As Inflation Rises, It’s Even Harder to Get a Raise
Hourly earnings in June grew 2.7 percent from a year earlier. That’s more or less in line with the pace of the past two years. But now those modest wage gains are worth less in the real world. The reason: The prices of goods and services are picking up. In May, inflation hit 2.8 percent and grew faster than wages, which increased 2.75 percent.
.. The White House has contended that corporate tax cuts, like those enacted last year, will prompt companies to make investments that improve productivity and thus enable them to pay employees more. (Productivity measures output per worker.)
So far, that virtuous cycle does not seem to be taking hold. And some economists are skeptical that it will. Companies have had the ability to invest cheap capital for years, and wages have not risen strongly.
.. “A lower cost of capital may lead to more investment that may lead to more productivity growth, but to assume that will trickle down to middle-class wages flies in the face of everything we’ve seen for the last 20 years,” said Jared Bernstein
.. the effective personal tax rate had not changed much in the past year, edging down to 12.21 percent in May, from 12.25 percent a year earlier.
.. He noted that inflation-adjusted wages had in recent years grown more or less in line with productivity, which has itself been lackluster.
But wages could soon outpace productivity, Mr. Zandi predicted, because companies will have to pay higher wages to attract and retain workers.