Trump’s Economic Vision: Evaluating Wage Growth and Inflation in 2024
Former President Donald J. Trump aims to “make America wealthy once again,” a theme that dominated the Republican National Convention’s recent discussions. The GOP focused on economic policies, inflation, regulation, and trade deals. This article delves into how wages have changed, whether they are keeping pace with inflation, and examines the potential impact of Trump’s economic plan on American wealth.
According to the Bureau of Labor Statistics, the average hourly wages of employees rose by 3.9% from June 2023 to June 2024. This growth outpaced the rate of inflation, which is a positive sign for employees. However, many Americans still feel the pressure of rising living costs despite this wage increase.
The Consumer Price Index (CPI), which measures the change in prices of goods and services, has increased by 20.8% since the onset of the pandemic. In comparison, average hourly earnings have risen by 22.3% during the same period. Gerald Cohen, a professor and chief economist at the Frank H. Kenan Institute of Private Enterprise at the University of North Carolina, explained, “We had a period where inflation rose faster than wages, but in the last year or so, we’ve seen wages growing faster than inflation.”
Small amounts of inflation are considered healthy for the economy, as they can spur business growth through hiring and wage increases. The Federal Reserve currently targets an annual inflation rate of 2%.
The Reality of Rising Living Costs
A survey conducted by Bankrate from October 2022 to October 2023 revealed that:
– Nearly 66% of Americans experienced increased wages at some point.
– About 38% reported receiving a pay raise.
– 16% found better-paying jobs.
However, only a third of those who saw wage increases felt that their income kept up with or exceeded their rising household expenses due to inflation. This disparity is more pronounced among retail and food service industry workers, who are especially vulnerable to the effects of inflation.
Households in the lowest 20% income bracket, spending more on housing and groceries, have more acutely felt the higher inflation rates. Cohen noted, “Different people have had different experiences.”
Despite recent gains, the income of the bottom 90% of Americans – those earning less than $216,056 a year in 2023 – has stagnated since the early 1970s. Jesús Fernández-Villaverde, professor of economics at the University of Pennsylvania, pointed out that this economic divide is reflected in Trump’s popularity among lower earners compared to higher earners.
Fernández-Villaverde questions the potential effectiveness of Trump’s economic plans. While stricter immigration limits might benefit the lower 90% of income earners, other proposals like halting outsourcing could harm the broader economy. He also noted a lack of detailed plans to tackle major economic challenges, such as improving worker education and creating a modern vocational education system.
By some measures, the U.S. is wealthier than ever. U.S. household wealth reached a record $160 trillion in the first quarter of 2024, driven by rising stock and real estate values. The median net worth of U.S. families grew by 37% from 2019 to 2022, adjusted for inflation – the largest increase in the Federal Reserve’s Survey of Consumer Finances history.
However, wealth and income distribution varies significantly. The average household wealth is more than seven times their income, slightly below the peak of eight times income in early 2022. Cohen remarked, “Equity markets declined, and then we’ve seen incomes continue to grow.”
Despite overall growth, many Americans feel the sting of high prices. “People are saying, ‘prices haven’t come down,'” Cohen noted. If incomes continue to grow faster than inflation, the burden may lessen. Trump’s economic vision to “make America wealthy once again” could resonate differently depending on individual experiences.
Ultimately, while wage growth outpacing inflation is a positive sign, the broader economic impact of proposed policies remains uncertain. The key to assessing Trump’s plan lies in its execution and ability to address the complex realities of American economic life.
