Wages Are Still Not to Blame for Inflation
Earlier this year, I wrote a blog based on the Bureau of Labor Statistics February reports explaining how stagnant wages were not causing inflation, as some Democratic leaders were alleging in order to promote their immigration-increasing policies.
BLS September reports further show how inflation is outpacing wages. According to these reports, while wages increased by 5.0% over the previous 12 months, inflation increased by 8.2% over the same period. Dr. John P. David, Professor Emeritus of Economics at West Virginia University Institute of Technology, explains that these factors indicate how wages are responding to inflation, not causing it.
As this Economic Policy Institute (EPI) chart featured in this video shows, recent wage gains are not the driving force behind inflation.
The April 2022 report by EPI entitled "Corporate profits have contributed disproportionately to inflation. How should policymakers respond?" explained that wages accounted for only 7.9% of the overall price increases in the nonfinancial corporate (NFC) sector since the second quarter of 2020. The report summarizes:
In short, the rise in inflation has not been driven by anything that looks like an overheating labor market—instead it has been driven by higher corporate profit margins and supply-chain bottlenecks.
Recent, modest wage gains for some are not driving inflation. Tell Congress that struggling workers could do better with less immigration, not more.
Recession Warnings Amplify
Economists have been warning of the possibility of a U.S. recession since the Federal Reserve began hiking interest rates this year to combat inflation.
Now, according to a Bloomberg column published this month "[a] US recession is effectively certain in the next 12 months."
Former Treasury Secretary Larry Summers, who predicted rising inflation this year despite his many naysayers, believes that "more likely than not" the US will face a recession.
Immigration Further Threatens Worker Bargaining Power During Recession
The October 7, Washington Post column "The job market is slowing, and this could just be the beginning" details how the slowing economy is negatively impacting the U.S. workforce:
A robust job market that has defied expectations for years is showing more concrete signs of slowing.
Companies' job postings have fallen sharply. Layoffs are creeping up. And new data released Friday show that U.S. job creation has slowed to its lowest level in nearly a year and a half."
In addition, the October 24, Washington Post column "Labor movement's next big challenge: Keeping momentum as economy slows" explains how recent worker gains in bargaining can be undermined during recession periods:
[A]s the economy teeters toward a downturn in coming months, the window for cementing more victories could be narrowing. Already job openings have fallen, and some companies — particularly in technology and interest-rate sensitive sectors such as mortgage finance — have ordered hiring freezes and layoffs, igniting fears that the paradigm of power in favor of workers could be short-lived."
Increased costs hurt American families. The solution isn't to depress Americans' wages.
LISA IRVING is a Content Writer for NumbersUSA's Media Standards Project
