Inflation is back in the news after several quiet decades. The components of the All Urban Wage Earners and Clerical Workers are listed above, comparing Feb 2020 with a 1997 base of 100, and then Jan 2022 with the same base. The most recent weighting of categories is in the rightmost column.
Overall, consumer prices have risen by a modest 2-2.5% annually, just 59% through Feb 2020 and 75% through Jan 2022. Yes, that is a 10% price increase in the last 2 years: 175/159.
The 3 largest components have shown price rises close to the overall average. The biggest sector, Housing (39%), displays slightly higher inflation, at 72% and 85%, closer to 3% annually, with a possibility of higher rises for the next few years. Transportation (22%) reveals lower than 2% annual inflation with a 45% increase across the full period. Food and Beverage (15%) is close to the average with 64% and 82% growth.
Some smaller areas have seen slow price growth. Apparel (3%) has declined in actual prices during this period. Recreation prices (4%) have grown by less than 1% annually.
Education and Information (6%) prices have grown by 1% annually, but this category includes 3 very different subsectors. Information Technology prices have declined throughout the period. No simple 25- year summary is available. Communications prices have dropped by an average of 1% annually. Education prices have grown much faster, more than offsetting the decline in IT and communications prices. The Tuition, Fees and Child Care measure of prices increased by 165% and 171%, more than twice as fast as overall inflation, roughly 4% annually. College tuition (data not in Fred database) increased by 191% and 196%, about 4.5% per year.
The Other Goods and Services (3%) category mostly contains miscellaneous items that don’t fit cleanly in Housing or Food/Beverage. The category displays faster price increases (3.5%) on average due to the very sharp increase in Tobacco prices (taxes) which have grown 4-fold in 25 years (7%/year). Note that alcoholic beverage prices increased by a little more than 2% annually
Finally, Medical Care (7%) has grown by 116% – 125% during these 25 years, about 3.5% annually.
Overall goods prices have grown slowly and service prices more rapidly. Medical care and college prices stand out for their increases, while the price of housing/rentals is flashing warning signs.
The “real” interest rate is the nominal interest rate minus the inflation rate. It reflects the “real” cost of borrowing. Prior to the “Great Recession”, 2% was a typical “real cost” of borrowing money. To entice lenders to lend, borrowers had to pay some “real” amount extra per year, 2%.
The Federal Reserve did what it could to “ease” monetary conditions and lower interest rates to offset the negative impact of the Great Recession in 2008-9.
By the end of 2011, real rates were ZERO or negative. In other words, the Fed went too far. By June, 2013, rates returned to positive territory, but only reached 0.5%, where they remained through the end of 2017, despite president Trump’s complaints that the Fed was constraining the Trump economy. Monetary policies were “easy” for a very long 7-year period.
By May, 2019, real interest rates were back to just 0.5%, having reached a peak of just 1% for 3 months at the end of 2018. With further “easy” money policy, real rates dropped back to ZERO percent by August, 2019. The economy was now 9 years into recovery. Interest rates should have been higher.
The Fed found new ways to “ease” monetary policy as the pandemic struck in 2020. Real interest rates dropped to -1% and stayed there. Monetary policy has been “easy” for more than a decade. Time for inflation. “Too much money chasing too few goods”. “Inflation is always and everywhere a monetary phenomenon”.
Supply Chain Disruption
The recovery has been faster than anyone expected, but most critically, with consumers less eager to buy “in-person” services, they have greatly increased their purchases of goods. The modern US economy relies on imports and modern manufacturers and retailers hold lower inventories to buffer changes.
Standard macroeconomic theory focuses on aggregate demand versus aggregate supply as the key driver of output, unemployment and inflation. When total demand grows faster than remaining excess capacity of total supply, inflation results. The biggest driver of changes in aggregate demand is the level of government spending (demand) minus government taxation (reduces demand).
