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US Federal Reserve says its goal is ‘to get wages down’

US Federal Reserve chairman Jerome Powell said his goal is “to get wages down,” complaining workers have too much power in the labor market. Economist Michael Hudson says this is “junk economics,” and corporate monopolies are driving inflation, not wages.

construction workers US wages
Construction workers in Houston, Texas in 2021

The chairman of the US Federal Reserve, Jerome Powell, said his goal is “to get wages down.”

In a press conference on May 4, Powell announced that the Fed would be raising interest rates by half a percentage and implementing policies aimed at reducing inflation in the United States, which is at its highest level in 40 years.

According to a transcript of the presser published by the Wall Street Journal, Powell blamed this inflation crisis, which is global, not on the proxy war in Ukraine and Western sanctions on Russia, but rather on US workers supposedly making too much money.

“Employers are having difficulties filling job openings, and wages are rising at the fastest pace in many years,” Powell complained.

The Fed’s proposed solution: bring down wages.

There are more job vacancies than there are unemployed people in the United States, as the economy recovers from the Covid-19 pandemic.

Powell claimed this discrepancy between job vacancies and unemployment is due to high wages, which discourage workers from taking bad, low-paying jobs with few benefits, and therefore give them too much power.

“Wages are running high, the highest they’ve run in quite some time,” the Fed chairman lamented.

Workers need to be disciplined by the labor market, he insisted.

Powell argued, “There’s a path by which we would be able to have demand moderate in the labor market and have—therefore have vacancies come down without unemployment going up, because vacancies are at such an extraordinarily high level. There are 1.9 vacancies for every unemployed person; 11½ million vacancies, 6 million unemployed people.”

Powell aims to do this by reducing wages.

“By moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that,” he said.

The Federal Reserve chairman did concede that “these wages are to some extent being eaten up by inflation.” But Powell blamed that rising inflation on increasing wages, which economist Michael Hudson says is an example of ridiculous “junk economics.”

Powell was first appointed Fed chair by Donald Trump in 2018. On May 23, 2022, he started his second four-year term, after being re-nominated by President Joe Biden and confirmed in a landslide bipartisan Senate vote of 80-19.

Inflation is rising faster than US wages

The US federal minimum wage is just $7.25 per hour, and has remained at that level since 2009, despite significant increases in inflation.

In 1968, the US federal minimum wage was $1.60, which would be equivalent to $13.29 in 2022 dollars.

It is true that the minimum wage has increased in recent years in numerous US states, especially ones that have significantly higher costs of living like New York and California. But real wages have not kept up with inflation.

Even the Washington-based think tank the Peterson Institute for International Economics, which is infamous for its avid promotion of neoliberal policies, acknowledged in a January 2022 study, “US wages grew at fastest pace in decades in 2021, but prices grew even more.”

The report explained:

Since December of 2020, nominal wages and salaries were up 4.5 percent, the fastest increase since 1983. These increases bring nominal wages and salaries to 1.2 percent above their pre-pandemic trend.

Prices, however, have also risen rapidly, and so inflation-adjusted wages fell by 4.3 percent at an annual rate over the last three months, 2.4 percent over the last year and 1.2 percent lower than they were in December 2019.

Inflation-adjusted wages should have grown 2.1 percent over this period if pre-pandemic trends had continued, leaving real wages well below their pre-pandemic trend.

While nominal wages have still grown faster in some sectors relative to its pre-pandemic trend, all sectors have seen below-trend real wage growth.

Michael Hudson: Inflation is caused by corporate monopolies, not labor

Economist Michael Hudson responded to these remarks by the Fed, analyzing the inflation crisis in a May 13 panel organized by the International Manifesto Group.

“Inflation is basically the excuse that right-wing governments have for trying to lower wage levels by blaming the inflation on rising wages,” he said.

“What economists like to blame it [inflation] on is labor, on rising wages, on government social spending, and of course on Russia trying to break away from America’s unipolar international order,” Hudson explained.

He recalled his time working at Chase Manhattan Bank in the 1960s. Hudson’s boss was Paul Volcker, who would go on to serve as Federal Reserve chairman under US presidents Jimmy Carter and Ronald Reagan.

He noted that Volcker had “always said that the big concern of finance is wage gains will mean that the purchasing power of all of our investors, who have bank accounts, and stocks, and bonds, will have less power over wages. And our class interest is in increasing our power over wages, so we’ve got to keep wages down, even if it causes a recession. That’s basically the Federal Reserve’s policy.”

“The present Federal Reserve chairman, Jay Powell, came right out and announced that the Biden administration, Democratic Party policy is quote, ‘to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially’,” Hudson continued.

