Posts Tagged "inflation"

Workers Stress about Inflation Spike

Emotional toll figureRegular working folks can always find something about their finances to be stressed about. But today’s stress is coming from a new place: a level of inflation this country hasn’t seen in four decades.

A large majority of workers – 76 percent – identified rising prices as having a negative impact on their finances. And among households earning under $55,000, 84 percent are feeling stretched, according to the financial services website Salaryfinance.com.

Nearly half of the 3,000 workers the firm surveyed in February specifically said that inflation is stressing them out, causing anxiety, depression, or both. They said the inflation makes it tough to afford basic necessities or save money.

Gas signThe stress is understandable. The consumer price index has risen 8.5 percent over the past year, and the increase isn’t just at the grocery store or the gas pump. A narrower measure of inflation that excludes food and energy is also up sharply – 6.5 percent for the year. Housing, another necessity, is driving up living costs too.

Workers got some protection from price hikes in 2021, because their wages were outpacing prices, according to the Wharton School. But those gains could disappear this year if inflation continues to accelerate.

Consumers are getting some relief from falling gas prices, which have declined for the fourth straight week, according to Gas Buddy. …Learn More

How Long Can Low Wages Outrun Inflation?

Waitress serving family after the COVID reopeningFederal labor officials are giving Amazon employees in Alabama a second shot at forming a union, and their coworkers in Staten Island are seeking clearance to hold a vote. Americans, more confident of their employment prospects, are leaving their jobs in record numbers, with much of the activity in low-wage industries like hospitality.

Employers, having taken note, are combatting high quit rates and staff shortages by raising pay at the bottom of the wage scale. Also fueling the hikes has been a series of increases in state minimum wages, including automatic annual cost-of-living increases in a growing number of states.

Various economists, using different data sources, have reached a similar conclusion about these recent developments: pay for low-income workers – the same people who suffered the highest unemployment rates during the pandemic – is currently outpacing inflation.

It’s unclear whether that trend will continue in 2022, if, as some economists now predict, inflation becomes more persistent. The government will report December’s inflation rate tomorrow.

But between the third quarters of 2020 and 2021, Arindrajit Dube, at the University of Massachusetts at Amherst, estimated that wage increases for workers in the bottom 30 percent of the pay scale outpaced inflation. Another economist, Geoffrey Sanzenbacher at Boston College, reached a similar finding: inflation-adjusted pay for people with earnings in the bottom 25 percent of all earnings rose last year while workers in the top 10 percent saw a decline.

When inflation first started picking up, economists said it would be a temporary blip that would ease when the goods piled up at West Coast ports started moving onto store shelves. But some economists are changing their tune and worry that high inflation will last longer than they’d predicted.

This would especially be a problem for low-wage workers, who spend most of their income on necessities. Rental housing is a good example. In a recent Federal Reserve survey, consumers estimated their rents would rise by 10 percent over the next year. An increase of this size would mark a new high for low-wage workers’ largest single expense – rent consumes more than half of their monthly income. …Learn More

Federal Minimum Wage is 40% Below 1968

minimum wage figureLargely missing from the debate about raising the federal minimum wage is how much its value has eroded over the past 50 years.

The current federal minimum is $7.25 an hour. If the 1968 wage were converted to today’s dollars, it would be worth about $12 an hour.

At $7.25 an hour, a full-time worker earns just over $15,000 a year before taxes, which is less than the federal poverty standard for a family of two. The Biden administration has proposed more than doubling the federal minimum to $15 by 2025, and one proposal in Congress would begin indexing the minimum wage to general wages so it keeps up with inflation.

A $15 an hour minimum isn’t enough, said one sympathetic Florida contractor who voted in November to gradually increase the state’s mandatory minimum wage to $15. “I’d like to see some of the American people go out there and try to make a living and put a roof over their head and raise a family,” he told a reporter. “It’s literally impossible.”

Customer receiving from McDonald's drive thru serviceBut small businesses say raising the minimum wage would increase their financial pressures at the worst time – during a pandemic. At least 100,000 U.S. small businesses closed last year as governments restricted public gatherings to suppress the virus, and the Congressional Budget Office (CBO) estimates a higher federal minimum could eliminate 1.4 million jobs.

This evidence ignores the complexity of low-wage workers’ situations. Employee turnover is extremely common in low-wage jobs in fast food establishments, for example, and workers frequently have bouts of unemployment that further reduce their already low earning power. Raising the minimum wage could somewhat compensate for their spotty employment and provide more money for essential items. And while the CBO warns of job losses, it also predicts that a higher federal minimum wage would lift 900,000 million workers out of poverty.

Many states have approved incremental automatic annual increases, and a $15 minimum wage has been approved in eight states, including Florida. Voters – over the objections of the Florida Chamber of Commerce – approved raising the state’s minimum wage from $8.65 this year to $15 in 2026.

“We won’t get fifteen for another five years. We need that now,” an Orlando McDonald’s worker, Cristian Cardona, told The New Yorker.

Once again, inflation is a problem. “By the time we get fifteen, it’s going to be even less,” he said. …Learn More