The Fed Thinks the Economy Is Healthy — But It’s Not
Working families aren’t sharing in the nation’s financial recovery. While businesses are reporting record profits and adding thousands of workers to their payrolls, American livelihoods continue to be at risk. That’s why the Federal Reserve’s hints at raising interest rates are so troubling.
We need an economy that works for all Americans — not just the wealthiest.
In September, I joined AFL-CIO leaders at a meeting with Federal Reserve Chair Janet Yellen where we warned that raising interest rates would further harm the ability of working families to improve their wages and standard of living. Workers aren’t sharing in productivity gains and employer profits, we reminded her.
The numbers don’t lie. The National Employment Law Project demonstrated that real wages for most workers actually have declined since the end of the Great Recession in 2009. Hardest hit are lower-income workers. Because real wages determine purchasing power, it’s clear that most workers haven’t begun to regain their economic footing.
Seven years after the Great Recession, wages of young high school and college graduates are still lower than they were in 2000, according to the Economic Policy Institute. At the same time, the Wall Street Journal reports the wages of workers in typical middle-class jobs — manufacturing, transportation, education and health services — are “growing at a substandard pace.”
Contrast this stagnant wage picture to productivity growth, which, according to another Economic Policy Institute study, grew 72 percent between 1973 and 2014.
Not surprising, the 1 percent continues to do well. Corporations are hoarding profits and rewarding shareholders instead sharing new economic gains with their workforces.
But what about the rest of us? The Fed’s mandate is to work for maximum employment. Yet, for the 6 million part-time workers who would like to land a full-time job, the assertion that the economy is near full employment is just laughable.
In contract bargaining this year, we’ve seen very wealthy companies seek to shift higher health care costs to workers and slash retirement security. We’ve seen companies look to cut good, full-time jobs that support families and communities, only to replace them with temporary and part-time work with limited or no benefits.
The current struggle of working families will only deepen under higher interest rates. It’ll make it more expensive for us to pay our credit cards, student loans, mortgages, car payments and more. That means we’ll have less cash in our wallets to purchase the goods and services we need. And when families don’t have money to spend, that extreme budget tightening quickly ripples throughout our communities. Local businesses earn less and hire fewer workers, and the economy slows.
We’re making it clear: the American Dream isn’t only for Wall Street bankers and the 1 percent. It’s supposed to be for all of us. Workers helped corporate America make a full recovery. Now it’s our turn.
We’ll know we’re moving in the right direction when growing productivity gains boost workers’ pay and good jobs, not just corporate profits. Until then, raising interest rates is exactly the wrong call.
