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US labor shortage fulfills Biden’s dream of doubling the minimum wage

In view of the catastrophic consequences of the pandemic for the 30 million Americans the most economically fragile, Democrat Joe Biden announced as soon as he came to power at the end of January that he wanted to double the minimum wage in force in the United States to put an end to this massive and endemic poverty of the left behind in the country the richest on the planet. An old claim of the Democratic camp.

From 7.25 dollars an hour, President Joe Biden had tried to legislate to raise the American minimum wage to 15 dollars an hour. In January, Vermont senator Bernie Sanders, a former progressive presidential candidate, called the $7.25 an hour “starvation wages”, adding to the attention of skeptics of the proposed increase:

“It’s not a radical ideal” (…) “In the richest country in the world, when you work 40 hours a week, you shouldn’t live in poverty,” he insisted.

But the fierce Republican opposition in the Senate had forced Joe Biden to abandon this campaign promise. He had to revise his ambitions downwards by simply increasing – a simple decree was enough – the minimum wage for federal government contract workers alone to 15 dollars at the start of 2022, against 10.95 dollars currently.

For the vast majority of private sector employees, the federal minimum wage therefore remained stuck at the threshold of 7.25 dollars, a level unchanged for 12 years (since 2009, even if, locally, several States have succeeded in imposing a higher wage ).

Overheated economy, explosion of job offers

However, with the vigorous economic recovery in the United States, this increase that Joe Biden could not obtain from the Republican senators, it seems that the laws of supply and demand in the labor market are in the process of realizing it. .

In fact, the current labor shortage is boosting low wages to the point of seeing the $15 an hour minimum wage, advocated for so long by the Democrats, become widespread in large companies.

Margin of negociation

Rarely, employees in undervalued sectors where salaries are usually very low have now gained a margin of negotiation vis-à-vis recruiters, according to David Cooper, economist at the Economic Policy Institute (EPI), a center for American reflection, quoted by AFP:

“For the first time since the late 1990s, employees with low salaries have a little more influence to demand higher salaries. »

Because, despite the jump in job offers, millions of Americans are still unemployed.

Too generous allowances? Courts rule otherwise

Business leaders and politicians have pointed to the generous unemployment benefits introduced with the pandemic, saying they “do not encourage the unemployed to return to work” in the words of Republican Senator Marc Rubio.

For the record, since January, the Biden administration has been paying all job seekers 300 dollars (245 euros) per week which, added to local allowances (on average 387 dollars), reaches 687 dollars per week: this is more than an average weekly full-time (or more precisely, that is equivalent to 40 hours of work but with an hourly wage of $17.17…). This aid has been extended by the Biden administration until September 6, 2021.

Also, faced with recruitment difficulties, some 22 American states out of the 27 governed by Republicans have decided to remove them before their time.

Decisions which must however wait for answers from justice, several appeals having been filed. However, judges in Maryland and Indiana have ordered these two states to continue paying the allowances, Bloomberg reported on July 21.

Employers put their hands in their pockets and grant benefits and bonuses

During this exceptional window, companies have put their hands in their pockets with not only salary increases but also the granting of bonuses and social benefits in order to attract future recruits, particularly in trades that have not been valued so far such as the trade of retail, logistics, catering or hospitality.

From now on, in addition to the salary increase, job offers in these sectors also offer care for children or elderly parents (when, in times of pandemic, the school or health systems are still far from being optimal), adjustments to the working day or even a reduction in the working hours. This is not without causing problems for employers, especially in catering, forced to limit the opening hours of their establishment despite the mass return of customers.

Another sign of this trend, the cohort of big companies like Amazon, Target, Chipotle, etc., which decided to cross the 15 dollar mark, was joined last week by the chain of pharmacies CVS, but with a caveat: its employees will have to wait until July 2022 to receive this increase.

Retail giant Walmart announced at the end of July that it would pay full tuition for some schools for its American workers, the latest effort by the country’s largest private employer to attract and retain workers in the face of a a competitor, Costco, which pays better.

Inflation risks?

Won’t such wage increases encourage a jump in inflation, which is already on the rise? A number of economists are not particularly worried at this time about the risks of fueling higher prices. They anticipate a rise in inflation, measured by the CPI index, of 0.5% after +0.9% in June. The publication of US inflation figures for the month of July is expected on Wednesday.

The average hourly wage increased by 0.4% in July compared to June and by 4.7% year on year. Increases that should continue next year.

Employers are indeed planning average increases of 3% in 2022, according to a survey by the consulting firm Willis Towers Watson, carried out between April and June. This is more than the +2.7% expected this year, according to the same source.

However, nuance the Washington Post, if the competition between companies allows that, for the first time, the average salary of the employees of supermarkets and restaurants exceeds 15 dollars per hour, this is only an average. Indeed, the salary of a large number of employees is still very much below this threshold, even if “Nearly 80% of American workers now earn at least $15 an hour, up from 60% in 2014”recalls the daily.

(with AFP, Bloomberg, VOA, CNN, Washington Post…)