The good news just keeps on coming.
After many years of stagnation, wages are increasing at a noticeable clip. In the first quarter of this year, they jumped almost a full percentage point, according to the Department of Labor. That’s the largest leap in over a decade.
The Employment Cost Index used by the Bureau of Labor Statistics shows an even bigger increase—nearly 3 percent. This is the fastest rate in a decade. Recent tax cuts, which are stimulating the economy, raising both before-tax and after-tax pay, are partially to thank.
According to the Congressional Budget Office, wages will continue to rise this year and beyond in tandem with economic growth, which has hovered around 3 percent in recent quarters. That’s across the spectrum of industries. Manufacturing wages are rising faster than they have in decades. Not since 1989 have so many small businesses said they’re going to hike wages.
Then there’s employment. Jobs are being added at a sustainable, steady pace of six figures a month, with lots of room to grow because there are over 6 million open positions. The national unemployment rate is now less than 4 percent. Women, Black-Americans, and Hispanics are all enjoying record low joblessness.
Part of this economic success is a result of the continued bull market. And tax reform, passed late last year by Congressional Republicans, is adding fuel to this fire. Tax cuts are putting more money in the pockets of small businesses and employees, providing a massive economic stimulus. These tax cuts allow small businesses to expand and hire, and allow employees to spend more, helping small businesses again.
I have a special appreciation for how tax cuts are impacting small businesses, which I work with closely in my commercial cleaning business. Small firms used to suffer tax rates as high as 40 percent. Now, a new 20 percent small business tax deduction frees up resources to add locations, improve facilities, and attract talent. Three in four small firms said in a recent poll they now plan to expand product and service offerings. Small Business Administration loans are up by 20 percent this quarter versus the same period last year.
Tax cuts are powering wage growth at the individual level by taking a smaller bite out of paychecks. The White House Council of Economic Advisors projects $4,000 in higher pay for the average Arizona worker in ensuing years. And the Tax Policy Center reports that 90 percent of middle-class families will receive roughly $2,000 dollars of tax savings this year. As Vice President Mike Pence noted when he came to Phoenix this month, the average Arizona family of four will see over $2,100 in tax cuts each year. Even families that pay little-to-no income tax will still see a benefit with the expansion of a refundable child tax credit.
No wonder more Americans report they feel good about their tax share and their opportunities to get ahead. Personal financial satisfaction is climbing to record highs.
Critics claim that the new code just favors the rich. But in reality, the new tax code increases the share of taxes that the rich pay.
For most people, their wage is one of their most important concerns. It’s time all Americans were educated about the origin of their higher wages. It isn’t a fluke that wages are finally rising again. It’s a result of tax cuts taking less money out of their paychecks and stimulating the economy to create more opportunities to earn bigger paychecks.
Afshin Cangarlu is CEO of Stratus Building Solutions.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.