Report: Trump tax cuts gave big boost to low-income workers

WASHINGTON D.C. – Data from the Bureau of Labor Statistics shows that America’s low-wage industries have seen a boom in the growth of worker wages since the Tax Cuts and Jobs Act of 2017.

Here in Maine, Democrats have used the days running up to Christmas to assail Senator Susan Collins for her support of the tax cuts, making numerous statistical claims about fairness and how some large companies also received the benefit from the tax cuts. In Maine, numerous companies said they would use their tax cuts to give workers raises, hire more workers, boost the retirement contributions for their employees or re-invest in their company for long-term growth and success.

From the look of this chart, many companies in low wage industries have used the tax cuts to boost pay for their workers.

Chart from AEI/ Hiring Lab US Labor Market Review and Outlook

The data shows that the increase in average hourly earnings for workers in low wage industries far outpaces those in middle or high wage industries, from 2017 forward.

Some opponents of the tax cuts were quick to claim that the increased minimum wage in some states was the driver behind the wage increase, but a report from the American Enterprise Institute suggests that is not really the case either.

Workers in states that did not increase their minimum wage are ahead of workers in states that did increase their minimum wage in that time frame. Atlanta Fed policy adviser John Robertsen, suggested that, aside from the tax cuts, tightness in the labor markets is a more significant driver than minimum wage increases.

“Interestingly, though, even in the “no increase” states, the relative median wage has improved, suggesting that the increased tightness of labor markets, or some other factor than hikes in state minimum wages, is playing a role in pushing up the pay for those in lower-wage jobs,” said Robersen.

“Consistent with the message of Chair Powell’s speech, the good news is that there is scope to continue to build on the gains from the long and ongoing expansion for workers at the bottom end of the wage distribution,” he wrote.

The American economy has been booming under President Donald Trump, with the number of jobs and Americans working reaching record-setting heights. At the same time, unemployment rates have been shattering records as they drop around the nation.

References by policy experts to a “tight” American labor market also hint that America’s workers may be experiencing a re-balancing of the supply and demand dynamics of the American economy and workforce – which bodes well for the paychecks of American workers.

In recent decades, an influx of undocumented immigrants across the southern border of the United States combined with legal immigration policy that promoted the addition of low-cost workers in large numbers has tilted the labor market against low-income and entry level workers. Under President Donald Trump, that appears to be changing.

It is not without pain though – while the American worker appears to have more power at the negotiation table than in recent memory, some employers in Maine and nationally say they can’t hire more workers no matter how much they offer to pay.

It’s a delicate balancing act to be sure, but for the American worker who has not seen real income gains over the past fifty years, it is a welcome relief.

In Maine, the 2017 tax cut bill is also paying dividends in parts of Maine that were facing serious economic troubles. The “opportunity zones” authorized in the tax cut bill have offered significant revitalization opportunities in areas such as Lincoln, Old Town, Waterville, Augusta and almost 30 other areas. Those areas, mostly low-income regions that were lagging in the economy, have seen job creation in the form of new manufacturing, real estate development and more.

While most economists focus more on macroeconomic indicators such as GDP and CPI, the American worker measures the success of the economy largely by one measure – their paycheck. In that regard, the record so far appears to show that President Trump and supporters of the Tax Cuts and Jobs Act of 2017 have delivered a win.

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