014 State of the Union address, President Obama pledged a “year of action,” in which he would take executive action to facilitate the creation of more jobs. One of these actions was the creation of economic “Promise Zones.” Promise Zones are regions within states that will earn federal incentives such as access to federal partners and grant partners in exchange for taking steps to engage local businesses to create more job opportunities and provide lower-cost housing for Americans. The first five Promise Zones were announced this year, with an expected 15 more to be announced over the next three years.

The Barrier of Being Unemployed

One of the biggest barriers for unemployed workers to gain entry back into the workforce is their status as unemployed. A White House study found that “candidates who had been out of work eight months were called back for interviews only about half as often as candidates who had been out of work one month, even with an otherwise identical resume.” To address this challenge for the long-term unemployed, President Obama has met with CEOs and other business leaders to create new best practices for recruiting and hiring the long-term unemployed. According to White House records, more than 300 companies have signed on to these best practices, including 80 of the country’s largest businesses. The president has also provided $150 million in competitive grants for employers and non-profit organizations who demonstrate effective programs that prepare and place the long-term unemployed into new jobs.

In a recent interview on the Diane Rehm Show, former labor secretary and current professor of public policy at UC Berkeley, Robert Reich, discussed the growing income inequality in America and the effect it has had on the economy. According to a CNBC report from 2013, the gap between the top one percent of earners and the rest of the country has been growing for about the last 30 years, with the incomes of the top 1 percent growing by 20 percent in 2012, while the incomes of all other workers grew by only 1 percent. A gap this large in terms of income disparity between the top earners and the rest of the country in the past was followed by the Great Depression in 1929 and the Great Recession in 2007-2008. In the interview, Mr. Reich asserted that the reason for the slow economic recovery in this country is a lack of purchasing power in the middle class: “Seventy percent of economic activity in the United States depends on consumers who are spending their money. And if consumers and again the middle class…don’t have the ability to spend because all of the money and the wealth is going to the very top, then you’re not going to have a strong recovery.” He went on to say that CEOs are not the job creators in America, but that consumers are, connecting the income of consumers directly with growing the economy: “Businesses are not going to create new jobs unless they have enough customers.”

Angel Gurria, secretary general of the Organisation for Economic Co-operation and Development (OECD), discussed the social justice factors that cause income inequality in America on the PBS NewsHour show: “The problem is not just a question of income. It’s also a question of inequality of opportunities, inequality of access to health services, inequality of access to education, inequality of access to employment opportunities. And these have been also growing.” To remedy the situation, Gurria recommends increased government services that help unemployed people get the training, education and skills they need to gain job opportunities.

Investing in Young Workers

In Germany, apprenticeships play a large role in providing education and training for young workers who cannot afford, or choose not to attend, a university program. One German company, the car manufacturer BMW, has exported their apprenticeship program to their only American manufacturing plant in Spartanburg, South Carolina. PBS NewsHour correspondent Paul Solman spoke with Moritz Kippenberger, a German mechanical engineer for BMW who works with apprentices at the Spartanburg plant. In contrast to the view that students are supposed to go to college, Kippenberger states, “I think we also need to recognize college might not be the best fit for every single person. America is also the land of options, the land of opportunity and variety, and variety of the education system can be a part of that.” The program focuses on training high school students in the BMW method of manufacturing, and pays “scholars” much more than a typical high school job: over $12.00 an hour. BMW sees the program as a way to provide “homegrown” talent for its future workforce; an investment in young workers that will be profitable over the long term.

Unemployment affects families in negative ways, especially children. According to MPR News, new studies have focused on the effect that extended unemployment of one or more parents has on their children. “Researchers have found that [unemployment] can lead to poor academic performance, behavior issues and effects that may last for the rest of the child’s life.” A study by Stevens and economist Jessamyn Schaller found that children who have unemployed parents are 15 percent more likely to repeat a grade. Additionally, a National Journal article discussed the emotional trauma that children face when parents are unemployed: “the possibility that the family may be forced to move; the lack of resources to invest in education; and, in the short run, the amount of quality time that overstressed parents can spend with their children.”

Under the president’s direction, Vice President Joe Biden is reviewing federal training programs to ensure that they are “helping people who are ready to work attain the skills needed to fill good jobs that are in high-demand industries.” Further, the White House has created partnerships with business and labor leaders to identify the skills and support that workers most need to succeed in the workplace and that employers need to grow their businesses.

Posted or updated: 8/17/2014 11:00:00 PM

Suggested Pages:

*The State of Employment in Our States

*Action Alerts

*Economic Justice

Take Action

  • Contact your members of Congress at (202) 224-3121 or at the local district office and urge them to pass S. 1911, the Supporting Knowledge and Investing in Lifelong Skills Act to support policies that help give workers the skills they need to get jobs in a modern economy; HR 1000, the Humphrey-Hawkins 21st Century Full Employment and Training Act to create a new national job program; HR 1617, the Emergency Jobs to Restore the American Dream Act to provide funding for thousands of new jobs; and HR 2553, the National Infrastructure Bank Act to create a new bank that would fund new infrastructure projects and provide a demand for more workers.
  • Watch the PBS NewsHour segment on the cutting edge BMW Scholars Program that is creating apprenticeships for high school students and graduates in South Carolina.
  • Read the Wall Street Journal article entitled, "Why Young People Can’t Find Work" to learn about one CEO’s view of barriers to workforce entry for Americans between the age of 20-24.
  • Read “The Economic Community,” ¶163, pages 513-519, in The Book of Resolutions of the United Methodist Church (2012).
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