“In other words, you want to keep the finance, insurance, and the stock market, real estate sector going; you just want to squeeze down wages somehow.”

“So the objective of all this is that, if labor wants to get a job, and the health insurance that goes with it, then labor will have to lower its wage levels. That’s the current US government policy.”

“Well it’s junk economics, of course,” Hudson continued. “Today’s inflation throughout the world, not only in the United States but now in Europe, is led by pure monopoly powers, headed … by energy and food prices.”

“The United States and NATO are trying to blame inflation on Putin and Russia not exporting oil and gas to Europe, as a result of the NATO sanctions against it, but gas hasn’t stopped yet, and … the US oil companies have said that, looking forward, they see a supply problem, and they’re raising prices now even though the supply of oil hasn’t really changed at all.”

“So you have supply being fairly constant, but prices going way up, because the oil companies say, ‘We anticipate they’ll go up, therefore we’re raising oil prices, because we can.’ Well, the same thing is happening in agriculture.”

“You’re also having rent rising as a result of the plunge in home ownership rates, that started with President Obama’s mass evictions of the victims of junk mortgage lending.”

“And the private capital investors that are taking over all of the houses, the owner-occupied houses that have defaulted, they’re being sold off, and you’ve had home ownership rates falling by about 10 percent in the United States since 2008.”

“Well now you have companies like Blackstone very sharply rising rents. In New York they’ve been jumping by about one-third in the last year. So again, with the same amount of real estate, prices are going way up.”

“So none of this can be blamed on labor,” Hudson stressed.

23 Comments

23 Comments

  1. Josh

    2022-05-25 at 07:45

    I really like articles like this where you cover it from both the perspective of what the mainstream media and financiers have to say, but counterpose that with other information directly refuting those claims. These also help me to better understand things like recession, inflation, etc. and what their real causes and effects are.

  2. Zach

    2022-05-26 at 10:09

    Sounds like Powell needs to lead by example and lower his salary to federal minimum wage. You first, Jerome!

    • Mark

      2022-05-28 at 15:34

      I was thinking the same thing. Next should be congress and the senate. Then the CEO’s and the lobbiest’s. How will lower wages create more workers? 6 million people looking for a job with 11.5 million jobs out there. You think the guy offering the lowest wage is going to be the first one to fill his position? Smoke another bowl.

    • Omar

      2022-05-31 at 07:19

      I agree, Jerome first and everybody who agrees with Powell. It’s crazy to think that. Lowering wages will further bring homeownership lower and bring up eviction and put pressure on the rental market raising vacancy creating another Fannie Mae and CMBS default run.
      Stop printing money! Award the worker by working not giving a handout.

  3. Atari Fun

    2022-05-26 at 10:46

    Fed wants Wages down really? WTF Prices won’t go down. Fuck the government and fuck corporate america!

  4. Lynn Wood

    2022-05-28 at 00:51

    In 1964 the Federal Minimum Wage was $1.

    The $1 Federal Reserve Note of that time was backed by 1/35 of a fine troy oz of gold.

    That amount of gold is now priced at $52

    The $1 Silver Certificate of that year, was backed by a little more than 77/100 of a fine troy oz of silver.

    That amount of silver now priced at $17.

    The $1 Federal Reserve Note of today is worth less than 2¢ of the value the $1 Federal Reserve Note held in 1964.

  5. Kytter

    2022-05-28 at 14:36

    Dear president Biden. I voted for you. I am beginning to think it was a mistake. I assume this idiot was put in place by you. If so, perhaps you should rethink that. It is obvious he is a Republican shill.

    • Ray

      2022-05-29 at 07:31

      In the article, it said Jerome Powell was picked by former President Trump then re-appointed by President Biden.

    • Chris

      2022-05-29 at 10:44

      He was put in place by Trump.

    • Party Louis

      2022-05-29 at 11:32

      The article says that he was elected under Trump and then again under Biden.

      They’re both self-interested politicians that nobody should have voted for.

    • Klarnk

      2022-05-29 at 13:00

      “Powell was first appointed Fed chair by Donald Trump in 2018. On May 23, 2022, he started his second four-year term, after being re-nominated by President Joe Biden and confirmed in a landslide bipartisan Senate vote of 80-19.”

      From the article. So both are to blame for this buffoon. It’s almost like both sides represent the wealth class in opposition to the rest of us.

  6. Salus

    2022-05-28 at 17:51

    At least they’re not hiding their intentions of class war anymore, the vulgarians.

