AT Wage Inflation DA - Michigan 7 2023 BFHGR

Wages DA
2AC --- JG Controls Wage Inflation
A JG controls wage growth --- ensures an employed buffer stock that provides a wage floor
Wray ‘20
(L. Randall, Levy Economics Institute, “Job Guarantee,” The New Palgrave Dictionary of Economics, pg online @ https://link.springer.com/referenceworkentry/10.1057/978-1-349-95121-5_3080-1 //um-ef)
An unemployed buffer stock (‘reserve army of the unemployed’) is supposed to work in a similar manner: with a large body of unemployed workers, employers can refuse demands for wage increases by threatening to hire replacement workers from among the unemployed. However, the unemployed buffer stock is not very effective at setting a wage floor. Since the unemployed do not have jobs, their wage is zero—meaning the floor wage is zero. However, the lower limit to wages will actually be above zero for three reasons: there will be some limit above zero because no one would work without a nonzero wage, there may be an effective minimum wage law in place, and there is likely some social assistance available to those without jobs so employers need to pay a positive wage to induce workers to move off welfare and into jobs. Supporters of the JG argue that the employed buffer stock is more effective in stabilizing wages. Not only does it establish a firm wage floor, but it also attenuates wage inflation more effectively. The unemployed buffer stock will tend to consist disproportionately of workers with less education, skills, and experience—just like the employed buffer stock. However, the employed buffer stock have the advantage that they are working. All else equal, employers prefer to hire those who are already working—who are demonstrating at least some work readiness. Further, their skills can be maintained on the job and may even be enhanced if there is training on the job. By contrast, those who are unemployed may be thought to be losing skills and perhaps developing undesirable behaviours. As time spent in unemployment grows, workers are perceived as less employable, and their probability of obtaining a job falls. It is well established that long term unemployment is associated with development of a variety of health and social problems. For these reasons, advocates of the JG argue that the employed buffer stock is actually more effective.
Increase worker power permanently solves the wage price spiral.
Spross ’17 [Jeff; 03-22-2017; “You’re Hired!”; Democracy Journal of Ideas; economic and business correspondent for The Week; https://democracyjournal.org/magazine/44/youre-hired/ \\pairie]
An even more intriguing possibility is that the job guarantee would eliminate the need for the Fed to adjust interest rates.
Here’s how that would work: Currently, Fed officials operate on the assumption that some amount of unemployment is necessary to control inflation. As workers’ bargaining power rises, an arms race sets in across businesses. Workers claim more revenue as compensation, capitalists try to preserve their cut by raising prices, then workers demand higher wages for the increased cost of living. Wash, rinse, repeat. The result is the wage-price spiral, delivering higher inflation.
The Fed intervenes by raising interest rates, which squeezes the supply of credit and forces companies to stop expanding or to downscale. This stops the arms race by destroying jobs. But, once again, it’s left up to the capitalists to decide just whose jobs are to be destroyed first.
There’s a burn-the-village-to-save-it quality to this practice, since allowing inflation to continue also destroys jobs as price signals go haywire. But again, with a job guarantee, the downturn would simply move workers onto the set wage and compensation rate, which doesn’t engage in a bidding war. This would end the arms race as well, but without casting people into joblessness and all its attendant human destruction. So the job guarantee could stabilize the ups and downs of inflation as well. (This would be complicated if the job guarantee’s wage was indexed to rise with inflation, though not indexing the wage would force regular legislative fights to raise it instead.)
2AC --- Wage Inflation Turn
Wage inflation is projected to remain high— only reducing job openings can tame it
Walton 6-22-23 (Paul Walton, 6-22-2023, Paul is a financial writer for StoneX. "Rate hikes ain’t over, all over the world," No Publication, https://www.forex.com/en-us/news-and-analysis/rate-hikes-aint-over-all-over-the-world/ // AP)
Tightening cycle continues
The scale of this morning’s BOE rate hike was unexpected. Fed fund futures now factor in an anticipated July rate hike, no changes to the year end, and then dropping 150 basis points or so in 2024. The market is finally taking the Fed at its word that it will not begin rate cuts until next year, but now the question is, will current rates be high enough? The market has consistently under-estimated the Fed’s commitment to the 2% inflation mandate, and the Fed has consistently under-estimated inflation stickiness.
