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**MARCH 7, 2022**
Kuttner on TAP
Don't Blame Wages for Inflation
****
Workers are at last beginning to get what's owed them. The sources of
price hikes are elsewhere.
The latest jobs report
from the Labor Department, released Friday, was about everything one
could want in a recovery. The unemployment rate fell again, to 3.8
percent, thanks to the creation of a prodigious 678,000 jobs in
February.
Wage growth was 5.1 percent over a year ago. As Dean Baker points out,
that is constructive and not inflationary. Coupled with a growth in the
rate of productivity of 2.3 percent (the average of the last three
years), this translates to an entirely sustainable wage-driven inflation
rate of 2.7 percent. As the
**Prospect** keeps reporting , the
main sources of inflation are elsewhere.
Counting people who've left the labor force, there is still work to be
done in restoring full employment. The total number of jobs in the
economy is still about 2.1 million below pre-pandemic levels, or 2.3
million adjusting for population and age. Of those, 1.2 million reported
that they were unable to work due to the pandemic.
Despite this excellent overall employment performance, the naysayers
seem determined to look on the gloomy side and see wage and jobs
progress as a case for austerity. Jason Furman
,
writing in
**The Wall Street Journal** (at least he is in his natural home),
contends that the increased production from these added workers will not
make up for their increased consumption and more inflation will result.
As the estimable Dan Froomkin
observes, the press in general seems determined to emphasize the
negative. They have decided that Biden is a failure, thus employment
successes are to be downplayed in favor of inflation risks.
One problem is that everyone experiences price increases, while only
some workers experience wage gains or move to better jobs. But that is
no reason to shift to austerity economics. We are only now getting some
wage gains that workers have long been denied.
Inflation will be elevated for a time. But future inflation increases
will be the result of wartime dislocations, not a bonanza to workers.
Let's attack inflation at its source-supply bottlenecks and
corporate price-gouging-and not short-circuit an overdue recovery for
ordinary working people.
****
~ ROBERT KUTTNER
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Follow Robert Kuttner on Twitter
**Robert Kuttner's latest book is**
The Stakes: 2020 and the Survival of American Democracy
.
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