Historically, various pressures have kept the federal budget deficit between -3% and +3% of GDP, allowing the government to buffer change in private demand through the business cycle. The large drop from -2.5% to -5% in 1979-82 was a factor that contributed to the last major round of US inflation. A similar decline from -2.5% to -4% in 1989-91 increased inflation, but not on such a large scale. It also served to convince President Clinton and congress to reduce the deficit to ZERO by 1997 and run a surplus for a few years.
The 2001 recession caused a 2.5% decrease in this ratio, from a surplus to a deficit. Bush tax cuts, foreign wars and congressional agreement lead to deeper deficits at 3.3% in 2003-4, before some recovery to -1% in 2007, prior to the Great Recession.
Bush, Obama and congress agreed to spend more to fight the Great Recession, pushing the deficit to a worryingly low -9.8% in 2009. There was no agreement on a second major round of spending, so the deficit improved a bit to -6.6% by 2012 and then to a more reasonable -2.5% in 2014-15. Instead of continuing to improve with the economic recovery, it fell a little, to 3.1% in the last year of the Obama economy.
President Trump’s first order of business was to enact “job creating” tax cuts. Unfortunately, the desired boost to economic growth to fund these tax cuts did not occur. The budget deficit increased from 3.1% to 4.6% of GDP, as the economy reached a record long recovery period of a full decade.
To address the pandemic, congress and Trump agreed to spend money to protect the economy and workers, leading to very large budget deficits of 15% and 12% in 2020 and 2021, respectively. Too much aggregate demand for the level of aggregate supply, so we have major inflation.
Summary
Easy money, easy fiscal policy and a 20% increase in demand for goods leads to major inflation. Like a frog getting boiled as a pot slowly warms up, we became complacent based on the apparently “just right” conditions of the late teens (2012-19). The federal budget deficit needs to get back above -5%, real interest rates need to become positive and consumers need to rebalance to consume more services and less goods. I don’t think we’ll see 7% inflation for 2022, but it looks like 4-5% is a good bet. Hold on.
Politics
Biden deserves a good share of responsibility for the government spending budget deficit, as he was seeking to make it even larger. I give him a “pass” on consumer demand for durable goods since it mostly occurred before he started. I also give him a “pass” for the loose Fed monetary policy which has been going on for a decade or so. He was wise to reappoint the Fed chairman, who I believe will raise interest rates as needed to get the real interest rate back to a proper level. In the meantime, Biden will pay politically for higher inflation, which has a “real” impact on the wallets of voters.
Ronald Reagan taunted Jimmy Carter with this question to voters in the 1980 debates. It helped him win.
Twelve years later, James Carville helped Democrats return from the political wilderness in 1992 with his advice to Bill Clinton that “it’s the economy, stupid”.
Politicians have used various measures, from unemployment to inflation to the “misery index” to jobs created to productivity to the stock market, to promote their success and detract from their opponents.
I want to focus on one measure, the ratio of the number unemployed to the number of job openings, to highlight the strength of the American economy in the last dozen years.
The Bush economy was widely criticized for its “jobless recovery” following the economically healthier Reagan and Clinton presidencies. The presidency started at close to 1 unemployed person per job opening. The recession pushed this up to 2.5x and then 3.0x. In labor market terms, this is a huge difference. At 1:1 or 1.5:1, unemployed workers expect to be re-employed quickly. At 3:1, some may enter the dark days of the “long-term unemployed”. After 3 years, the economy DID recover to 1.5:1, but it was unable to improve further. The “Great Recession” was a brutal job killer, pushing this measure of labor market tightness up four-fold, from 1.5X to more than 6X before its peak in the first half of 2010, as Obama and congress and the federal reserve bank wrestled with the situation.
Obama: Recovery and “New Territory”
Between April, 2010 and April, 2012, the economy cut this ratio in half, from 6x to 3x, a very solid performance. It took 3 years, until April, 2015, to complete the next 50% reduction, from 3x to the historically “very solid” 1.5X. The economy continued its growth for the next 2 years, but at a slower pace, reducing this ratio to 1.3X.
