Fifteen bucks ain’t what it used to be.
Sen. Bernie Sanders and his liberal band of Robin Hoods pushed hard to make $15 an hour the national minimum wage, arguing it would be a gigantic step in reducing poverty and bringing dignity to work.
It never happened as a policy. But the marketplace did what the leftist activists couldn’t.
Labor shortages coming out of the COVID-19 epidemic have made the Fight for 15 campaign obsolete. Fifteen dollars an hour has become the de facto minimum wage — almost no one is working for the official $7.25 an hour pay floor anymore.
And even so, employers are still having trouble finding workers and are tacking on benefits such as health insurance, 401K plans and paid college tuition to the higher hourly pay.
In October, the annual wage rate increase reached 4.9%, twice the average of the past two decades.
So what’s happened? Instead of leaving workers flush with cash, their buying power hasn’t increased at all. It went down.
Inflation in October came in at an annual rate of 6.2%, the highest level in 31 years. And the impact on the most common goods purchased is even more painful.
Basic grocery staples such as meat and eggs are up 10% this year. Used cars are up 24%. Cost of gasoline, 42%; furniture, 11%. Fuel for home heating this winter is expected to spike 30% or more.
So even at $15 an hour or more, the goal of a livable wage remains elusive.
Higher labor costs are only partly to blame for the price jumps. Disruptions in the supply chain caused by shutdowns during the pandemic and a reluctance of employees to rejoin the workforce are a major contributor.
So is unprecedented government spending in the name of COVID relief and stimulus. The federal government so far has passed $5.5 trillion in extra spending since the pandemic began. And if President Joe Biden and Democrats get their way, they’ll add another $2 trillion through the Build Back Better proposal being held up in Congress only by the resistance of Democratic Sens. Joe Manchin of West Virginia and Krysten Sinema of Arizona.
Manchin issued a statement last week warning of the damaging affects of soaring prices, an indication that he’s arming himself for a continued resistance against Biden’s huge spending ambitions.
The Biden administration insists inflation is transitory, and will ebb when the economy normalizes. But Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen are now saying the upward push in prices will last longer than they expected, likely remaining strong into the middle of next year.
The administration must take inflation more seriously. It should put a hold on its Build Back Better spending bill until it can gauge whether its hunches about the temporary nature of inflation are right. Flooding more federal dollars into an economy that is already struggling to meet consumer demand is reckless.
And the Fed should consider a more aggressive response. Powell does plan to reduce the bond purchases that were used to prop up the economy during the COVID shutdowns, but has said the Fed will not cut interest rates until the country reaches full employment. With Biden planning even more incentives for Americans not to work, who can say when that will be?
Powell called the inflationary pressure “frustrating.” For Americans living on the economic margins, “disastrous” would be a better word.
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