The Invisible Hand: The fastest raise for American workers is a lower price tag

Opinion

By Victor Ashby

The Invisible Hand

Two years of inflation have taught American workers a lesson economists keep relearning: a raise is only as good as what it buys.

The numbers from the Bureau of Labor Statistics this week are plain. Consumer prices rose 6.9% from October 2024 to October 2026, led by gasoline and electricity. Over the same two years, average hourly earnings for private-sector workers rose from $35.46 to $38.00, or 7.2%, according to the BLS payroll survey. Adjusted for inflation, the agency’s measure of real average hourly earnings went from $11.23 to $11.26 in 1982-84 dollars. That is not a pay cut. It is running hard to stay in place.

There are two ways out. One is to push wages up faster by contract, mandate or statute. The other is to push the cost of living down by producing more of what families buy. My colleague on this page tonight will make the case for the first. I want to make the case that the second is faster, broader and more durable, and that Washington has the tools to do it this month.

Start with electricity, the bill that keeps arriving whether or not you got a raise. Federal data from the Energy Information Administration show the average residential price rose from 16.36 cents per kilowatt-hour in the first eight months of 2024 to 18.19 cents in the same months of this year. In the District of Columbia, it climbed from 17.34 cents to 24.86 cents.

That is not a mystery of greed. It is a shortage. PJM Interconnection, which runs the grid from New Jersey to Illinois, said its last capacity auction cleared at the federally approved price cap and still came up short of its reliability target, and that “data centers’ demand for electricity continues to far outstrip new supply,” in its own words. PJM also said about 57 gigawatts of projects have completed its study process but many continue to be slowed or stopped by factors including “local opposition, state/local permitting delays, supply chain challenges or financing.”

When demand rises and supply is penned in, prices rise. No collective bargaining agreement repeals that law. A union contract can win a steelworker a bigger check; it cannot make the power plant down the road get built faster. Only the people who write permitting rules can do that.

Which is why the most important pay raise on the Senate’s agenda may be the bipartisan permitting bill. The Senate voted 73-25 to take it up, and Sen. Sheldon Whitehouse (D-R.I.), one of its authors, says amendments and final passage come next week, Reuters reported. Every month a transmission line or generator spends waiting on a review is a month households pay for scarcity.

The administration deserves credit for pushing the cost of new power onto the companies that need it. Its Ratepayer Protection Pledge, signed by Amazon, Google, Meta, Microsoft, OpenAI, Oracle and xAI in March, asks the builders of data centers to “fully cover the cost of increased electricity production.” That is the right instinct, and it is a market instinct: let the buyer of the new capacity pay for it, and let suppliers compete to provide it. The Energy Department’s support for letting large users “build, bring, or buy” their own capacity is the same idea.

The same logic applies at the checkout counter. Every tariff is a tax collected at the register, whatever its strategic purpose. If Congress wants families to feel richer, the cheapest thing it can do is stop making the things they buy more expensive by law, whether through tariffs, licensing rules that keep workers out of trades, or zoning that keeps apartments from being built.

The other approach has real appeal, and I want to be fair to it. Union members who just won large contracts are better off this year than they were last year, and nobody should begrudge them. But mandated raises have a cost that does not show up in the press release. When the price of hiring rises faster than the value a worker produces, businesses hire fewer people, automate sooner or move. A higher wage floor helps the worker who keeps the job and hurts the one who never gets it.

The labor market today is not one that needs rescuing by statute. The unemployment rate was 4.1% in October, the BLS reported, the same as two years earlier, and nonfarm payrolls have grown by about 1.35 million jobs since October 2024. Employers are competing for workers. What workers lack is not leverage but purchasing power, and purchasing power is a function of prices.

Lower prices also do something raises cannot: they reach everyone. A cut in the cost of power lowers the bill for the retiree on a fixed income, the gig driver, the small-business owner and the union electrician alike. A contract raise reaches those covered by the contract.

So here is a market agenda for a lame-duck Congress that says it cares about affordability. Pass the permitting bill and resist amendments that would reopen endless litigation. Hold data center developers to their pledge to pay for their own power. Roll back tariffs on everyday goods and the inputs factories need. And tell the states that every unnecessary license and every blocked apartment building is a tax on their own workers.

Workers have kept pace with two years of inflation, barely. The way to get them ahead is not to fight over a bigger slice of a fixed pie. It is to make the pie, and the electricity that bakes it, cheaper.

Victor Ashby is the pen name of a Washington Inquisitor opinion columnist writing from a free-market enthusiast perspective. The views expressed are the author’s own and not those of The Washington Inquisitor.