‘Cutting jobs to curb inflation is not good idea’
WASHINGTON – Federal Reserve Chairman Jerome Powell’s plan to address inflation by slowing down the economy has raised concerns among low wage workers.
Worried that wages for all workers are rising too fast, the Federal Reserve is enacting a series of interest-rate hikes designed to curb economic activity. Democrats fear that the move will increase unemployment.
Senate Banking Committee Chairman Sherrod Brown said that cutting jobs or wages in the name of fighting inflation is not a good idea.
According to The Politico — an investigative news website – the first 14 months of the Biden administration and the last 10 months of the Trump era had brought rapid wage growth.
But since then, both wage and price growth have cooled in the wake of aggressive rate hikes by the Fed.
The pandemic-era spending had injected trillions of dollars into the economy, spurred consumer spending and had put workers in ultra-high demand.
Experts believe that 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.
Labor Department figures show that incomes for those earning $12.50 an hour nationwide rose 5.7% from 2020 to 2022.
The numbers are impressive when compared to the increase of just 3.9% between 2009 and 2017.
Wages for low-wage workers rose just 3.1% during that period when inflation is factored in.
The progressive think tank Groundwork Collaborative has also warned against policies that lead to unemployment.
Economists at the Federal Reserve have predicted a mild recession later this year. The cost of living in the U.S. rose 4.9% in the 12 months through April.
Over the past three years, while low-income workers enjoyed historic wage gains, the same time price rise ate into incomes of the higher-earning workers.
Adjusted for inflation, their incomes have fallen by about 5% in recent years.
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