Union wage hikes aren’t driving inflation up, new report says
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Those big wage hikes that unions are demanding — and some getting — are unlikely to set inflation soaring again, write Goldman Sachs analysts in a new paper.
Why it matters: The paper offers a straightforward response to concerns that union demands, like the UAW's initial ask for a 40% raise, will be a big hit to the economy — at least in terms of stoking inflation.
Zoom in: Union wage hikes are essentially an echo of the big wage increases we saw in the private sector over the past two years.
- That's because unionized workers are locked into longer-term contracts, and many couldn't immediately demand higher pay during the high inflation moments of 2021-2022. (That's partly why teacher pay is now lagging so far behind.)
Meanwhile: There just aren't enough unionized workers in the U.S. for their raises to make a huge difference to the economy. Just 10% of the overall workforce is unionized, a number that hasn't budged despite the recent flurry of high-profile organizing pushes.
- And the headlines about 40% raises are misleading — those numbers don't represent annual increases, but the percentage growth over the life of a multi-year contract.
- Some union workers have recently won their largest wage increases in decades, but these aren't double-digit gains. The latest union wage gains have averaged around 6% annually, Goldman points out.
- That's worth about 0.15 percentage points to the country's overall wage growth, the paper says.
The bottom line: Unions are now seeing the wage gains enjoyed by their nonunion counterparts last year, but their raises will have minimal impact on inflation.
