Inflation Is Canceling out Wage Growth – Next City

Inflation Is Canceling out Wage Growth

(AP Photo/David Goldman, File)

The 2018 U.S. economy is “booming,” “strong,” and “firing on all cylinders,” if headlines are to be believed. But overall, inflation is erasing wage gains, according to numbers released by the Labor Department last week.

The cost of living was up 2.9 percent from July 2017 to July 2018 — and that inflation rate outpaced a 2.7 percent increase in wages over the same period, the Washington Post reports. The average U.S. “real wage,” i.e. a federal measure of pay that factors in inflation, is slightly lower than it was a year ago.

The Post reports:

Inflation hit a six-year high this summer, in part because of a jump in energy costs. The price of a gallon of gas has increased 50 cents in the past year, up to a national average of $2.87, according to AAA….

Consumers are also paying more for housing, health care and automobile insurance, the federal government reported Friday. Additional price increases could be coming as President Trump’s new tariffs boost the prices of cheap imported products on which U.S. consumers rely. And many economists warn that growth might have peaked for this expansion.

Those high costs — particularly for housing — have a ripple effect on city economies. From 2000 to the end of 2017, median rents had increased by 9 percent, but median renter household incomes had decreased by 11 percent, Angel Ross wrote in an op-ed for Next City last year. In 2017, nearly 50 million people nationwide lived in rent-burdened households, and those dollars often flowed away from local economies.

“The housing affordability crisis is not only taking a toll on renters, it’s also impacting municipal pocketbooks,” Ross wrote. “Research from the Urban Institute shows how renters’ economic and housing insecurity drains city budgets: In a typical year, one in four households experiences an income disruption due to job loss, health or a pay cut of 50 percent or more. And this has major cost implications for cities when it comes to homeless services, unpaid utilities and uncollected property taxes.”

According to the Post, most of the benefits of Trump’s strong economy have flowed to the top — to already high-paid workers, stock market investors and corporations. Relying on data from the Economic Policy Institute, the paper also reports that the bottom 10 percent of the workforce has seen modest gains in recent years, likely due to a number of minimum-wage increases passed by cities and states. But for workers in the middle, wages measured from 2009 to 2017 stayed flat or were slightly down.

Some good news: Key housing programs received several funding boosts under Congress’ last-minute budget bill passed in March. While the dollars still fall short of what’s needed, in many cases, increases to the Community Development Block Grant and Section 8 will at least help cities in assisting some of their rent-burdened residents.

Rachel Dovey is an award-winning freelance writer and former USC Annenberg fellow living at the northern tip of California’s Bay Area. She writes about infrastructure, water and climate change and has been published by Bust, Wired, Paste, SF Weekly, the East Bay Express and the North Bay Bohemian.

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Tags: jobsincome inequalityminimum wage