Americans Are Making Less Money Despite Trump’s Promises
(Bloomberg) -- President Donald Trump heads into a midterm referendum on his presidency showing no real progress on a core promise: to raise the wages of America’s “forgotten man and woman.”
Once the impact of inflation is included, ordinary Americans’ hourly earnings are lower than they were a year ago.
Real wages have remained mostly stagnant despite an expanding economy, record stock prices, soaring corporate profits and a giant deficit-fueled stimulus from Trump’s tax cuts that took effect Jan. 1. The Trump administration claimed its policies would immediately boost wages, with its tax overhaul ultimately increasing average pay by $4,000 to $9,000.
That hasn’t happened. And though Trump regularly boasts of the economy’s performance, many Americans don’t feel they’re sharing in the gains -- a risk for Republicans as they seek to defend their House and Senate majorities in November elections.
A majority of voters believes their personal financial situation has remained the same or gotten worse over the past two years, said Tim Malloy, assistant director of the Quinnipiac University poll.
“When you look at that backbone of the country -- the middle class -- people think that there’s stagnancy and not much has happened for them,” although “things might be marginally better nationwide,” he said. “That could be a problem in the midterms for a lot of people. At least some people believe that promises were not fulfilled.”
Inflation-adjusted hourly wages dropped 0.2 percent in July from a year earlier, their worst reading since 2012, according to the Labor Department, amid faster price gains. They’ve grown at an average 0.3 percent annual pace under Trump overall, compared with 1.1 percent during Barack Obama’s second term. Trump’s escalating tariff disputes risk eroding buying power further by driving up prices.
At the same time, many Americans received a boost in take-home pay from the tax cuts, though some ended up paying more in taxes. About 65 percent of taxpayers will receive a tax cut in 2018, averaging $2,200 from the new law’s individual provisions, while 6 percent will receive an increase of about $2,800, according to estimates from the Tax Policy Center in March.
As a candidate, Trump excoriated his predecessor for slow growth in American workers’ incomes.
“Household incomes are over $4,000 less today than they were 16 years ago,” he said during a campaign rally in Pensacola, Florida, in September 2016. “We’ll get your salaries and your wages up, up, up.”
Workers are still waiting. By a margin of 58 percent to 38 percent, U.S. voters believe the Trump administration isn’t doing enough to help middle-class Americans, according to a Quinnipiac University poll released Aug. 14.
The White House didn’t respond to requests for comment. But Treasury Secretary Steven Mnuchin said Tuesday that slow wage growth was attributable to new workers entering the labor force.
“Wages are going up,” he said in an interview on CNBC. “I know that some people comment that the numbers don’t show that but let me just say, with new people coming into the work force at lower wages, that’s going to show on a gross level some different things -- but wages are going up on same people.”
Before the tax bill passed, White House Council of Economic Advisers Chairman Kevin Hassett said he expected reducing corporate taxes would spark “an immediate jump in wage growth.”
Speaking to Fox Business Network this month, Hassett said those higher wages will come with time, citing the low unemployment rate, growth in capital spending and rising productivity.
“That stuff, historically, helps blue-collar workers,” he said.
Trump has been telling voters that wages already are rising at historic rates, though economic data don’t show it. In various recent speeches, he has falsely claimed that wages are going up for the first time in 18 years, 19 years, 20 years, 21 years and 22 years.
“We have so many jobs now coming in, but they’re raising wages,” Trump said last month at a roundtable event in Iowa. “The first time that’s happened in 19 years, where wages are going up.”
Average hourly earnings -- not accounting for inflation -- rose 2.7 percent in July from a year earlier, the same pace as the 12-month period before Trump’s election. They’ve been rising at an average 2.2 percent pace since the recession ended in mid-2009.
Trump’s claim is also belied by other measures of wages often used by economists, including the employment cost index and the Federal Reserve Bank of Atlanta’s wage-growth tracker.
Tepid wage growth throughout the current economic expansion also bedeviled the Obama administration and remains one of the biggest challenges even with unemployment near the lowest level since 1969. On top of that, workers are failing to reap benefits of legislation cutting corporate taxes, an outcome predicted by some economists before Congress passed the law in December.
“It was our expectation that the major elements of the tax plan likely wouldn’t trickle down into stronger wages for the average worker,” said Michael Gapen, chief U.S. economist at Barclays Plc. “It was more likely to go as returns to shareholders.”
Companies in the S&P 500 index are set to authorize $1 trillion in stock buybacks in 2018, a record and a 46 percent jump from last year, according to an estimate this month from Goldman Sachs Group Inc.
Only 37 percent of Americans approve of the tax package, compared to 45 percent who disapprove, according to a Monmouth University poll released Aug. 20. Such unpopularity is hampering Republicans who had hoped the law would give them a boost in midterm elections.
One in four Americans don’t think they’re “at least doing OK” financially, and more than one in five respondents said they were unable to pay the current month’s bills in full, according to the results of a late 2017 Fed survey released in May.
“People that depend on wages -- and that’s essentially almost everyone except higher-income or higher-wealth individuals -- are not seeing as much benefit from this economy,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York. “People at the lower end of the income spectrum are actually more constrained.”
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