Welcome to President Joe Biden’s White House, where numbers don’t actually matter and dictionary definitions can be rewritten at the will of the president and his allies.
Two consecutive quarters of economic contraction no longer constitute a recession, and an 8.5% increase in the consumer price index over the past year is somehow spun by Biden as “zero inflation.”
Yet perhaps no lie from the West Wing is as flagrant as this one — Ron Klain claiming that wages are up.
Jobs up and inflation down. Wages up and gas prices down. https://t.co/GtMn2X6NHW
— Ronald Klain (@WHCOS) August 10, 2022
Unlike his boss’s lengthy list of falsehoods, which we can generously attribute to senility, the White House chief of staff’s lie is an apparently intentional confusion of the facts.
Although wages rose nominally by 5.8% in July, that was more than nullified by the 8.5% increase in the consumer price index. Once both numbers are taken into account, real average hourly earnings fell by 3%. Couple that hourly wage decline with the 0.6% decrease in the average work week, and real average earnings per week fell by 3.6%.
Workers on a biweekly payroll schedule receive 26 paychecks a year. Thus, inflation has cost the average worker, weighted for the average nominal wage increase offered by employers to offset the cost of living increases, an entire paycheck. Meanwhile, the average worker who has not received any raise or cost of living adjustment has lost more than an entire month’s pay to inflation.
Bear in mind that all of these estimates are based on the Bureau of Labor Statistics’s extraordinarily conservative CPI basket. For example, BLS estimates that shelter costs, which comprise roughly a third of the total weight, have risen by just 5.7%, even though rents recorded by Redfin have increased by 15% and monthly mortgage payments on median-priced homes are up 45%.
Inflation as experienced by lower-income workers would also place heavier weight on shelter, food, and energy costs, all the categories with some of the highest rates of inflation. Even without reweighing the CPI basket, an inflation rate recalculated with the requisite shelter cost increases would likely be well into the double digits, rendering real wage losses much larger.
All in all, the average worker is looking at weeks, if not multiple months, of lost pay in real dollars over the past year, all just because of inflation.
