Over the last couple of days, we have seen news coverage of McDonald’s employees in the U.S. protesting their level of pay. The basic message they are trying to convey is that they are not able to keep up with the cost of living at their current wage.
That runs counter to the rhetoric communicated by the U.S. Federal Reserve. Inflation is under control, so why are people starting to complain about the cost of living?
William Dudley, the President of the Federal Reserve Bank of New York, famously addressed a group of cost-of-living protestors in New York last year and stated that they shouldn’t be complaining because advances in technology (and, thus, the quality of life) had been greater than general price increases for goods. He got specific when he referenced how iPads have become more powerful but that the price rise for an iPad had not been commensurate with that increase in power.
Protesters replied that there were “not able to eat iPads.” Normally economic protestors have it wrong, but in this case they were right. The issue is about inflation in the price of basic necessities, not about technological advances offsetting costs (which, incidentally, has been somewhat of a religion at the Federal Reserve since Alan Greenspan’s term).
With respect to the McDonald’s employees, the demands for a higher minimum wage is certainly not good economics. However, their inadvertent insights into the fact that inflation is lurking in the area of basic necessities, which being officially ignored by politicians and policymakers alike, is a valuable lesson.