Trump: Even Better
The Trump economy continued to improve for the first 18 months of his term, reducing this ratio from 1.3X to 0.8X by September, 2018. This was a time of record low unemployment and economists recalculating their standard of “full employment”. While the economy continued to grow, the unemployment rate continued to decline and the stock market continued to climb, THIS measure had reached its minimum before the 2018 mid-term elections. It remained steady at the very positive level of 4 job seekers for every 5 jobs (0.8) for the next 17 months, until the pandemic disrupted everything. The ratio quickly shot up to 5X, not as high as the 6X that Obama faced, but very high. It quickly recovered to 1.4X by the end of Trump’s term. This was partly job recovery and partly fewer job seekers, but it was an amazing recovery in historic terms. Recall that 1.5X was “a good as it got” during George W. Bush’s presidency.
Biden: Even Better, Again !
In the first 6 months of the Biden presidency, this ratio dropped from 1.4X back down to the prior record level of 0.8X. Yes, by July, 2021, there were 5 jobs available for every 4 job seekers. This was as low as the ratio had previously fallen, even as the Trump economy piggybacked on the Obama economy and continued its extraordinary run. The ratio continued to fall in the next 6 months to 0.6X, an unheard-of level. 5 jobs for every 3 job seekers. It’s “no wonder” that voluntary job quits are at unprecedented levels. For, perhaps, the first time in American history, “everyone who wants to work, can find a job”. Whether you are right or left, Dem or Rep, this is “good news”. This is “great news”. Wages for the “bottom 20%” are rising in real terms. Income inequality is declining, a bit. The economy seems to be able to digest this new condition. And, the economy is not done growing, innovating, creating businesses, creating jobs, exporting, etc. About 2% of Americans are likely to be attracted back into the workforce in the next year or two, keeping the headline unemployment rate from going much below 4%, but pushing US real GDP growth to 4% in 2022 and close to 4% in 2023.
Summary
The “Great Recession” and the “once in a century pandemic” have been unable to disrupt the ongoing progress of the American economy and labor market. As a nation, IMHO, we have cultural and political challenges, but we “aught” to appreciate the power of the American economy to move forward.
Many states have legislatures and governors from the same party and voted for this party in both the 2016 and 2020 presidential elections. These states have adopted quite different Covid management strategies. There are 14 solidly Democratic states and 21 solidly Republican states, leaving 15 states with some level of “mixed” political control and influence.
Democratic states average 80%, Republican states 66% and Mixed states 73%. The national average is 72%. Nevada (69%) is the only Blue state below 75%. Alabama, Wyoming and Mississippi have the lowest scores for the GOP at 59-60%. Florida has the highest rate at 75%. The split in world views is confirmed by this measure. The mixed group ranges from Louisiana and Georgia at 63% to Massachusetts (85%) and Vermont (86%).
The overall death rate for the country is 256. The mixed states are similar at 265. The Democratic states average 221 deaths per 100K people. The Republican states average 282 deaths per 100K people. If the Republican states had the same rate as the Democratic states, they would have 59 fewer deaths per 100K people, for a cumulative total of 70,000. Economists use $10M as the value of a life in many cost-benefit calculations, so one measure of the difference is $700B.
California (196) and New York (227) drive the lower D result, but the Dems include higher fatality states such as Rhode Island (305) and New Jersey (344). The mixed states include some relatively high death rates in Michigan (315), Louisiana (329) and Arizona (350). The Republican group includes 3 states below the D average in Utah, Alaska and Nebraska, but 7 states at 300 or higher: Oklahoma, Indiana, West Virginia, Arkansas, Tennessee, Alabama and Mississippi.
Nonfarm Employment Recovery: Nov 2021 vs. Feb 2020
Overall employment is within 2% of the February, 2020 peak for the country as a whole. The “mixed” states have recovered to within 2.3% of the peak. The Democratic states are only at 96.4% of the peak, while the Republican states, on average, are just below breakeven at 99.9%. If the D states had the same level of recovery, there would be 1.8M jobs added in the recovery to date. At the recent median $1,000 per week wage, this would generate $94 billion of income annually.
