The affordability crisis can be solved, according to America’s top bank official.
It’s simple: Give Americans a raise.
This is not news to us, as the productivity gap has become wider with each year. But to see the Fed Chair make the argument is a newsworthy moment to say the least. We hope that his words will give the issue the priority that it desperately needs.
“The best way to fix Americans’ cost-of-living problem is to give workers bigger raises, Federal Reserve Chair Jerome Powell said last week.
The problem: That solution looks broken, too. The US job market has been stagnant in recent months, and paycheck growth has been falling steadily for more than three years. We’ll get a clearer picture Tuesday when the Bureau of Labor Statistics publishes the delayed October and November jobs reports.
Affordability has remained issue No. 1 in poll after poll, despite more than a year of relatively normal inflation and over two years of wage growth outpacing price hikes. That’s because Americans haven’t yet adjusted to the price shock from a few years ago, when inflation surged to a four-decade high.
Economists, business leaders and politicians have debated the best solution to make America’s cost-of-living feel affordable again, including increasing health care and housing subsidies and reducing tariffs. But Powell, in laying out the reasons for the Fed’s recent interest rate cuts, offered a much simpler solution: Just pay people more money.
‘We are going to need to have some years where real compensation is higher … for people to start feeling good about the affordability issue,’ Powell said last week at a press conference after the Fed cut rates. ‘We are trying to keep inflation under control, but also support the labor market and strong wages, so that people are earning enough money and feeling economically healthy again.'”
For the rest of the story, visit CNN here.