Rising wages are a 'feature,' not a bug, of the post-pandemic economy, President Biden says

• Wage hikes at large-scale employers are an encouraging sign for the economic recovery, Pres. Biden said on Thursday.
• The increases are a sign workers are gaining bargaining power for the first time in decades, he added.
• Biden noted there's "more than ample room" to raise wages without driving inflation higher.
• See more stories on Insider's business page.

The wage hikes seen in recent weeks offer an encouraging hint of what the new US economy can look like, President Joe Biden said Thursday.

Large-scale employers have been raising their minimum wages as they look to attract workers through reopening. Companies such as McDonald's, Amazon, and Under Armour have rolled out higher starting wages through May. The hikes appear to be in response to unexpected tightness in the labor market.

While millions of Americans remain unemployed, those on the sidelines are holding out for higher compensation before rejoining the workforce.

Republicans have blamed bolstered unemployment benefits for the labor shortage, saying they disincentivize jobless Americans from seeking work. Biden, however, sees a more encouraging trend behind the wage hikes. The raises "aren't a bug" but "a feature" of the post-pandemic economy and show that workers are finally regaining bargaining power, the president said.

"Instead of workers competing for each other for jobs that are scarce, we want employers to compete with each other to attract workers," Biden told a crowd in Cleveland, Ohio.

He continued: "That kind of competition in the market doesn't just give workers more ability to earn a higher wage, it gives them the power and demand to be treated with dignity and respect in the workplace."

Critics of the recent wage hikes have also deemed them a symptom of rampant inflation that could spark a new economic crisis. Stronger inflation typically does translate to higher pay, as workers demand greater compensation to counter rising prices.

Biden instead linked the raises to a reversal in long-stagnant wage growth. Worker salaries and wages have made up a smaller and smaller share of US economic output since the 1960s. At the same time, compensation for CEOs and shareholders has boomed.

Boosting compensation for workers at the bottom of the pay scale is long overdue and poses little risk to the recovery, the president said Thursday.

"We have more than ample room to raise workers' pay without raising customer prices," Biden added.

While several companies have announced their own wage hikes, the latest efforts to introduce a higher minimum wage at the federal level have so far failed. The Senate voted down an amendment to raise the federal wage floor in March, and lawmakers haven't made substantial progress toward such a hike since. And with eight Democrats defecting from the party and voting against the proposal, such legislation faces an uphill climb at least until the 2022 midterms.