I used the Feb 2015 to Feb 2020 period to generate a pre-Covid trend growth rate. This was 6.4% for the country, 5.4% for the mixed states, 7.0% for the D states and 6.7% for the R states. This indicates that the Republican faster recovery is not due to prior momentum. I used the 2020/2015 growth rate to create a solid estimate of the 2021/2020 recovery rate for each state (r = 0.63). It confirmed the 3%+ gap between the 2 parties was not due to prior trends. I also checked the percentage of 2019 employment in the leisure and hospitality sector, to see if this was driving the difference, but it did not have a material effect.
Real (inflation adjusted) Gross Domestic Product (GDP), the value of all goods and services produced in the US reached $20.8 trillion in 2020, compared with only $0.7 trillion in 1900. This is a nearly 30-fold growth across 120 years.
Year
Real $GDP (T)
Added $GDP
Percent
1900
0.7
1910
1.0
0.3
46%
1920
1.3
0.3
21%
1930
1.5
0.3
22%
1940
1.8
0.3
20%
1950
2.7
0.8
45%
1960
3.7
1.1
41%
1970
5.6
1.9
50%
1980
7.8
2.1
38%
1990
10.6
2.9
37%
2000
14.9
4.3
40%
2010
17.6
2.7
18%
2020
20.8
3.2
18%
It’s difficult to “digest” 20.8 trillion dollars. But, it is true that the US economy in 2020 was ten (10) times as large as it was in 1952, well into the post-war economic boom period. The population had more than doubled and the productivity of the economy had increased more than three-fold across this period.
The economy is 3 times as large as it was in 1975, when it was entering a challenging period of stagflation, foreign competition, high interest rates, energy shortages, environmental concerns and divided politics.
The economy is twice as large (in real terms) as it was in 1990.
The economy grew by an average of 42% per decade from 1940 through 2000. The last two decades have grown by 18% each, similar to the growth from 1910 through 1940.
However, the amount of growth, measured in real dollars, has continued at a very strong pace. The economy averaged growth of $2.8 trillion per decade from 1970 through 2020. That is roughly the size of the whole economy in 1950! The latest decade recorded a $3.2 trillion increase, larger than the output of the whole economy in 1950, and the second largest growth ever.
US Population
Year
Population (M)
Added (M)
Percent
1900
76
1910
92
16
21%
1920
106
14
15%
1930
123
17
16%
1940
132
9
7%
1950
151
19
14%
1960
179
28
19%
1970
203
24
13%
1980
227
23
12%
1990
249
22
10%
2000
281
33
13%
2010
309
27
10%
2020
331
23
7%
The US population has increased by 4.3 times since 1900, from 76 to 331 million people.
The population doubled from 1900 to 1950 and then doubled again since 1955.
The US added an average of 25 million new residents per decade from 1940 to 2020 (12%).
In the last 30 years, the US has added 85 million residents; the same number as its total population in 1905!
Despite many challenges in the last century, the US population has grown consistently and significantly.
Real $GDP Per Capita
Year
Real $GDP/Capita
$ Added
Percent
1900
9,300
1910
11,200
1,900
20%
1920
11,800
600
5%
1930
12,400
600
5%
1940
13,900
1,500
12%
1950
17,600
3,700
27%
1960
20,900
3,300
19%
1970
27,700
6,800
33%
1980
34,300
6,600
24%
1990
42,800
8,500
25%
2000
53,100
10,300
24%
2010
57,100
4,000
8%
2020
62,700
5,600
10%
Real (inflation-adjusted) output per person has grown 6.7 times since 1900!
It has doubled since 1975, tripled since 1960 and quadrupled since 1945. Yes, today’s economy produces four times as much, per person, as the supercharged Word War II winning “arsenal of democracy”. It produces twice as much per person as the 1975 economy which then appeared to plateau in the face of Japanese import competition.
