Obama's plan turns largely around a key point, that over the last eight years and longer, the wages of all but the top 1 percent of Americans have either remained flat or shrunk. In very short, his plan for fixing that rests on two main things, taking money from the taxes of the top wage earners and giving it to those in the middle class and below. The other point is to reduce the deficit.
One of the problems with this scenario is the fact no one really knows for sure why we have seen that pattern. There are lots of theories but no real proof.
For instance, Alan Greenspan has attributed it to our failing education system, and that increasingly high paying jobs that are being generated by the modern economy require specialized training. Another perhaps more obvious reason is that outsourcing jobs to lower paying countries, i.e. globalization, is causing Americans to lose what were better paying jobs. And there are other theories as well; including that health care costs have absorbed what would have otherwise been wage increases.
Another view is the influx of heavy immigration, with immigrants taking low wages, has caused the average wage to lower, creating a statistical effect that means little. Finally, there is the simple economic fact that as globalization has increased and Americans are more and more competing with a worldwide labor force, our wages are shrinking toward lower wages found worldwide.
Today, the Wall Street Journal reported wages for all categories of educational groups have fallen in that time, except for the highest level, i.e. doctors and lawyers. Even at that level they only saw a 3 percent increase in eight years, the rest have slid backwards on inflation adjusted wages. This pretty much proves that it is a true phenomenon, and not a statistical anomaly have some have argued or the result of low paid immigrants skewing the numbers.
Look for this to be a key issue in upcoming economic debates, as this is the problem that much of Obama's plan turns on to try to resolve. I can tell you now, simply taking more money from the wealthy to give to the middle class is not going to do much except give them some money. It won't raise the wages on their jobs, which is the ultimate answer.
This is a thorny problem, and until some more definitive agreement is reached on what the problem is, it will be difficult to find a solution.