The Fed repeatedly states that wage inflation remains their primary concern, and that wage inflation will not be tamed until we see a better balance between the number of workers seeking a job versus the number of job openings. Realistically, the Fed’s only tool to tame wage inflation is to decrease the number of job openings. However, today’s jobless numbers continue to reflect a tight jobs market with plentiful employment opportunities. On the other hand, higher rates have hit home prices and sales.
2AC --- High Wages Good
Wage increases stabilize the economy.
Lily Roberts 21, the acting vice president for Inclusive Economy at American Progress. Her work focuses on raising wages; combating economic inequality linked to race, gender, and geography; and building wealth and stability for American families. She is the former managing director for economic policy and director of economic mobility at American Progress. She has appeared on CNBC, NPR, and Politico to discuss economic justice and the labor market. Prior to joining American Progress, Roberts worked at Mathematica Policy Research, where she researched federal strategies to support low- and middle-income families. Roberts received a master’s degree in social work, focusing on community development, from Case Western Reserve University. Her undergraduate degree in military history and English is from the University of North Carolina at Chapel Hill. Roberts has served as a case manager at a Washington, D.C., social services nonprofit and was previously an advisory neighborhood commissioner in Shaw. Ben Olinsky, January 27th, 2021, "Raising the Minimum Wage Would Boost an Economic Recovery—and Reduce Taxpayer Subsidization of Low-Wage Work," Center for American Progress, https://www.americanprogress.org/article/raising-minimum-wage-boost-economic-recovery-reduce-taxpayer-subsidization-low-wage-work/ ---ML
Since 2014, CAP has demonstrated that an increase in the minimum wage would significantly decrease the use of the Supplemental Nutrition Assistance Program (SNAP), as millions of workers are currently paid so little that they must rely on the public social safety net. Indeed, an increase to the federal minimum wage (and the elimination of the subminimum wage for people who work for tips and people with disabilities) would have broad benefits for the economy beyond the wages of affected workers. Wage increases—particularly for those at the bottom of the income spectrum—increase community-level economic activity and support local businesses; reduce the amount by which taxpayers subsidize corporations for the low wages they pay; and reduce the pay inequalities for women and people of color that depress overall economic growth.
An increase to the minimum wage would be far from divisive: American voters have repeatedly signaled broad, bipartisan support for raising the minimum wage to $15. In November, 61 percent of Florida voters supported a ballot measure to do just that, even as the state’s voters backed Donald Trump for reelection. The percentage of Americans who say that they support raising the minimum wage has grown during the pandemic—66 percent of Americans supported raising the minimum wage in February 2020, while 72 percent supported it by August 2020.
The failure of the Senate in recent years to pass minimum wage legislation has meant real, tangible harm to American families. The last time Congress passed an increase to the minimum wage was in 2007, which fully phased in by 2009. Since 2009, America’s minimum wage workers have endured the longest period since 1938 without a pay raise, while the rising cost of living simultaneously eroded the value of the minimum wage by more than 17 percent. Last year, CAP put this into sharp relief by highlighting how much workers are losing each day the Senate fails to act:
While the Raise the Wage Act languishes in the Senate, workers lose $62 every eight-hour workday earning an hourly wage of $7.25 instead of $15. That’s $310 a week, $1,348 a month, and $16,174 a year. Eliminating these losses would also be a crucial step toward reducing existing pay gaps for women and particularly women of color, who disproportionately work in low-wage and tipped occupations.
As Congress works on coronavirus rescue legislation and a subsequent package to rebuild the economy, the minimum wage should not be dismissed. Raising the wages of low-income workers will stimulate the economy; substantially lower the amount the country spends on social safety net programs such as SNAP; and reduce economic inequality, thereby unleashing additional economic growth in a period of recovery.
Stimulate the economy by putting more money in workers’ wallets
Phasing in a minimum wage increase between 2021 and 2025 would boost consumer spending and economic growth as the country recovers from the public health and economic crises.