From 1960 through 2020, the economy has added an average of $7,000 more output per American for each decade.
While improved output/productivity in the last 2 decades has not matched that of 1960-2000, it still added $9,600 of output per resident, more than the total output per resident in 1900. In the last 3 decades combined, the economy has added nearly $20,000 of output/income per person, an amount equal to the total output/income per person in the late 1950’s.
Political views are rationalizations of moral intuitions. They are demonstrably not the result of dispassionate analysis by individuals.
A small number of moral intuitions are broadly held across time and cultures and can be “explained” on the basis of evolutionary pressures on mankind.
The prevalence of the six logically defined and statistically confirmed dimensions differ markedly between liberal and conservative minded people in various cultures.
1. Care/Harm
Desire to protect children and weaker others from harm. Caring, kindness, gentleness, nurturance, compassion, feelings, empathy. Liberals and conservatives both show an interest in this dimension of morality. Liberals value this dimension most highly. Conservative men and libertarians, on average, show much less interest in this dimension.
2. Fairness/Reciprocity/Cheating
In a social setting, there is a need to rely upon others keeping their word, being honest, doing their share of work, etc. Justice, rights, cooperation, deception, trust. Liberals tend to interpret this in terms of equality. Equal rights, equal opportunity and equal results. Conservatives are closer to the evolutionary basis as seen in game theory / the prisoners dilemma / “tit for tat” winning strategy. They highly value proportionality, closely linking results to inputs or effort.
3. Liberty/Oppression
No one wants the “alpha dog” to take advantage of their position. Individual and group opposition to domination, tyranny, restrictions, bullies and cruelty. Liberals and conservatives both value this dimension in modern, western, secular, commercial societies. They define the oppressor differently, with liberals focusing on business and institutional sources of power and conservatives focusing on government and regulators. Libertarians value this dimension most highly. These first 3 sources of morality are more individual oriented, mediating the tensions between individuals and groups.
4. Group Loyalty
Clear commitment to the group. More than “limited liability”. Betrayal, in-group attachment, patriotism, nationalism, betrayal, self-sacrifice, us vs. them, tribe, religion, party, flag, clan, neighbors, family. Conservatives value this dimension very highly, with felt loyalties to several groups. Liberals value this dimension, but not nearly as highly; with a tendency to value the largest groups: nation, humanity, nature. The liberal focus on “diversity” and valuing others, outgroups and the “oppressed” is very different from the conservative worldview. Western, secular, commercial societies value this dimension less.
5. Authority/Respect
Larger groups require some degree of hierarchy. Leader and follower. This is a complement to the liberty/oppressor value. Respect for authority, leader, institution, rules, history. Safety, order, predictability. Obedience, deference, submission. Against subversion, revolution. This is the classic conservative value, supporting the known value/benefits of a given system against the potential value/risks of change. Modern, individualistic liberals tend to not value this dimension highly, instead choosing to “challenge authority”.
6. Purity/Sanctity
The sixth dimension differs from the first 5. It is not so clearly about managing the “individual to group” challenges. It focuses on the disgust/gag reflex to things or situations that are so threatening as to be beyond consideration. This takes place at both the practical and the abstract levels. Degradation, disgust, disease, infection, dirt, germs, contamination, carnality, body, sex. Piety, chastity, temperance, compliance, burning, cleanliness, food rules. Everyone has some sensitivity to this dimension, but conservatives have much higher concern. Research says that conservatives, on average, have a lower interest in new (unsafe, novel) activities or experiences. Moral values 4-6 retain higher priority outside of western, commercial, secular societies. Liberal references to purity may focus on things like the environment.
