Democrats' Inflation Hands Workers A Pay Cut

KEY TAKEAWAYS

• Painfully high inflation under Democrats’ misguided policies has turned workers’ pay gains into pay cuts.
• After accounting for inflation, average hourly earnings were down 2.8% in August from one year earlier, continuing a trend of negative inflation-adjusted earnings every month since March 2021.
• Democrats’ stimulus law in early 2021 fueled inflation’s rise, and last month they voted to make things worse by passing their reckless tax and spend spree. 

Painfully high inflation is stretching American workers’ paychecks thin. Inflation has soared during President Biden’s time in office, up 13.2% since January 2021. It’s so bad that it is eclipsing workers’ pay gains. According to Labor Department data, seasonally adjusted average hourly earnings were $32.36 in August, lower than the $33.74 average in January 2021, after accounting for inflation. With year-over-year inflation topping 8% for the past six months, it’s hard for families to keep up, much less get ahead. In one survey of workers conducted in July, 71% said the rising cost of living is going up faster than their pay, up from 58% who said so in February.

Inflation Has Eroded Wages under Democrats

Before the pandemic struck, the booming economy delivered strong pay increases for workers. For most of 2019, nominal average hourly earnings increased by more than 3% on a year-over-year basis, faster than in prior years and above the low inflation of the time. So far this year, average hourly wages have gone up at rates of more than 5% each month compared to one year earlier, partly as businesses have increased pay to attract new workers for millions of open jobs and retain workers they already have. But hold the celebration: high and persistent inflation has been outpacing these wage gains.

In August, inflation-adjusted average hourly earnings for private sector workers overall were down 2.8% from a year earlier, following declines of 3.5% in June and 3% in July. According to Department of Labor data, March 2021 was the last month that they were positive. Inflation has turned average pay gains into pay cuts, including in industries like mining and logging, construction, manufacturing, transportation and warehousing, and retail trade.

It’s been impossible for consumers to avoid inflation, with prices jumping up quickly on essentials like rent, gas, electricity bills, and groceries. A recent Gallup poll found that 56% of Americans say inflation is causing financial hardship for their family. The figure was higher – 74% – for people in households making less than $48,000 per year, but inflation is harming households of all incomes. The same Gallup poll found that people are trying to cope with rising prices by cutting spending, canceling vacations, driving less, and buying cheaper versions of things.

Democrats are focused on the wrong “solutions”

Americans are concerned about the rising cost of living, but Democrats keep showing they are out of touch and focused on the wrong things. In a recent interview, President Biden tried to minimize the historically high inflation, saying: “Guess where we are? We’re in a position where, in the last several months, it hasn’t spiked.” Americans suffering under months of inflation above 8% would hardly call that a success.

Americans need look no further than Democrats’ policies to understand why they are struggling under high inflation. The March 2021 stimulus law sparked inflation’s climb, and since then Democrats have made excuses and tried to cast blame elsewhere. The economy shrank in back-to-back quarters this year, a common definition of a recession. Democrats responded with the same misguided policies from the year before, voting for more reckless spending and massive, job-killing tax hikes. Workers are tired of seeing their paychecks crushed by relentless inflation, and Democrats just keep coming up with the wrong solutions.