Different methodological approaches predict varying aggregate effects of minimum wage increases. However, calculations uniformly point toward wage increases begetting stimulus, especially wage increases for low-wage workers:
The Federal Reserve of Chicago determined that low-wage worker households spent an additional $2,800 in the year after a $1-per-hour increase to the minimum wage.
The most recent analysis from the Economic Policy Institute found that increasing the minimum wage to $15 by 2025 would generate $107 billion in higher wages. Their earlier analysis indicates that an increase from $7.25 to $9.80 per hour between 2012 and 2014 would have generated “approximately 100,000 new jobs.”
The Institute for Policy Studies calculates that for every extra dollar going into the wallet of a low-wage worker, about $1.21 is added to the overall economy.
Increases revenue while decreasing costs.
Justin Wolfers 15, nonresident senior fellow, has been associated with the Peterson Institute for International Economics since September 2014. He is professor of economics and professor of public policy at the University of Michigan. He is also visiting professor of economics at the University of Sydney, research associate with the National Bureau of Economic Research, research fellow with the Institute for the Study of Labor (IZA) in Bonn, research affiliate with the Centre for Economic Policy Research in London, international research fellow with the Kiel Institute for the World Economy, and fellow at CESifo in Munich. He was previously visiting professor at Princeton University, associate professor at the Wharton School of the University of Pennsylvania, assistant professor at Stanford Graduate School of Business, and economist with the Reserve Bank of Australia. Jan Zilinsky was a research analyst at the Peterson Institute for International Economics from October 2014 to August 2016. He worked with Senior Fellow Justin Wolfers on economic inequality and related policy issues and with Senior Fellow Paolo Mauro on euro area recovery and the impact of fiscal policy on growth. January 13, 2015, "Higher Wages for Low-Income Workers Lead to Higher Productivity," PIIE, https://www.piie.com/blogs/realtime-economic-issues-watch/higher-wages-low-income-workers-lead-higher-productivity ---ML
Economists have long argued that increases in worker pay can lead to improvements in productivity—indeed, that it can actually be profitable to pay workers higher wages. As Alfred Marshall, the father of modern economics, argued almost 125 years ago, "any change in the distribution of wealth which gives more to the wage receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production." Since then, economists have compiled rich data validating Marshall's hypothesis that paying higher wages generates savings:
Higher wages motivate employees to work harder. Janet Yellen (1984) suggested that higher wages create the conditions for workers to be more productive, pointing to "reduced shirking by employees due to a higher cost of job loss; lower turnover; an improvement in the average quality of job applicants and improved morale." Among the studies documenting this point are Levine (1992), which analyzed a sample of large (mostly Fortune 500) manufacturing companies, and Holzer (1990), which used data from a national sample of firms finding that "high-wage firms can sometimes offset more than half of their higher wage costs through improved productivity and lower hiring and turnover cost." Reich et al. (2003) surveyed employers at the San Francisco airport after a broad-based increase in wages and found that the employers of the majority of affected workers reported that their overall performance had improved. Mas (2006) analyzed the case of New Jersey police officers who were granted a wage increase of 17 percent, and who were 12 percent more productive in clearing cases than those who were refused the increase.
Higher wages attract more capable and productive workers. The evidence that higher wages attract more high quality applicants for new jobs is voluminous. Dal Bó et al. (2013) show that offering higher salaries yielded an applicant pool with a higher IQ and with personality scores and motivation that made them a better fit for the advertised jobs. Moreover, the first firm to offer higher wages is more likely to attract and retain more productive workers.
2AC --- Wage Growth =/= Inflation
No link— wage growth doesn’t drive inflation— experts agree
Hiltzik 6-13-23 (Michael Hiltzik, 6-13-2023, Pulitzer Prize-winning journalist Michael Hiltzik writes a daily blog appearing on latimes.com. "Column: Wage growth doesn't drive inflation. So why is the Fed out to crush workers? ," Los Angeles Times, https://www.latimes.com/business/story/2023-06-13/column-wage-growth-doesnt-drive-inflation-so-why-is-the-fed-out-to-crush-workers// AP)
Federal Reserve Chairman Jerome H. Powell and his colleagues have made major mistakes in their battle with inflation.