Haidt is a self-professed “liberal” who intuitively/instinctively rejected the “rational” morality theories he learned in graduate school in the 1980’s. During his early research on alternate approaches, he had the “aha” insights that 1) other cultures have very different moral values and that 2) moral/political views are intuitive and rationalized. He hoped/hopes that liberals can see that their more limited moral palate (3 items) is not the only one and that this difference between including or not including the other 3 bases is a huge insight, even if liberals choose to not value the other 3 dimensions. He analyzed national politics in each election cycle from 2000, highlighting the large advantage that Republican politicians have in monopolizing the 3 other dimensions. In 2016, he advised the Dems to fight against Trump on the “conservative” moral dimensions of loyalty (Putin?), authority/order (Trump chaos/revolution/policy changes), and purity (sex allegations) instead of policy positions or personal character.
Haidt collaborated with a CATO scholar to analyze the 2016 Democratic and Republican candidates for the presidency, analyzing their supporters in terms of the Moral Foundations Theory.
The basic conclusions are supported, but all details are not. The 1 Care / 2 Fairness versus other dimensions emphasis between liberals and conservatives is supported. But, statistically, there may just be individual versus group moral foundations (2 dimensions versus 5-6).
Group? Which group? Small or large? In-group or out-group? Research is now focused on defining questions that clarify in-group versus out-group attraction and then, the difference between liberals versus conservatives, if any.
Academics have been busy working on the details. One criticism is that the 5 or 6 dimensions were defined in an ad hoc manner, rather than part of an overall theory of how man evolved. One group has stepped up to propose a theory that is solely based upon the various forms of cooperation, resulting in 7 dimensions.
On the academic left, Haidt’s “moral equivalence” approach to the 3 modern, secular, liberal values and the 3 historic, religious, conservative values has been sharply criticized. An alternate view that highlights bias/bigotry, social dominance, right-wing authoritarianism, Schwartz Value Theory and Evolutionary/Coalitional Theory (ECT) has been proposed.
Haidt and his colleagues have defined 6 dimensions of moral thinking which underly modern political views that make sense based on evolution. The “west” could clearly learn something about the moral/political views of other societies that did not have the same historical evolution into a commercial/largely secular situation. Politicians could seek to more effectively target their messages to trigger all of these 6 values in their target audiences. Civic minded individuals could promote greater understanding of these insights to lessen the Manichaean “good versus evil” polarization we see in politics today.
Today’s news releases show 6.0M jobs added during 2021 according to the household survey and 6.5M jobs added according to the employer survey. The ADP employer jobs survey released this week showed 6.2M jobs added. The employer reported number of open jobs increased from 6.8M to 10.6M this year. Hence the total filled plus open jobs increased by 10.6M, from 149.3M to 159.6M, a truly incredible expansion of the US economy’s production potential and demand for labor. This is 1M more filled plus open jobs than the December, 2019 peak of 158.6M. Employers are clearly struggling to work this backlog down from the 10-11M range back to the pre-pandemic 6-7M level. This provides the demand side for another 8-12 months’ worth of 500K filled jobs added per month.
The 3 underlying measures use different definitions and survey methods, but in the long-run they generally agree.
The monthly changes are much less consistent. Much of the media highlighted that the employer survey data showed just 200K jobs added in December. The household survey indicated 600K jobs added, while ADP reported 900K jobs.
It’s best to look at all 3 measures to try to get a best estimate of the most recent changes. I see roughly 500K new jobs added each month from July through December. A flat number, not an increasing one. The first half of the year was probably adding a few more jobs each month, closer to 600K each.
From 2000-2009, the dynamic US labor market laid off workers at a consistent 2M per year rate. This declined a bit to 1.8M per year in the next decade. After the pandemic, the economy quickly returned to this 1.8M per year rate from July to December, 2020.
It has dropped and remained at a 1.4M per year rate at the end of 2021, fully 30% lower than its normal level. Good news, indeed.
Unemployment Claims
Historically, the US economy generated 350,000 new unemployment claims each week. This measure declined slowly after the Great Recession, reaching a nice 300,000 level in 2014. It slowly declined to a record low of 205,000 in Feb, 2020. The disruption rate dropped back down to the very high but stable 800,000 level from Aug, 2020 through Apr, 2021. In the last 8 months the rate has dropped very quickly back down to the record low 200,000 level!
