Written by Will Hekman
CNBC recently published an article titled, “The upside to inflation: rising wages” which argued that the rise in consumer prices is a good thing because wages for workers are also going up. While wages are going up, it is not because of rising prices but mostly due to a labor shortage that has hampered the Biden Administration since day one, which has forced companies to increase wages to stay competitive.
Americans have become increasingly concerned with inflation since Biden took over, in part due to the fact that he and his administration are leading the country through the end of the COVID-19 pandemic. But much of the nation is still dealing with the pandemic, with businesses closed and schools still not fully open, many Americans simply can not afford the rise in prices.
Back in May, consumer prices in the United States increased at its fastest annual rate in 13 years, as the economy was reeling from the pandemic and subsequent shutdown of the economy during the early months of the pandemic. At the same time, the Consumer Price Index also rose 5%, more than the expected 4.7%. Core CPI rose 3.8%, the most since June 1992. While prices have increased, it is true that workers wages have increased. Average hourly earnings rose .3% month to month last June and 3.6% year over year according to the Labor Department. Despite this, the problem of labor shortage continues and the Biden Administration has seemingly done nothing to stop it, which has led companies affected by the shortage to offer cash bonuses upon hiring. “One of the major challenges for employers, along with finding workers, is to retain their current employees and one way to do that is to offer current employees a new opportunity and increased pay,” said Mark Hamrick, senior economic analyst at Bankrate.com. According to the job site Indeed, 4.1% of companies offered cash bonuses or incentives in June, which is double the rate of June 2020.
Many economists fear that a rapid increase in wages could cause companies to raise prices even more, creating more inflation and creating a bigger problem. The Biden administration has denied this viewpoint and along with their continued denial of an inflation crisis as Biden said back in May, “A lot of companies have done extremely well in this crisis, and good for them.“We have more than ample room to raise worker pay without raising customer prices.”
With the ongoing labor shortage and rise in prices, the Biden Administration could see an inflationary crisis that has not been seen since the days of Jimmy Carter.