State of the Union elevates “middle-class economics” issues, but low-wage workers need a boost

President Barack Obama’s State of the Union speech proposed new initiatives to help middle-class Americans, including education, job growth, infrastructure, and climate change initiatives. While these initiatives, if implemented, could improve economic security for the middle class, we still have a long way to go to ensure that those at the bottom of the income distribution—not just the middle class—also have opportunities to advance.

President Obama proposed a plan for community college students, called America’s College Promise, which would make two years of community college free for qualified students. President Obama noted that 40 percent of college students choose community college: “Some are older and looking for a better job. Some are veterans and single parents trying to transition back into the job market. Whoever you are, this plan is your chance to graduate ready for the new economy, without a load of debt. Understand, you’ve got to earn it — you’ve got to keep your grades up and graduate on time,” he said.

Woodstock Institute is pleased that President Obama is trying to mitigate the negative impacts of excessive student debt by proposing to make community college free for two years and we urge policymakers to target resources for the neediest students. This community college program could dissuade students from going to more expensive for-profit colleges, where many students struggle to transfer to other schools for secondary degrees or find jobs in their field. Research conducted by senior policy and communications associate, Katie Buitrago, shows that community colleges have a lower net cost for low-income students than for-profit colleges.

Incurring significant student loan debt early in life can impact a borrower’s future economic well-being. Student loans make college accessible and may be considered “good debt” that builds skills which will command higher wages, but excessive debt may limits the ability to engage in other wealth-building activities. President Obama used the story of Rebekah and Ben Erler, a couple from Minneapolis, to show the sacrifices that middle-class families make to pay off student loans and prepare for retirement. The Erlers are forgoing luxury items such as vacations and cars in order to repay student debt. Lower-income student loan borrowers may struggle so much financially that they cannot even consider saving for retirement, much less purchase luxuries. According to a CNBC article, college graduates have an average of $30,000 in student loans. While more jobs are available today than during the Great Recession, many do not require degrees or pay a livable income. This, in turn, can affect an employee’s ability to put money away for retirement, save for a mortgage or pay for rent, and develop a good credit score.

President Obama championed the fact that unemployment has returned to a pre-crisis level, noting that American businesses have created more than 11 million new jobs. The President did not specify what kind of jobs were created or who received them, however. Underemployment and a lack of job opportunities for recent college graduates continue to plague the job market. A Bloomberg Businessweek article highlights how underemployed individuals are often left out of unemployment statistics. Of 1,000 surveyed college students who graduated between 2012 and 2013, 46 percent said their current job did not require their degree. Woodstock Institute’s data show how employment rates vary in communities across Illinois.

Continued high levels of unemployment in many areas, especially in communities of color, dictate that policymakers examine other ways to reduce barriers to employment and expand opportunities. Barriers to employment such as employers’ use of workers’ credit and criminal records, lack of affordable housing and transportation near jobs, and just-in-time/on-call scheduling that creates income volatility and unpredictability are some of the many issues that disproportionately impact low-wage workers, women, and people of color. Policymakers must address these barriers in addition to child care, paid medical leave, fair wages, the right to organize, and other “middle class economics” issues that the President outlined.

We applaud President Obama for bringing “middle-class economics” issues into the national spotlight and urge policymakers to ensure that the millions of low-wage workers who struggle to make ends meet are not left behind.