Cumulative individuals claiming unemployment benefits has historically varied with the business cycle. We can see the increase from 2M to 4M at the turn of the century. The “Great Recession” had a greater negative impact, driving this number from 2M – 4M – 7M. This number fell throughout the extended business cycle recovery period, breaching 2M in Feb, 2017 and reaching a low of 1.7M in Feb, 2020. The unemployed number reached a full order of magnitude higher at 23M during the pandemic, then dropping to 13M in Sep, 2020 and 4M in Mar, 2021 and 2M in Nov, 2021 and finally equaling the record low in December, 2021 at 1.7M. This is great news!
Unemployment Rate
The unemployment rate has reached 4.2% and will return to its historical low of 3.5% in the next 4-6 months.
African-American unemployment was typically in the 8-10% range. It was driven down to the 5-6% level after the Great Recession during the extended business cycle expansion period. The rate is now below 7% and falling.
Hispanic American unemployment averaged 5-7% in the 2000’s. It spiked after the Great Recession to 13%, then slowly declined to 4.3%. It has since recovered to 5.2% and is dropping quickly.
Broadly Defined Unemployment
Broader definitions of unemployment show the same swift recovery from the pandemic situation.
Labor Force Participation
Labor force participation among the core 25-55 year age group reached an historic, and possibly unsustainable high of 83% in late 2019. It stayed around 81% at the end of 2020 and has since improved to 81.8%. This is one of the few labor market indicators that clearly shows that we have NOT “fully recovered”. There is 1% of the population waiting to be attracted back into the labor force.
The voluntary “quit” rate has doubled since the good side of the “Great Recession”. It is 50% higher than during the very favorable labor market of 2018-2020. Employees are confident that they can leave their current employer and find another position quickly.
This is the CRAZY positive labor market chart. Historically, we see 3-5M job openings. Expansion to 6M in 2016-17 as the post Great Recession recovery faced its “end”. But, the expansion continued even further, with 7M open positions available in 2018-20. The economy recovered to 6.8M open positions in Dec, 2020. This figure has since climbed to an incredible 11M open positions, more than double the historic norm.
Historically, economists generally emphasized the negative short-term and long-term impacts of significantly higher, broadly applied minimum wage increases. Studies in the 1990’s indicated that the negative effects of moderate minimum wage increases could be relatively small, so economists’ articles have been more balanced in the past 3 decades.
Some more liberal leaning economists have been actively suppporting minimum wage increases as the US minimum wage has continued to decline on a real, after inflation basis, US minimums have fallen compared with other developed countries and the US distribution of income has become more unequal and poverty rates have not fallen despite US economic progress.
Some economists even point to the self-serving benefits of higher minimum wages for corporations, including greater productivity, innovation and retention.
But, large corporations are increasing their own minimum wages and trying to position themselves as supportive of “common sense” public policy changes that do not impact themselves very much. Some critics say that this is because large corporations can absorb higher minimum wages through their economies of scale and pricing power, while smaller businesses cannot and will go out of business, resulting in further growth of power for large businesses.
Perhaps more importantly, large corporations in a variety of industries have voluntarily increased their minimum wages from the $12/hour to the $15/hour plus range in the last 2 years. (Out of self interest).
Wages for less skilled and less experienced positions are increasing – dramatically – in the USA – in the last 5 years, especially since the pandemic reduced the supply of labor, and going forward. Larger companies have seen the costs of higher turnover and decided that they are going to offer relatively higher wages and find ways to generate enough economic value added to justify these marginal (incremental) investments. Politicians in left-leaning and centrist areas have pushed through higher minimum wages. Lower experience and lower skilled workers are able to take advantage of this situation. This is “good news” for these individuals. It is also “good news” for the economy because it has prompted firms to find ways to restructure work, processes, tools, technology, etc. to add more value from each employee.
