The winners and losers of the Biden economy

Precisely because pay for hospitality workers has surged, the cost of fast food has risen sharply. Between May 2020 and May 2023, hourly compensation at American limited-service restaurants jumped by 23 percent, according to the Bureau of Labor Statistics.

Over the same period, fast food prices soared, rising 8 percent in 2021, 6.6 percent in 2022, and 6 percent in 2023, far outpacing the overall inflation rate.

Tight labor markets — in which jobs are abundant and workers scarce — benefit Americans in their capacities as laborers. They give workers more bargaining power at their jobs and more freedom to ditch a bad gig without risking prolonged unemployment.

This is especially valuable for workers who lack rare skills, face discrimination in the labor market, or require special accommodations. When labor markets are loose, employers can afford to pay meager wages to lower-level staffers, or pass over Black applicants, or refuse to make postings accessible to people with disabilities.

When finding enough workers to satisfy customer demand is a struggle, however, firms have no choice but to pay higher wages, consider applicants of all races, and make positions accessible to a wider pool of workers. This is why the Biden era has been so good for low-wage workers. And it is also largely why the unemployment rates of Black and disabled workers have fallen to record lows during his tenure.

But tight labor markets have less beneficial effects for consumers. Rising wages generally translate into higher prices, especially for goods and services that are labor-intensive. And strong demand for workers also means that many businesses are going to struggle with retention and hiring, and be understaffed as a result.

Many consumers of fast food, child care, taxi rides, and other labor-intensive services have therefore found themselves paying more — often for lower-quality service — in the Biden era. For upper-middle-class consumers, whose educational backgrounds and special skills provide them with a modicum of bargaining power even in times of elevated unemployment, the trade-offs of tight labor markets might not be favorable.

In my view, more expensive Big Macs are a small price to pay for higher growth, more worker power, and low unemployment. And I also think that the broader strengths of the Biden economy outweigh its weaknesses.

Recovering from the pandemic was always going to be painful. Covid shuttered entire sectors of the US economy and disrupted factory production the world over. At the same time, consumers suddenly shifted their spending away from in-person services and toward manufactured goods, a development that producers weren’t prepared for.

These disruptions had unavoidable economic costs. We could have paid those costs by immiserating America’s most vulnerable workers through a prolonged period of high unemployment. Instead, under Biden, we all chipped in to pay Covid’s toll through inflation while protecting the disadvantaged. I think this was a sound decision.

But I understand why some older, high-income Americans — especially those who never lost their jobs during the pandemic, keep all their savings in cash, paid off their student debts long ago, own no home, love fossil fuels, and live off Taco Bell — might disagree.