Every time inflation ticks up, it takes a bite out of workers’ pay and chews away at their bank accounts. And this current stretch of inflation — triggered by a confluence of events, including the war in Ukraine and the ongoing pandemic — has had a voracious appetite.
Making matters worse for US workers is the Federal Reserve, which has embarked on a rate-hiking campaign aimed at not only taming inflation but wage growth, too.
“When the Fed meets and makes its policy decision, most people are not getting that what the Fed is saying is ‘you are making too much money, your wages are rising too fast, and we need to slow the demand for labor, and we need to slow wage increases,'” said William Spriggs, an economics professor at Howard University in Washington, D.C., and chief economist for the AFL-CIO labor union.
But wage growth is not, to a material degree, driving inflation, said Mark Zandi, chief economist at Moody’s Analytics.
“The causality is running from inflation to wages, not from wages to inflation,” he said.
“You cannot simply remove major wheat production, major food oil production, major fertilizer production, major oil production, major natural gas production, major production of [semiconductor] chips used in automobiles and think you’re not going to get inflation,” he said. “When it gets presented in the American news, you get this idea that if our stimulus checks had been lower, and if our wages had gone lower, that we wouldn’t have this inflation. Nobody in the world accepts that as the viewpoint.”
Paychecks won’t stretch as far
America may not technically be in a recession — but to many folks, it sure is beginning to feel like one.
Factoring in inflation, however, real wages are running at negative 3.5% during that…
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