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US policy seeks higher wages

Joe Biden wants American wages to go up. After decades of trying to battle inflation at the end of the last century, the post-pandemic era is seeing a significant change in wages policy.

| 5 min read

There was a time when governments feared inflation and tried to keep wage growth down. The long period of restraint enforced by weak banks and a slow recovery from the crash of 2008-9 started to change that. Now President Biden heralds a new post-pandemic era when one of the main aims of his policy is to get wages up.

He has appointed Vice President Kamala Harris to oversee a Task Force on worker organising and empowerment. She condemns the 15% fall in unionisation of the workforce over the last forty years and wishes to reverse the trend.

The Task Force points out approvingly that: “Union workers make $191 per week more than the average worker who is not a member of a union”. It points to a missing $200bn of spending power resulting from low wages across the economy. It argues that the more union-based jobs they can bring about, the less inequality will stalk the land. Secretary of Labour Marty Walsh attacks the way that the US labour market has increased inequality and shifted power away from workers to corporations and Wall Street.

The President is unlikely to be able to pilot his $15-an-hour minimum wage through both Houses of Congress. He is encouraging Democrat states to raise their minimum wages as they are all able to do this. He has also passed Executive Order 14026 to require a minimum wage of $15 an hour for all labour used on federal contracts from next January. He will use the powers of the state and of his office to talk wages up as much as possible in the private sector, whilst offering the public sector unions support and a better deal.

The administration still refers to President Reagan’s showdown with the Air traffic Controllers, when he fired ones who would not return to work, as a bad moment in US history they would like to reverse.

Big Government returns

This area of policy development is one of several that reveal the Biden Presidency, according to its rhetoric, intends to be a very active ‘Big-Government’ administration. The President wants more open borders and a generous immigration policy. He wants to drive in the fast lane to net zero in an electric vehicle, and intends to promote greater diversity and equality through his White House Gender Policy Council and other measures. He wants to make it easier for people to vote in the hope that will discover more Democrat supporters, has set up a commission to consider changing the recruitment to the Supreme Court so he can change its balance of opinion, and is promoting a major expansion of the state’s role in everything from health to welfare and from infrastructure to technology.

All this is in stark contrast to candidate Biden, and to the words of his Inaugural speech. In these he stressed the need to unite America, to bring people together and soften the divisions. His programme of much bigger government is anathema to many Republicans and does not imply a wish to find compromises between two very different philosophies. So far, he has given the left most of what it wishes, giving the President an easier ride from his own party.

After the opening months the President will have to choose between his two conflicting programmes. He is in negotiation with the Republicans, who wish to scale back the American Families Plan and the Infrastructure Plan to something more affordable and more in keeping with their view of limited government. If he chooses to do a deal, the left will then have worries and may start to make a noise. If he turns down any Republican offer, he will seal his deal with the left of his own party and challenge them to legislate as much of their programme as possible. The President is s shrewd politician. I suspect he fears his own left more than the weakened Republicans for the moment, making a deal over his two large reflation plans problematic.

Meanwhile, work continues to extend the state and drive-up lower pay as a matter of priority and policy. Whilst there are limits to how much pay the President can directly lever, the power of the pulpit and a short-term inflationary background gives him some opportunity to increase pay at the lower ends of the scale.

He will be conscious of the need to get through contentious legislation and a more expansionary budget before the mid-term elections challenge the Democrat hold on Congress. In the months ahead, as the negotiations and compromises proceed, it may emerge we have now seen peak Biden stimulus as the political and economic realities settle in. Meanwhile, the aim is to pay the extra wages out of profits, as there is no love of Wall Street and big business amongst the main economic players of the current administration.

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US policy seeks higher wages

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