  7. Rich

    2022-05-28 at 18:00

    I would say it is time for general strikes! Wages are NOT driving inflation, corporate greed is. Organizing has already begun and they should fear what is about to happen. left and right will unite as this is the REAL ENREMY of the people … The minimum wage SHOULD be $25/ hour keeping up that is the FLOOR I wonder why there are mass shootings everyday and strife everywhere. These policies NEED to be destroyed at ALL COSTS!!!!!

  8. Ian

    2022-05-28 at 21:34

    Is this satire? This has to be satire, there’s no way anybody seriously thinks wages are too high.

    • Amy

      2022-06-24 at 08:55

      Unfortunately it is not satire. It is greed and selectivism. They want Americans to make less money so corporations can make billions more. I wonder what Powell’s salary will be lowered to. I like the idea of a mass work strike. Those greedy f**kers that never pay what the work is worth will be sh*t out of luck without workers. If daycare workers, nurses, supermarket employees, gas company employees, and fast food workers all went on strike at the same time, the country would come to a grinding halt. That is the way to curb inflation, MAKE GREEDY CORPORATIONS PAY A LIVING WAGE

  9. Geo

    2022-05-28 at 23:41

    Wages are not the issue with inflation it has and always will be Property values that raises inflation.

    Decrease property values and you decrease inflation.
    will they do it of course not. The only thing owners of businesses can do is to abuse their workers to pay for the inflation as always caused by paying the elites way too much for what they produce which is essentially nothing in comparison to their work and results.

    Don’t buy into this wages have not kept pace with inflation for the past 100 yrs rather just DIY for everything and not even bother with businesses if they cannot pay us a decent wage.
    Better off just stay at home taking care of the house vs working if they cannot pay a living wage.

    Also get rid of useless jobs if you cannot pay it owners or do it yourself. Automate it then I dare you and pay higher pay for the techies for the amount of time wasted servicing you. Rather have that than deal with min wage jobs that are worthless and should only be for part time high schoolers not for living on.

    MCD jobs are not real jobs get rid of it IDC. Replace them with vending machines instead even. Make MCD real estate useless.

    But you wont cause you lazy cheap and arrogant.

    I see many Detroit cities in the future created by boomers as young people leave and create their own cities and leave the old people to die in their own cities they cannot fix while property values sky rocket and crime sky rockets then more young people leave and boomers all die due to their incompetence trying to enslave the younger generation. so they all leave.

  10. MM

    2022-05-29 at 00:05

    I have to truly wonder how world leaders are so clueless and living inside their own bubbless. Things can unfortunately go this way, if people like Powell continue: general strikes, violent strikes against Wallstreet families, leading to a country like Colombia, that is run by “security first”. It makes no difference what the economical system is called, when it is in fact oligarchy ruling the country. Then these oligarchies will have war between each other, because in their bubble they think they will win something unwinnable.

  11. k.a

    2022-05-29 at 02:14

    Only someone who is a absolute psychopath could blame wages being to high in America for inflation! unless they are talking about CEO wages… those are clearly too high.

    I mean people are struggling to survive on fucking food stamps! wages have not kept up with inflation for decades meaning all that spending power has gone to the 1%

    this is just brutal class warfare! keep that shit up and your eventually going to end up with a violent revolution… you can only squeeze so much blood out of a people…

  12. Anonymous

    2022-05-29 at 09:35

    Government spending is the reason for inflation. These considerations of rewarding predatory lenders with a jubilee to “fight student loan debt” will be another addition to the mire of insane inflationary spending. Reductions in production, in the name of “going green” is limiting the availability of goods, and hurting services, which is why we all feel the markers of inflation, by many fold.

    Get rid of these idiot policy makers, and stop voting based on ‘feelings’, if you want to see an improvement.

    • JonnyJames

      2022-06-12 at 11:49

      No it’s not. You sound just like Jerome Powell.

      Prof. Hudson explains why, and it seems crystal clear to 99% of the commenters here. Please read the article.

  13. Chris

    2022-05-29 at 10:43

    Elizabeth Warren called Jerome Powell dangerous and lobbied Biden hard to replace him.

  14. Brian

    2022-05-30 at 05:49

    So it’s not the multi home owner charging astronomical rents that’s the problem, no, it’s not the CEOs making 2000 times what their employees makes, no, its not the corporations making RECORD profits and still increasing prices on everything, no, its the hardworking shmuck that barely gets by that’s going to have to take a hit once again!? Fuck Jerome Powell, we need to tar and feather him like they would have done in the olden times.

  15. Uranus

    2022-05-31 at 19:40

    Nothing says “free market” like the Fed trying to manipulate wages despite the demand for labor exceeding supply.

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