Friday, December 6, 2013

President Obama Speaks to the Middle?

Middle Class

Yesterday, President Barack Obama spoke to the “Middle Class” at Osawatomie High School in Osawatomie, Kansas. We know he was speaking to the “Middle Class” because he used the phrase “Middle Class” a total of twenty-six times.

Obama told us who the Middle Class were; they were the teacher, the nurse or the construction worker earning maybe $50,000 a year. He told us that they were people who have a college degree, that unemployment for people with college degrees is about half the national average and income is twice as high as those who don’t have a high school diploma.

But what is the “middle”? In statistical jargon, there are four key measures for any population of data points; mean, median, mode and range. The middle value of any population is the median. The value that appears most often is the mode and the average of all values is the mean. Range is the difference between the highest value and the lowest value in the populations.

Middle Income

The median American household income in 2012 was $51,371.[1] That must be the middle Obama was speaking about when he told us that “a teacher or a nurse or a construction worker, maybe earns $50,000 a year”.

"There are three kinds of lies: lies, damned lies, and statistics."
~Mark Twain

But “household income” is NOT synonymous with individual wages. The measure of household income tells us nothing of how many people worked, how many hours they worked or whether the income was derived from their work or from other sources such as pensions and annuities, business income, rent, interest or other capital gains.

According to the Social Security Administrate the average compensation (wages, tips and the like) for 2012 was $42,498.21 but the median compensation was estimated to be just $27,519.10.[2] What this means is that half of the people who worked and earned money in 2012 were compensated with less than $27,519.10. We still do not know how many hours they worked or what their hourly rate was, but we do know that they did NOT earn “maybe $50,000 per year”.

The Surest Route to the Middle Class

“In this economy, a higher education is the surest route to the Middle Class. The unemployment rate for Americans with a college degree or more is about half the national average. And their incomes are twice as high as those who don’t have a high school diploma.”

Education - Unemployment

To understand this statement, the words have to be un-wrapped and the rhetoric exposed. The national average unemployment rate of those 25 years of age and older is 5.8% and the unemployment rate for those with a Bachelor’s degree and higher is 3.7%.[3]

But this too is misleading because the number is artificially reduced by the inclusion of those with advanced degrees who are the least likely to be unemployed.

In 2010, people with a Bachelor’s degree made up 19.4% of the total population, 23.2% of the employed population and 13.5% of the unemployed population. People with advanced degrees made up 10.5% of the total population, 13.0% of the employed population and just 4.8% of the unemployed population.[4]

Weighted for percent of population, the unemployment rate for those with an advanced degree is roughly 2.8% and for those with a Bachelor’s degree is 4.2% or nearly three fourths the national average … NOT even close to half.

Is an Associate’s degree a “college education”? In 2010, people with an Associate’s degree (including vocational degrees) made up 9.1% of the total population, 10.5% of the employed population and 18.2% of the unemployed population.

The unemployment rate for those with an Associate’s degree is 5.2%, roughly the same as the national average.

But other factors remain to be considered, such as age. Unemployment is especially high among those who are 25-34 years of age; 42.4% of the people in that age range are college graduates and the unemployment rate is 7.2%.

The question then becomes not just what percent are unemployed but what do they earn when they are employed.

Education – Wages

Excluding those with advanced degrees, in 2009 a person age 25 to 34 years old with a Bachelor’s degree earned an average of $45,692 and with an Associate’s degree earned $35,544. The same age person with some college but no degree earned $31,392 and a high school graduate earned $27,511. Those who were not a high school graduate in the same age range earned $19,415.[5]

The president’s choice of words was very careful indeed. While 42.4% of people in this age range have a college degree, only 11.6% did not graduate from high school. High school graduates and those with some college but no degree make up the largest part of the population at 46.1%.

The truth is that a person in this age range with a Bachelor’s degree only earns, on average, 45% more than a person with any education whatsoever beyond high school. Most of their added income is consumed by the necessity of repaying loans or by higher tax rates.

And remember, these are means or averages, not medians or modes. If income distribution curves tell us anything it is this, the median is always lower than the mean and the mode is always lower than the median. In other words, half of the college graduates will earn significantly less than the mean and a college graduate is far more likely to earn dramatically less than the mean.

Education, Unemployment and Wages

Unemployment is NOT the result of having too few educated people. In fact unemployment is also high among educated people. When President Bill Clinton finished his term of office in 2000, the unemployment rate for those age 25 years and over with a Bachelor’s degree and higher was just 1.7% compared to the current rate of 3.7%. Even those with a high school diploma and no college had a lower unemployment rate of just 3.4%.

