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The State of the Union Address given by President Obama last night had a surprising number of correlations with our current lessons. The President talked at length about current inequality and the lack of upward mobility that we see in the job market and in social classes. We recently discussed in class, and Yuxi pointed out in her post “The Necessary Evil,” how slavery and its economic benefits created a system of inequality that benefited producers and extractive economies. She continues this conversation and extends it to show that this system of separation and oppression supported the prosperity of the country and the potential of the “American Dream.” That dream has changed with industrialization, urbanization, and development of new and more equal economies. We also discussed how classes were intentionally separated for social or economic purposes, and this separation is still entrenched in us today. Mobility is much more difficult than many Americans would like to believe. However, I find that the issue is not that class or race that separates us, but that education levels separate us. This is proven by the fact that today we have a well-educated African American as our president. Education has shaped America over the years, and has allowed for not only more economically sound markets, but ones with higher values. It is our hope that this positive trend continues with some of the extensions of education programs and trade programs that Obama has asked. They should help improve this mobility and erase the last true inequality gaps between races, regions, and genders. Obama touched on a few issues concerning “labor insourcing,” increasing the minimum wage, and expanding trade programs so that people do not have to live in poverty. I certainly agree with the fact that the higher levels of human capital that exist in the United States have created an incentive for investment. We discussed how slaves with special skills were often sought after and were worth more for plantations that needed more educated labor. This principle holds true today. During the time of slavery the Americas were a land of investment because of our natural resources and factor endowments including vast lands. Today industry is turning back to us because we not only have the physical resources, but also the human ones necessary to make change.
I think that it is too early to consider raising the minimum wage, however. Encouraging investment often requires the premise of potential profit. If we raise the rate before investment takes place, I believe we will see fewer jobs added and more cut as labor becomes too expensive. Slavery existed for the reason of eliminating a major cost. If we desire for more jobs to be created, and for each employee to work for more hours, we must let the economy develop before introducing a new expense. I hold the view that bringing more people to employment is going to help our economy grow and average wages will increase as competition and innovation continue. Along with the additional expenses that the Affordable Care Act has brought to businesses, the addition of other costs for labor would cause more problems with unemployment, and result in more underemployment. An almost $3 per hour increase in wages would render full-time labor often too expensive. We also do not want to see this cause unnecessary inflation levels either. Producers will not be ignorant of the increase in income, and may seek to raise their prices if they understand that consumers can afford them. This could cause a general price spike, weakening the purchasing power of the dollar and perhaps harming rather than helping workers.
Whether or not we like to admit it, much social change is stimulated by economics. Bolstering the middle class and opening opportunities to mobility are attractive for moral reasons, and there are ways that we can make them attractive economically as well. We will encourage investment, both domestic and foreign, by showing our relatively high human capital in conjunction with economic sense. We have seen, as the President mentioned, 8 million new jobs created in the past year. We would all like to see this trend continue. I believe that encouraging employment of more people full-time will stimulate the economy and produce a more productive, innovative, and mobile middle class. Poverty is today’s slavery. It holds us back from fulfilling our potential. We all would like to end it across the world, and each believe in different paths to that success. I will be interested to see if these programs take effect and if they will succeed.