They instituted the fastest increase ever in interest rates despite evidence that many of inflation’s drivers, such as shipping logjams at the ports and the Russian invasion of Ukraine, were immune to interest rate changes.
They ignored the contribution of corporate profiteering, despite data clearly showing that business profits were expanding sharply — in other words, businesses were raising prices far more than they needed to cover rising costs.
But the most egregious error may have been their fixation on labor costs as a driver of inflation. The truth is that workers were the victims, not the culprits, in the inflation spike.
That conclusion is underscored by the latest government figures on inflation and wages. On Tuesday, the Bureau of Labor Statistics reported that consumer inflation fell to 0.1% in May, month over month, and 4% over the last year.
Earlier, the government had reported that hiring remained robust, though wages were falling on an inflation-adjusted basis.
Despite abundant evidence that the Fed’s inflation-fighting campaign has left many workers behind, Powell has consistently harped on the need to increase unemployment to bring inflation down.
“Reducing inflation is likely to require ... some softening of labor market conditions,” Powell said in his most recent news conference, following the Fed’s latest interest rate hike on May 3.
Powell treated every statistic showing labor market strength — low unemployment, “excess demand” for workers, persistent wage increases — as an obstacle to reducing inflation.
“Labor market conditions,” he said, “may have to soften a bit more to begin to see progress” against inflation. Barring that, he added, the Fed wouldn’t be willing to start cutting interest rates.
It’s hard to overstate how dangerous the Fed’s preoccupation with labor costs has been for the average American family. Powell tends to speak in the bloodless terms of academic economics, referring to “market conditions” and supply-and-demand curves. But those generalized formulas mask the potential for real pain and penury in American households in which efforts to “soften” labor conditions translate into layoffs and pay cuts.
Make no mistake: The people on the front line in this battle are not technocrats in air-conditioned rooms. They’re rank and file workers whose opportunities get liquidated in economic downturns.
Whether this approach will still hold won’t be known until Wednesday afternoon, when the Federal Open Market Committee announces its decision on interest rates. Most experts believe the Fed will pause in its more than yearlong cycle of raising interest rates. After the announcement, Powell will hold another news conference to discuss the committee’s thinking and outlook for the near future.
As I’ve been writing for nearly a year, the idea that wage increases drive inflation has been an enduring shibboleth among economists. Its most concise expression is the Phillips curve formulated in the 1950s by a New Zealand economist, which posits an inverse relationship between inflation and unemployment — that is, higher inflation is linked to lower unemployment and vice versa.
The most direct expression of this argument came last June from former Treasury Secretary Lawrence Summers, who said in a June 20 speech in London, as reported by Bloomberg: “We need five years of unemployment above 5% to contain inflation — in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.”
At the time, the unemployment rate was a historically low 3.6%. It was 3.7% in May, according to the Bureau of Labor Statistics.
Even though many respected economists recognize that if this relationship exists, it holds only in the very short term, the Phillips curve “has been the foundation of monetary policy for decades,” as Christopher J. Waller, a member of the Fed Board of Governors, observed in a March 31 speech.
The truth, Waller said, is that “if you simply plot inflation against the unemployment rate over the past 50 years,... there does not appear to be any statistically significant correlation between the two series.”
In other words, there’s no reason to assume that wage increases are a contributor to inflation. In an interview April 19 on NPR’s “Marketplace” program, Chicago Fed President Austan Goolsbee described the wage-price issue as a classic riddle along the lines of which came first — the chicken or the egg? “For sure, wage growth and price growth are tied together,” he said. The question is “are wages a leading or a lagging indicator of price inflation?” His answer was the latter.
That has been the case during the recent era of high inflation. Although wages have been rising over the last year in nominal terms, workers’ gains have been eroded by inflation, month after month.
According to the most recent wage report by the BLS, earnings increased by an average 3.4% in May, compared with a year earlier. Real wages, however — accounting for inflation — fell by 0.7%. A

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