Fed’s Bazooka Enriches Top 20% Of Earners, Not Bottom 80%

by confoundedinterest17

The Federal Reserve’s bazooka fired by Jerome Powell back in March helped to stimulate the stock market while helping to lower mortgage interest rates. Until recently.

The problem is that 20% of earners own nearly all the stocks held by US households. So a surge in the S&P 500 index really only helped the top 20% of earners.

The Covid recovery has been very uneven with low wage workers (e.g., hospitality and restaurant workers) remain worse off than before Covid struck. Only high wage workers are ahead.

The Biden/Harris administration will attempt to help low wage workers by more than doubling the Federal minimum wage to $15 dollars per hour.

Overall, roughly 2% of all U.S. workers who are paid hourly earn $7.25 or less, government data show. Hiking the national minimum to $15 an hour by 2025 would lift 1.3 million workers above wages that put them below the poverty line, according to the nonpartisan Congressional Budget Office.

But as businesses attempt to cope with a doubling of the minimum wage by raising prices to consumers or seek ways to substitute mechanization for labor (capital/labor substitution), the number of households lifted out of poverty may be overstated.

Take Creator in San Francisco, for example, that makes hamburgers by machine. A great way to minimize labor costs.

We shall see if Biden’s $15 minimum wage works. Along with Powell’s bazooka.

 

 

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