Fed inflation fight could hinder wage gains for lowest-paid workers

Mitchell Hartman Jun 27, 2022
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The Federal Reserve's efforts to deal with inflation could have ripple effects that reach workers in lower-wage jobs. Photo by Chip Somodevilla/Getty Images

Fed inflation fight could hinder wage gains for lowest-paid workers

Mitchell Hartman Jun 27, 2022
Heard on:
The Federal Reserve's efforts to deal with inflation could have ripple effects that reach workers in lower-wage jobs. Photo by Chip Somodevilla/Getty Images
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Fed Chair Jay Powell’s testified to Congress last week, telling lawmakers that as long as inflation’s running as hot as it is right now, achieving maximum employment — the other part of the central bank’s mandate — won’t be the top priority.

That’s likely to take a toll on workers — especially those at the bottom of the education and income scale.

For the Fed to succeed, the job market needs to get weaker to limit wage inflation. 

Wages overall are up just-over 5% a year, but — in leisure and hospitality, and transportation and warehousing, wages are up more than 11% — driven by acute labor shortages as the economy roars back to full recovery. 

But — labor economists warn these outsized wage gains are likely to dry up. As the Fed hikes rates, fewer jobs will be created and competition for labor will diminish. Workers will lose the leverage to demand big wage hikes, signing bonuses and the like. 

Even with recent gains, some of these jobs still offer really low wages. Workers in hotels, bars and restaurants, for instance, average less than $18 an hour.  

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