In the year 2000, 65.3% of the population had jobs and today only 61.1% have jobs. In the year 2000 just 24.4% of the population had a Bachelor’s degree and higher[6], today that number has risen 29.9%. The population of college educated people has risen 5.5% but the employment ratio has dropped 4.2%.

Note: The employment ratio remained well below 61.1% from 1948 until 1985. The ratio was commonly 56-59% from 1948 until 1978. Current employment ratios represent a correction toward historic levels of employment except that modern employees are underpaid.

Did educating a higher percent of the population reduce the employment ratio? Of course not! Educating people creates a ready supply of qualified labor, but it does not create jobs.

What about wages? President Obama told us about well established public sector teachers with a college education, experienced college educated nurses and skilled construction workers with union jobs earning $50,000 per year. But new entrants in these vocations are not fairing as well in spite of the larger number of college educated people.

Most of the new jobs are in retail, food service and hospitality. Are the people stocking shelves at the grocery story, serving food in restaurants, and making beds at hotels earning more because they have college degrees? Not a chance!

Roughly half of college graduates who have work say that their college degree was not required. This is especially true of those earning lower incomes. 38% of college graduates found white collar jobs and 49% of them said that a college degree was not required. 18% of college graduates found blue collar jobs and 81% of them said that a college degree was not required.[7]

With the exception of postgraduates and professionals or executives, the majority of college graduates indicate that a college degree is not required for their job.

Wages and Hours - A Fair Shot and a Fair Share

Some people thought that President Obama was talking about the “minimum wage”, but he wasn’t; he only used the phrase “minimum wage” once in reference to President Theodore Roosevelt’s vision for wages, work hours and education. Roosevelt called his vision “New Nationalism” and introduced it at a speech given in Osawatomie, Kansas on August 31, 1910.

“No man can be a good citizen unless he has a wage more than sufficient to cover the bare cost of living, and hours of labor short enough so that after his day's work is done he will have time and energy to bear his share in the management of the community, to help in carrying the general load. We keep countless men from being good citizens by the conditions of life with which we surround them. We need comprehensive workmen's compensation acts, both State and national laws to regulate child labor and work for women, and, especially, we need in our common schools not merely education in booklearning, but also practical training for daily life and work.”

President Obama said, “I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, when everyone plays by the same rules.” But what is this “fair share”?

The average work week is about 35 hours and our fair share is about 35 hours per week so that is what most of us should be working. Wages should be high enough to support an individual and their small family on 35 hours per week of employment.

Because many full-time employees work excessively long weeks to earn higher wages, other workers are unable to get sufficient work hours to meet their basic needs. So that some people can be paid vey high wages, other people must be paid very low wages.

Part-time is 1-34 hours per week, full-time is 35-40 hours per week, and over 40 hours per week is considered to be overtime. One study observed that “overtime workers were more likely to be male, white, and middle-aged, with higher levels of education and income.”[8] Another study shows that about 11% of employees work more than 50 hours per week (16% of men work very long hours compared to 6% of women).[9]

If doing our fair share is important, it is also important to make sure that everyone has the opportunity to do their fair share. Some need to work less so that others can work more.  If earning our fair share is even going to be possible, some workers will need to lower hourly rates so that others can earn higher hourly rates.

According to the Bureau of Labor Statistics, the average weekly hours of all employees in private employment is 34.9 hours per week and the average weekly earnings are $844.23. If every person currently employed were to be paid $24 per hour and every person worked 35 hours per week, each working person would earn $43,690 per year. All of the work would be done and it would cost no more than the current wage distribution.

In Germany, the first 8,004 € ($10,936.67) of household income earned is tax free, an additional allowance of 7,664 € ($10,472.09) of tax free income is made for each adult and 7,008 € ($9,575.73) of tax free income is allowed for each child. A family of four could earn the equivalent of $40,560.22 without paying any income tax in Germany. The next 5,465 € ($7,467.38) are taxed at the low average rate of 14% and the following 39,410 € ($53,849.82) are taxed at an average rate of just 23.97%. A small family could earn the equivalent of $101,877.42 without paying a high income tax rate. Taxes leap up to 42% and then 45% for higher income ranges. These high tax rates discourage high wages, multiple incomes per household and long work hours.[10] There is no maximum number of hours that Americans can work or be expected to work, but all across Europe the maximum is 48 hours.[11] France has a 35-hour workweek by law and other countries in Europe generally have similar working time. Annual work hours are reduced by a relatively high amount of paid annual leave, usually four to six weeks.

