Republicans and Democrats agree on one thing: The labor shortage's wage gains are great
- Democrats and Republicans both see the wage boom as a positive development from the
- Record-high quits and slow hiring forced businesses to raise wages at the fastest pace in decades.
The labor shortage has, for the most part, been another source of partisan disagreement. Democrats say it gives workers much-needed bargaining power, while Republicans have raised concerns around small businesses struggling to get back on their feet.
Yet members of both parties agree on one thing: Wage gains made during the shortage have been welcome and long overdue.
In a year filled with new COVID-19 variants and historic
Democrats were quick to cheer the trend when it emerged in early 2021. President Joe Biden urged employers seeking scarce workers to "pay them more" if they wanted to hire faster. The president reiterated his stance on January 7, saying recent wage gains and record-high worker quits were signs of a strong labor market, not a faltering recovery.
"They're moving up to better jobs, with better pay, with better benefits," Biden said. "This isn't about workers walking away and refusing to work. It's about workers able to take a step up to provide for themselves and their families."
Many Republicans agree, albeit with slightly different verbiage. For Rep.
"We've seen low-wage appreciation without the government having to come in and raise the minimum wage through more rules and regulations by sector," he told Insider.
Comer's state is among those hit hardest by the shortage. Data out Friday showed Kentucky had a job-opening rate of 6.8%, one of the highest in the country. The state is also struggling with an unusually high quit rate of 4.2%.
Still, some Republicans aren't convinced the free-market explanation is so clear-cut. Wages have risen to decade-high rates but so has inflation. The majority of workers are "still losing money every time" they go to the grocery store because of higher prices, Sen.
"I don't think it's just the free market at work. You can't have a shock to your economy like we have had with the pandemic and not have it change things," Kennedy said. "And we don't even know yet ultimately what those changes are going to be."
Productivity is also complicating the picture, Sen.
Productivity — as measured by output per hour — soared through the pandemic as businesses learned how to operate with fewer workers. The adoption of new technologies like QR-code menus and automation also boosted workers' outputs.
Wage growth and productivity are, so far, moving in harmony, according to Federal Reserve Chair Jerome Powell. Those developments helped keep rising wages from being "a big part of the high inflation story," he said in a December 16 press conference. If productivity stays strong, the wage boom can continue without plunging the US into a new inflation nightmare, he added.
"If you had something where real wages were persistently above productivity growth, that puts upward pressure on firms and they raise prices," he said. "It would take something that was persistent and material for that to happen, and we don't see that yet."
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