Obama calls for action on 'profoundly unequal' economy

President Barack Obama says the US must stop viewing its growing "opportunity gap" as a problem just for racial minorities

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President Barack Obama has called for action to remedy what he described as profound income inequality and a lack of social mobility in the US.

He called for a rise in the minimum wage and for stronger collective bargaining laws, among other measures.

He also said his embattled healthcare overhaul would ease one part of American families' financial struggle.

Mr Obama's approval ratings have plummeted in recent weeks amid that law's botched rollout.

While acknowledging the political difficulty of passing any such government action with a divided and acrimonious Congress, Mr Obama's speech in Washington DC gave a broad overview of economic themes for the rest of his term, analysts say.

'Frayed' bargain

The US president said the country had accepted higher levels of economic inequality than other developed nations because Americans "were convinced that America is a place where even if you're born with nothing, with a little hard work you can improve your own situation over time".

But Mr Obama, a Democrat, said rising income inequality had been accompanied in recent decades by diminishing opportunities for social mobility. He faulted tax cuts for wealthy Americans, declining investment in schools and infrastructure, and laws that have weakened labour unions, compounded by broad structural changes in the global economy.

"The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe," he said.

Start Quote

We can't tackle inequality if the economic pie is shrinking or stagnant.”

End Quote President Barack Obama

"The idea that so many children are born into poverty in the wealthiest nation on Earth is heartbreaking enough. The idea that a child may never be able to escape that poverty because she lacks a decent education or healthcare, or a community that views her future as their own, that should offend all of us and it should compel us to action."

The US president argued rising inequality was eroding trust in institutions and reducing civic and community involvement. And he said the "growing gap" was as much about class as it was about race.

To remedy the growing income inequality, Mr Obama called for a rise in the national minimum wage, currently $7.25 (£4.43) - as low as it was during the administration of President Harry Truman in the 1950s in terms of spending power, Mr Obama said.

Several states and cities have raised their own minimum wages, most recently New Jersey and Washington DC.

A proposal is currently being floated in the Senate to increase the national minimum wage to $10.10 in three steps and tie further increases to changes in the cost of living, but its path even through the Democratic-controlled Senate is unclear.

He also suggested targeted programmes for cities and regions hardest hit by the 2008 recession and other sea changes in the US economy, universal preschool education for young children, a shoring-up of the US pension and social safety net schemes, and laws to make it easier for workers to organise into labour unions.

Mr Obama also pressed Congress to extend unemployment benefits to 1.3 million people who have been unemployed long-term, set to expire toward the end of December.

Additional weeks of benefits have been approved since 2009, but on Tuesday, a senior Republican congressman, Representative Tom Cole, said his party opposed an extension.

Also, Mr Obama said US government policy must remain relentlessly focused on strengthening the economy.

"It may be true that in today's economy, growth alone does not guarantee higher wages and incomes," he said. "But what's also true is we can't tackle inequality if the economic pie is shrinking or stagnant."

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