- by New Deal democrat
On Friday I wrote about how the Fed likely contributed, via hurting aspiring homeowners, to the outcome of the Election last week. Today I want to take a look at another issue - wages.
As it happens, while I was writing this Paul Krugman put up a graph which he says explains the Election results:
This is a variation of a graph I run versions of every month after we get the inflation data, which is real hourly and weekly wages:
As you can see, both are significantly higher than they were in 2019 before the pandemic. After declining in 2022 (in part due to $5/gas), real average hourly wages are close to record highs. On the other hand, real weekly wages are lower than they were throughout most of 2020 and 2021.
But now let’s take a look at the monthly estimate of real median household income through September via Motio Research:
This really puts the difference between 2016-20 and 2020-24 into perspective. Real median household income rose consistently between 2016 and the onset of the pandemic. But for the entire three year period of 2021-23, real median household income went nowhere. In fact it was typically somewhat lower than late 2019. Only in the last few months of this year did it finally break out to the upside.
Puts a different gloss on why so many people might remember the former Administration more kindly than that of Biden, doesn’t it?
Further, another important way in which the signal is more complicated is that those who switched jobs since the beginning of the pandemic have consistently seen higher wage growth than those who stayed in the same jobs, via the Atlanta Fed’s wage growth tracker:
While the Atlanta Fed does not have a cumulative measure, I wanted to take a look at how job stayers had fared since the 2020 election compared with job switchers. It turns out that the average wage growth for those who stayed on the same job in the past four years was only 20.1%, while the (hypothetical) wage growth for a person who switched jobs every year was 25.5%. Since inflation over that time cumulatively was 20.6%:
this means - most importantly - that the *average* wage growth for a person who stayed in the same job during the entirety of the Biden Administration was a little *less* than inflation. And because that is just the median, that means that a very significant percentage of people - perphaps 25%, perhaps 40% - saw wage growth *significantly* below inflation.
I encountered several such people in the week before the Election, and even though they had voted Democratic in the past, they were seriously considering voting for Trump this year.
This ties in with one other hot button issue: immigration.
The CBO has estimated that an additional 5-6 million immigrants over the average have entered the U.S. between 2022 and this year, a huge jump over the typical number before the pandemic:
These immigrants subsequently became new entrants to the job market, which presumably made their experience more like job switchers than job stayers. By contrast, it is probable that native born older workers skewed in the direction of job stayers. When the situation is looked at that way, the potency of the immigration issue in this Election makes some sense, given the anger by some workers who feel that immigrants are making out better than them.
As Dan Guild wrote this morning, “if this election had been held nine months later and it became clear inflation was tamed, consumer sentiment would have reached the high 80s (even considering the partisan split), and Biden would have been close to 50% approval. This was always a race against time.”
And the Democrats lost that race.
