One of my pet peeves about television financial programs is that they rely too heavily on pretty faces and irrelevant data to convey information to us (their audience) that is neither accurate, reliable, nor useful. Long ago I concluded those three elements were critical to any message of importance to the credibility of those who opt to speak publicly or write on almost any topic of interest. Otherwise, they are engaging in “jib-jab,” and are not giving enough respect to anyone who dares to listen critically. Wage inflation is one such topic. Constructive criticism also demands that I offer a response that is a lot more accurate, reliable, and useful. With that immodest introduction, here is my report.

Economists by and large know that inflation is the outcome stemming from demand, meaning there is too much money in circulation for the goods and services being offered. Prices rise to sop up those excess dollars. The second factor arises from production, or too few goods and services being offered for the amount of money in circulation. Producers will charge more simply because they can. The third is called an external “shock,” that is both unforeseen and not included in most calculations. The inhumane attack on the people of Ukraine and its effects on specific commodities is an example of such a shock.

I am not an historian, so I will tread lightly with my thoughts that rely on bygone eras. My world view is mostly deductive, meaning that I draw from a wide horizon of persons, places, and things when searching for a few nuggets that can add meaning to or help make sense of a broader issue. My approach in this narrative is to draw artfully from the past, compare it with the present, and then project that mosaic of words and thoughts forward to their logical outcome. That is called “coherence,” a subject that is within my repertoire of activities. In addition, most of my predictions also rely on mathematics, another topic that I’ve spent a goodly number of years studying. Still, I won’t bore you with formulas or too many numbers.

Wages are not something that are bought or sold in the conventional sense. You and I must bargain for what we believe is fair and honest given the environment in which we must deal. The conventional explanation might be true if we were all potato farmers, or piano players. When ten thousand people are in line for the same job, you can bet that the pay being offered is dirt cheap, or it lacks a good harmonious melody when announced. (bad puns intended). I have no rational explanation about why those who can run with, hit, throw, or kick a round object are paid multi millions of dollars. Those who have some sex appeal on the “big screen” can probably make a better case for their millions of excess dollars; but those who inherit positions, wealth, and income (and that is about 90 percent of the explanation behind all income and wealth issues) can only point to the laws bought and paid for that force such outrageous outcomes on the rest of us.

A Living Wage. Once upon a time somebody felt that there was a bottom line floor wage—a poverty level—that needed to be articulated in order that most participants in the workforce could at least understand what they were up against in the marketplace of wages. They arrived at a value that was based on the cost of a basket of food. In 1960 that level of income was $1,495 annually for an individual, and $1,945 annually for 2 persons. At an average compound rate in the cost of living, the 2-person rate would be $22,160 today. No sensible person, then or now, could accept such levels as adequate pay for the minimum costs that we all face.

Today, we have a different wage level that makes a lot more sense. It is the Living Wage, developed by the MIT economics department, led by Professor Amy Glasmeir. Knowing there were different standards as well as different costs, they established one for each of the 3,006 counties in the US. Their models are based on what the annual costs are to a household for food, fuel, housing, health care, transportation, and education—to be able to live without assistance excluding dining out or taking a vacation. The average costs (not including California, Alaska, and Hawaii) are $75,000 annually.  But 52 percent of US residents must live with less—thus they need some government assistance.

So how much income would it take to raise most US participants to the new Living Wage? The answer is approximately $1.4 trillion. Trust me on the math even though I did it in my head and did not account for the skew that requires some refinements and a lot of calculus. The more important question is this: Is it do-able?

Approximately 52 percent of households currently receive an average of $27,000 too little under the Living scales. They have a total shortage of $1.4 trillion. We need to raise personal incomes from its present $14.7 trillion to $16.1 trillion. And the best way to close that gap would be by raising GDP from its current level of $20 trillion to $21.445. That is do-able, and it would not cost a dime in new tax revenues, nor would there by any additional costs to anyone. The opposition to all such measures is resident in the mentality that begins with “we should never do anything for those in need. They are too lazy, too stupid, and … too different by race, color, religion, or ethnic backgrounds.”

A false narrative that is being proffered by Fed chairman Powell and repeated by many in the news media is that rising wages are one of the causes of the present inflation surge. Wages, of course, have not kept pace with inflation over the past 55 years. But in that same time period executive pay has increased from 21:1 to 351:1 over worker wages, or by 30,000 percent! We would need to adopt a new awareness about this enormous pay gap for the coming 10-year time frame. Average household wages would need to rise to Living Wage levels, with the objective of reducing the need for expanding government programs to help all residents to capture more of the wealth of America that they have and are continuing to produce.

My task is done. I am neither a preacher nor an ideologue. I am an economist with only the tools of science at my disposal. Those tools are embedded in the scientific method: Analysis of facts, synthesized, evaluated, and carefully presented with limited  conclusions that are accurate, reliable, and useful. But I have it on good authority that the omnipresent highway to hell is still being paved by those with good intentions.