Second in a Series on the American Middle Class
“Your beat up buck won’t be worth a cent…
Prices’ll fly to the firmament.”
“Talkin’ Inflation Blues” by Tom Glazer
The city of
Some 21 states currently require employers to pay hourly wages above the federal minimum.
Here’s a more revealing wage number: $24.31. That’s the average hourly wage for an American worker in April. A year ago it was $23.82, so our average wage increased only 49 cents an hour over the last year, or just under 2 percent. That’s under a thousand dollars in average pay increase annually. So after adjusting for inflation, real wages have increased about 0.5 percent in the last year. This is a disappointing trend. Unfortunately, wages have been stagnating in relation to the cost of living for more than 35 years.
The current commotion over the minimum wage does not address our greater problem, which is that many qualified adults cannot find gainful employment and are taking low paying jobs. Minimum wage positions make sense for teenagers, many of whom are working their first job and attempting to establish a solid employment track record. But to support a thriving middle class,
Wage growth often triggers inflation, as employers compete to attract better workers. While this is good for salary levels, it hurts middle class purchasing power in the short term. Inflation isn’t close to the Federal Reserve’s official target rate of 2 percent. In an effort to spur growth by forcing savers to deploy capital, the Federal Reserve has been attempting to create inflation on its own. A much more healthy economic progression, however, would be to allow market forces to inflate the currency rather than continued Quantitative Easing by the Federal Reserve. The best we can hope for is to see wages and inflation rise naturally, separate from artificial government stimulus.
Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, chartered financial consultant and accredited investment fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” and fiduciary registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.