The cost of living in the U.S. rose 4.9 percent during the 12 months ending in April, according to the consumer price index, well above where the Fed wants it to be.

For the median worker — in contrast with low-income workers — increases in pay and prices have essentially been a wash, underscoring why the central bank is willing to sacrifice the former for the latter.

And even for the lower-wage workers who have seen the biggest gains, inflation is denying them the full benefit of raises, with many of them going into debt to cover basic expenses.

“We are definitely concerned that even those modest gains could even be eroded even further if the labor market gets worse,” said Katrin Kark, who is director of workforce innovations at Local Initiatives Support Corp., a community development financial institution.

The policy debate around the interplay between inflation and wages is also, in part, a proxy fight about government aid to the economy, particularly the $1.9 trillion American Rescue Plan that passed soon after Biden took office. To supporters, the booming job market looks like an endorsement of that choice, especially in contrast to how long it took workers to recover in the wake of the 2008 financial crisis.

“Having a scarred economy because you don’t want to stoke inflation is one where you’re also keeping a lot of people out of the labor market,” said Skanda Amarnath, executive director of worker advocacy group Employ America. “It’s better to hit the accelerator to get back to full employment. We have lots of experience with sluggish recoveries after recessions.”

Indeed, for the first time since the government has been keeping data on racial gaps in employment, Black men are roughly as likely to participate in the labor force as white men.

Read the full article about low-income workers by Victoria Guida at LISC.