For most working people, the Federal Reserve Board is an obscure government agency seemingly distant from our lives. But when it meets on Tuesday and Wednesday, it is ready to raise interest rates again – a decision that could put millions out of work and wreak untold misery on the working class.
Since the beginning of the year, the Federal Reserve Board has hiked interest rates four times, twice by 0.75%, which is much larger than usual. In any case, it has justified its actions as a way to combat inflation – but higher interest rates will not address the real causes of inflation we are currently witnessing: supply chain problems, the war in Ukraine and corporate profiteering.
Working people are rightly outraged by price hikes, especially for basic necessities such as petrol, food and housing. However, inflation is just the latest blow to the living standards of the working class, which has faced a cost-of-living crisis for decades. Since the 1980s, employers have shifted health care costs onto workers, eliminated pensions and replaced them with 401(k)s, and kept wages low. Globalization and the transition to a service economy have meant that good union jobs have been destroyed and replaced with part-time, temporary and low-wage jobs. Meanwhile, the cost of housing, healthcare, education, and childcare have risen much faster than workers’ incomes.
In fact, inflation has only become a major political issue because, unlike the cost of housing, childcare, or health care, it affects the rich. Inflation is eating away at the value of the saved money they have and lightening the burden on those who owe money – the working class.
While inflation has squeezed the pockets of working people, the tight labor market has simultaneously boosted wages for employed members of the working class. Wage growth has been strongest at the bottom end of the wage distribution, meaning that, on average, inflation has less of an adverse effect on low-wage earners than on others. The current economy is actually benefiting the poorest strata of the employed working class in a number of ways: they are more likely than usual to be employed, can work longer hours (and therefore receive larger paychecks), and are able to exit jobs that are are abusive.
Rather than plunge our country into recession with rate hikes, our federal government should take other measures to ease the pain of working people, especially those on fixed incomes. Raising Social Security contributions, reintroducing child tax credits, and giving workers inflation rebates, all of which can be paid for by taxing corporate profits and the wealthy, would put more money in workers’ pockets and allow them to cope with higher prices to become.
Our government can also take steps to directly control prices as contained in the Emergency Price Stabilization Act introduced by US Rep. Jamaal Bowman, DN.Y., in August. This legislation would allow the government to scrutinize corporate profits and enact appropriate controls and regulations to stabilize prices. It would also engage and mobilize the public in a way modeled on the successful and popular Office of Price Administration that kept basic goods affordable during World War II.
In addition, Congress should strengthen workers’ ability to negotiate higher wages by immediately passing the Protecting the Right to Organize, or PRO Act, which would make it easier for workers to form unions, and by fully funding the National Labor Relations Board to ensure this it has the resources to enforce existing labor law.
Our government has the tools to address the cost of living crisis. You just have to use the right ones.
Carl Rosen is President of the United Electrical, Radio & Machine Workers of America. In the past 30 years he has negotiated or advised on hundreds of collective agreements.
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