None of the so-called champions of the people, not even Barack Obama, are talking about a fairer and more equal division of wages and hours.  There will be no new and progressive legislation that would firmly establish the 35 hours work week or a living wage for all people. Maybe, if we elect enough Democrats, the minimum wage will be increased a little bit?

Working class people cannot solve this problem! The ownership class will only employ as many people as are needed for profit motivated production of goods and services at the lowest wage they can get away with paying and working class people lack the resources to employ themselves at better wages. The same people that own it all and won’t employ us or pay us, don’t want the government to employ us or pay us either. It’s almost like they are … Republicans.

Tax the Rich

President Obama is talking about taxes; he mentioned taxes twenty-one times. He is beating the same not-so-progressive drum that Democrats have been beating since he took office. Extend the payroll tax cuts … restore the Clinton era personal income tax rate of 39% for incomes over a million dollars … close loopholes and shelters that lower the effective tax rate on millionaires. Maybe if we elect Democrats they will make this happen, but it will be a cold day in a hot place before the Republicans will let this happen.

Appeal to Fairness

Forgive me, but I was hoping to hear a tall, clean shaven, dark skinned version of Robert Reich, instead what I heard was mostly rhetoric for his support base who are the established, employed, people with college degrees in the public service sector such as educators, professionals and paraprofessionals with seniority like nurses and upper tier skilled labor in unionized trades like construction workers who earn roughly $50,000 per year or more, are responsible home owners and tax payers.

I didn’t hear anything for the 60% or more of the population who fall short of the implied “Middle Class” standard. He sang the sweet hymn of praise for the holy grail of the Middle Class … education. He talked about how virtuous they were, how they worked hard, got an education, were responsible home owners, and how they paid their taxes and how the government programs they liked had all suffered to shrink the evil budget deficit.

Now it’s time for others to pay more taxes! And its time for others to get an education and get to work! How other people need to be responsible like them and do their fair share like they have already done.

Am I being too cynical? Maybe.

Roosevelt and the New Nationalism

The average listener or reader has no idea what the nationalism movement of the late 1800s was or what new nationalism in the early 1900s was. Nationalism was a bold and progressive movement with the aim of nationalizing the important industries of the nation such as public utilities, banks, railroads and eventually agriculture and distribution.

But that is another article that needs to be written.

My closing thought is this, the Obama speech was riddled with praise of the market-based economy … competition for jobs, competition with foreign industries, economic growth and consumerism. What America really needs is a great big dose of cooperation to replace all of that competition, but that isn’t what Obama learned in school and it isn’t what most of us learned or want to hear.

The big problem is growth! Unrestrained population growth, unrestrained stripping of the earth’s resources to feed our population growth, and unending growth in debt necessary to pay interest on the money privately loaned into the economy for most of the last century.

Nobody talks about the big problems because there is still profit to be made exploiting the last of the earth’s resources and destroying our environment using the last of the cheep fossil fuels and the endless of supply of cheap human labor that can be obtained from a huge population of well educated people who are deep in debt and afraid of what will happen next week if they don’t get a paycheck this week.

[1] American Community Survey Briefs, “Household Income: 2012”, September 2013, U.S. Census Bureau,
[2] Measures of Central Tendency for Wage Data, Social Security Administration, extracted from the Official Social Security Website on December 5, 2014,
[3] Bureau of Labor Statistics, Labor Force Statistics for the Current Population Survey, data for Sep 2013, Not Seasonally Adjusted, extracted December 5, 2013.
[4] U.S. Census Bureau, "Statistical Abstract of the United States: 2012”, Section 4 - Education, page 152, "Table 231. Educational Attainment by Selected Characteristics: 2010",
[5] U.S. Census Bureau, "Statistical Abstract of the United States: 2012”, Section 4 - Education, page 152, "Table 232. Mean Earnings by Highest Degree Earned: 2009",
[6] U.S. Census Bureau, Education Attainment: 2000”, Note: The number of people with Associates degrees and some college but no degree also rose significantly.
[7] GALLUP, "Majority of U.S. Workers Say Job Doesn't Require a Degree", September 9, 2013,
[8] "Long hours of work in the U.S.: associations with demographic and organizational characteristics, psychosocial working conditions, and health", Grosch et al, 2006,
[9] OECD, "Better Life Index: United States", extracted December 5, 2014,
[10] Wikipedia, "Income Tax in European Countries", sub. Germany, extracted December 5, 2013,
[11] Wikipedia, "Working Time", sub. Germany, extracted December 5, 2013,