Larry Kudlow: ‘Bidenflation’ Is the Root Cause of These Pay Hikes


Just hours before the deadline, the much-feared rail strike was finally resolved. Now, that’s a good thing because it would have wreaked even more havoc on an economy that was already in crisis. The shortage of supplies would have prompted inflation higher still. As for the deal, I don’t know all the details yet, but the headline sounded reasonably reasonable.

Basically, it’s a 24% pay raise over five years, retroactive to mid-2020 and extending through 2024, depending on your job. Annual increases are estimated at increases of 3 to 7%. There is an $11,000 retroactive pay bonus. The unions originally wanted a 31% profit, but settled for less. Notably in all of this, the Atlanta Fed wage tracker is 6.7% over the past year. The CPI, of course, is 8.3%.

Now, in some conservative circles, it’s always fashionable to criticize union pay raises (no pun intended), but, you know, the reality is that they’re trying to keep up with inflation.

Bidenflation is really at the heart of all this. It is the fundamental cause of these wage increases. It’s really not the workforce’s fault that in recent years, the federal government spending has triggered inflation and the Federal Reserve, until recently, has accommodated it. Unions do not control the purse strings of Congress or the nation’s money supply. They may want to, but so far, they don’t.


President Biden's speech

President Joe Biden addresses the 76th session of the UN General Assembly on September 21, 2021 at the UN headquarters in New York City. (Photo by Timothy A. Clary-Pool/Getty Images) ((Photo by Timothy A. Clary-Pool/Getty Images) / Getty Images)

Real wages in the past year fell 3.4%, representing a huge pay cut for workers. So in this case, I can’t blame typical working families for trying to buy groceries or keep the fridge on or heat their homes or buy a new car. They’re just trying to keep the lights on and get by. The government is the big problem, not the workforce, and in this case, not the union.

Now, if we had a reliably strong dollar king and a balanced budget and supply-side growth policies that minimized taxes and regulations, we wouldn’t have this relentless inflation. So, I’m on the side of the workers and, in this case, the union. These are, by the way, private sector union workers, not government workers. Call me a sympathizer of the former, but I don’t sympathize with the latter.

Now, I want to point out, though, that the Biden administration has thrown everything but the kitchen sink at its union supporters. This is a different point. I should say in the union leadership, because the leadership is far to the left of most rank-and-file workers.

For example, the National Labor Relations Board has promoted the most aggressive union policies in half a century. have cooperated with union leaders in union elections doing everything possible to prevent employers from telling their side of the story. They have even called for a redo of the elections in several cases, including the Amazon episode in Alabama.

The NLRB has endorsed what is called card verification, which circumvents fair elections with secret ballots. They try to prevent employers from holding private meetings with employees. The most egregious thing is that the Biden administration is imposing Davis-Bacon wage rates on all types of new construction.

Davis-Bacon, dating back to the 1930s, requires contractors to pay inaccurate and inflated government-determined wages and benefits on taxpayer-funded construction projects. In other words, not competitively determined market wage rates, but government-set wage rates, which of course are always higher.

For example, in this recent CHIPS Act for the semiconductor industry, it required Davis-Bacon prevailing wages for any building that benefits from federal tax credits. No Davis-Bacon wages, no tax credit.

All the Green New Deal spending on huge tax credits and subsidies in the so-called “Reducing Inflation Act” allows for a Davis-Bacon wage bonus for unions. No union store – no Davis-Bacon bonus.


These types of regulations will increase construction costs. They will stifle job creation and will surely discourage competition from small businesses and discourage competition in labor markets. Minority workers are often the first to suffer.

I don’t care that working people get higher wages to offset higher inflation, but I do care about the Biden administration’s costly attempts to favor unions over basic market competition. All this is one of the main causes of inflation.

This article is adapted from Larry Kudlow’s opening commentary in the September 15, 2022, issue of “Kudlow.”


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