Fighting inflation isn't the best way to make life more affordable, some economists say

Mounting public attention on the struggle millions of Americans face affording food, housing and other daily necessities has largely centered on what can be done to quash inflation. Yet some economists say the discussion is incomplete without addressing another major reason life has become unaffordable for so many people: their meager paychecks.

"It's not just about how much things cost. Affordability is truly about, 'Does an individual have enough money to buy the things they want?' So it's not about making things cheaper, but making it so you earn more so that the stuff you need is affordable," Heidi Shierholz, president of the Economic Policy Institute, a nonpartisan think tank, told CBS News.

President Trump on Tuesday evening is expected to address cost-of-living concerns and other economic issues at a rally in Mount Pocono, Pa. Although he has at times dismissed claims that the U.S. faces an affordability crisis, his administration has also taken steps to offer relief. 

In November, for example, Mr. Trump removed country-specific tariffs on imports of beef, bananas and coffee as consumers continue to grapple with high food prices. The president last month also discussed offering Americans a $2,000 payment funded by U.S. tariff collections, while this month he floated the idea of using tariff revenue to cut federal income taxes.

"Your money doesn't go as far"

To be sure, controlling inflation is critical, as well as an explicit aim under the Federal Reserve's dual mandate to keep both unemployment and prices in check. Scott Lincicome, vice president of general economics at the Cato Institute, a nonpartisan think tank, describes prices and wages as "two sides of the same coin."

"You can achieve the same standard of living by either raising wages or lowering costs or both," he added. "So it is important to deal with cost-of-living issues if you want to improve living standards, but raising wages also works."

Shierholz, who served as chief economist at the Department of Labor under Barack Obama from 2014 to 2017, thinks a better way to make life more affordable is to raise worker wages so their dollars stretch further. She also favors providing government subsidies to help ease the burden of affording essential — and increasingly costly — services such as child care and health care.

One-third of middle-class families struggle to afford housing and child care, according to a recent report from the nonpartisan Brookings Institution. 

Meanwhile, many Americans are struggling to afford things beyond the bare essentials, according to the Ludwig Institute for Shared Economic Prosperity. The research firm has found that the bottom 60% of income earners in the U.S. have difficulty affording expenses such as higher education, transportation and even the basic technology required for their jobs.  

"There are some things that feel out of reach that didn't feel like they were out of reach in the past," said Veronique de Rugy, an economist at the Mercatus Center at George Mason University. "Your money doesn't go as far as it used to."

Why prices may not drop much

Economists note that prices don't generally decline broadly unless the economy is in a recession, with presidential administrations and even the Fed having a limited toolkit for addressing severe bouts of inflation. Meanwhile, a sharp, across-the-board drop in prices can indicate a dangerous erosion in consumer demand, leading to an economic downturn.   

"Overall, it's very rare and not a good thing to have outright deflation across the economy," the Cato Institute's Lincicome told CBS News. 

Indeed, millions of people would have to lose their jobs, and then cut their spending, for demand to slow enough for companies to broadly reduce their prices, according to Shierholz. 

"In order to bring the overall price level down, you have to have a massive recession because people are not demanding stuff, because they don't have any income," she added. "That's how you get a drop in the overall price level."

Affordability fixes?

Shierholz favors a range of policies for driving both short- and long-term wage growth. First and foremost, the U.S. could boost the federal minimum wage, which has been stuck at $7.25 an hour since 2009. 

Local governments aren't waiting around for the feds to take action, with dozens of states in recent years adopting higher baseline wages. In 2026, minimum wage increases are set to take effect in 19 states and 49 cities and counties starting on Jan. 1, according to the National Employment Law Project. 

Reforming labor laws to make it easier for workers to form a union can also lead to higher wages for workers, Shieholz said. Equally important, in her view, is providing a robust social safety net. That includes providing ample unemployment insurance benefits so workers who lose their jobs can stay afloat financially.

"That actually raises wages because it gives workers power," she said. "By contrast, if your employer knows you'll drop into poverty if you give up or lose your job, you're going to be much less able to make any risky demands." 

The Washington Center for Equitable Growth, a nonpartisan group focused on economic equality, also argues in a new report that expanding unemployment insurance benefits helps low-income workers find better-paying jobs. 

Although surging employee pay can fuel inflation under certain conditions, De Rugy of the Mercatus Center said that rising wages rooted in strong economic growth "actually improves affordability, because it tends to shift the bargaining power toward employees." 

To ease housing costs, progressive economists also support policies like freezing the rent and offering financial incentives to homebuilders to put up more affordable housing. 

Other experts also underline the importance of providing low-cost child care as a key part of solving the affordability puzzle for U.S. families. Child care costs today exceed the cost of rent in dozens of cities, according to a recent LendingTree analysis. Households spend an average of $1,282 per month for full-time child care for one child and $2,252 for two kids, the lending marketplace found. 

Some states are leading the way to ease child care costs, showing that progress is possible given sufficient political will. In November, New Mexico became the first U.S. state to offer free universal child care to residents, with Gov. Michelle Lujan Grisham telling CBS News it would save families an average of $12,000 a year.