Even with 3 percent growth last quarter and unemployment at 5.8 percent, the lowest rate since the summer of 2008, Americans still worry about the economy, and with good reason.
While available jobs have increased at the top and the bottom of the pay scale, not much is happening in between. The country’s vast middle class is also treading stagnant water when it comes to wages, which grew an average of 2 percent over the past year, barely outpacing the 1.7 percent inflation rate. Exit polls during the recent midterm elections showed that 78 percent of voters were troubled by the economy’s direction, with two-thirds saying it’s getting worse.
Millennials are still experiencing a slow launch. Weighed down by high college debt and low-paying jobs, too many are unable to fully participate in the economy, buy homes and start families. Older adults, meanwhile, are reluctant to retire because of inadequate pensions or savings. That means more of them are blocking others who are trying to climb the employment ladder.
Despite employment increases, the underemployment rate, which includes discouraged job seekers who aren’t looking for work and part-timers who want full-time positions, is 11.5 percent. Although that’s a significant improvement over the 13.7 percent rate a year ago, economists warn that it’s still too high. Too many Americans are desperate for work, which keeps the pressure on wages low.
Some economists are optimistic that higher wages are on the horizon if growth continues. But the election suggested that Americans won’t believe it until they see it. Even though they voted resoundingly against Democrats, the red states of Alaska, Arkansas, Nebraska and South Dakota voted for minimum-wage increases, sending a clear message of concern about the economy.
Now in charge of both houses of Congress, Republicans should heed that message and look for ways to make progress on economic issues. They should be able to agree to a higher federal minimum wage than the current $7.25 an hour, even if it’s less than the $10.10 an hour President Barack Obama has called for. At the same time, they could tie future increases to an economic indicator such as the Consumer Price Index, as New Jersey and other states have. As The Washington Post’s Charles Lane has noted, that would give Democrats the higher wage they want while depriving them of a winning issue to use against Republicans in the future.
Most importantly, a higher minimum wage would give many Americans an immediate raise while increasing the upward pressure on wages in general. Stagnant pay, unwieldy personal debt, and poor retirement outlooks did not go away after the midterms. And until Washington starts solving these problems, voter anger won’t go away either.