- The labor shortage is just the free market setting a new minimum wage, Rep. James Comer told Insider.
- Recent wage hikes "probably needed to happen" for adults to earn a livable wage, he added.
- Still, Comer raised concerns around soaring pay leading to permanently high inflation.
The labor shortage and related hiring delays are only the free market working as intended, Rep. James Comer of Kentucky told Insider.
The US remains gripped by an unusual worker shortage, and few states are enduring the phenomenon quite like Kentucky. Data out Friday showed the state touting a job-openings rate of 8.4%, the second-highest in the country. Kentucky's labor force participation rate sits well below pre-pandemic highs, and only just above 45-year lows. Millions of the state's workers are in no rush to take jobs because of factors ranging from COVID fears to childcare pressures.
The labor shortage is holding hiring back, but the delay has its benefits, Comer told Insider in an interview conducted December 10, shortly before deadly tornadoes ripped through his district and put more workers' lives at risk. By putting more power in workers' hands, the shortage is giving Americans a boost that Congress hasn't agreed on since 2009, the Republican congressman said.
"The Democrats in Washington have been talking about raising the minimum wage, and conservatives would come back and say, 'Let the market determine the wage,'" Comer, who represents Kentucky's 1st Congressional District, said. "Well, the market has."
"We've seen low-wage appreciation without the government having to come in and raise the minimum wage through more rules and regulations of the private sector," he added.
Comer has a point — wage growth seen throughout the recovery has been some of the strongest in history. The Employment Cost Index surged 4.6% in the third quarter, the fastest rate since 2004. Sectors hit hardest by the pandemic have experienced the biggest pay bumps as businesses scramble to reopen. While Democrats weren't able to pass a $15 minimum wage earlier in the year, the labor shortage is driving the country's de facto minimum sharply higher.
The pay hikes "probably needed to happen for people to be able to work," Comer said. The minimum wage "wasn't a living wage" for many adults and the shortage is solving that problem by forcing companies to catch up, he added.
"I don't know anywhere in my district now that's offering a beginning salary anywhere around minimum wage. Everything I know is at least 30% above minimum wage," Comer said. "This has been a help to a lot of low-wage workers in America."
To be sure, many workers aren't feeling a difference, because inflation has outpaced wage gains on average for workers except for those in the leisure and hospitality and transportation and warehousing sectors, according to government data.
Comer also suggested that the government should be wary of letting the market run free to the point of runaway wage growth, as wages rising even more amid the labor shortage could create a different kind of crisis. He raised concerns around a wage-price spiral, a vicious cycle in which rising wages lead businesses to hike prices and lead wages to jump even higher. That trend fueled the inflation nightmare of the 1970s, and allowing wages to keep surging could turn pandemic-era inflation permanent, Comer said.
Federal Reserve Chair Jerome Powell has pushed back against such fears, saying Wednesday that pay growth "has not been a major contributor" to the historic inflation seen in 2021.
Comer also expressed some worry around whether businesses can keep up in the race to lift pay. The representative shared anecdotes of employees hopping from one job to another to reap the benefits of sign-on bonuses. The state's labor market has "a lot of musical chairs happening" and it's keeping the economy from settling into a new normal, Comer said.
"It's a civil war among Kentucky employers trying to hire and retain workers," he said, adding at a later point that "Hopefully, the market will work itself out."