A POLITICO analysis shows that pandemic-era policies reversed the trend toward a widening income gap. The move away from them threatens those gains. Which way will Biden turn?
Progressive lawmakers and economists have questioned whether progress for low-wage workers is being sacrificed in pursuit of price stability. | POLITICO illustration/Photos by Getty Images, iStockFor the past three years, low-income workers have made historic gains in wages even after inflation, reversing the trend of advances for upper-income workers and stagnating pay for laborers that dominated the previous four decades, according to a POLITICO analysis of data from the U.S. Labor Department.
The resulting slowdown will hurt low-wage workers disproportionately. In recent months, the number of people quitting their jobs and the number of vacancies posted by employers have drifted downward, suggesting less mobility and fewer opportunities for wage growth. “For the first time in a long time, workers have gained some power in the economy,” Senate Banking Chair told POLITICO. “Wages and employment numbers are the best we’ve seen in decades. We can’t erase those gains by cutting workers’ jobs or wages in the name of bringing down inflation.”
“There’s never been a better time to organize,” D. Taylor, who heads UNITE HERE, said. | Justin Sullivan/Getty Images Dube, along with two co-authors, dug through Census Bureau data and found that the gains were particularly strong for non-college-educated workers under the age of 40 between January 2020 and September 2022. That raises the possibility that younger generations will fare better than millennials, who entered the workforce in the wake of the Great Recession at low pay, dragging down their potential lifetime earnings.
, who has blasted rate hikes on the Senate floor, on Sunday morning news shows and in interviews. A progressive coalition is also mobilized around her argument that the central bank is limited in how much it can fight this bout of inflation, primarily caused by pandemic-related supply snarls, and so at a certain point, higher borrowing costs just scapegoats workers without clear benefit.
For its part, the Biden administration argues that it has gone to bat for workers in a manner that will sustain them in the long run, despite the Fed’s recent actions. “When the president ran for office, one of the crises that he identified was economic inequality, particularly by place, particularly across race and the challenges that creates,” Boushey said. “He talks a lot about the need to build the economy from the bottom up and middle out.”
On top of that, he said, many of those same people have also slowly seen their government benefits dwindle even as their wages have risen. During the pandemic, many families saw a significant boost from stimulus checks, topped-up unemployment benefits and enhanced child tax credit payments — aid that has all since ended.
Bunny White, 65, is a cashier at pro sports stadiums in New Orleans. She was part of a movement at her workplace to form a union, and they secured their first contract in early April. The result? Her pay will go from $12.50 an hour to $16 an hour, she said. Some of the biggest income gains are visible at restaurants and hotels, both of which were hit hard by the pandemic and then scrambled to find workers as the economy reopened. The average national hotel wage is above $23 an hour this year, compared to $18.74 in 2020 — an increase of 25 percent.
Chip Rogers, who heads the American Hotel and Lodging Association, said that in cities where hotel occupancy is back to normal, the competition for employees has been fierce, and a lot of experienced people who worked in the industry before the pandemic have left.Still, workers who spoke with POLITICO talked about their increased pay as helping them cover basic expenses, not necessarily get ahead.
The cost of living in the U.S. rose 4.9 percent during the 12 months ending in April. | Justin Sullivan/Getty ImagesMeanwhile, consumers are still getting hammered by inflation. The cost of living in the U.S. rose 4.9 percent during the 12 months ending in April, according to the consumer price index, well above where the Fed wants it to be.
The policy debate around the interplay between inflation and wages is also, in part, a proxy fight about government aid to the economy, particularly the $1.9 trillion American Rescue Plan that passed soon after Biden took office. To supporters, the booming job market looks like an endorsement of that choice, especially in contrast to how long it took workers to recover in the wake of the 2008 financial crisis.
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