Biden’s presidency was marked by a kind of paradox. Under his leadership the US economy had the highest growth rate in the G7, and yet a lot of people felt like their living standards were getting worse. Jeevun Sandher MP looks back at Bidenomics and argues that Labour has a lot to learn from its successes and failures.
Enjoying this post? Then sign up to our newsletter and receive a weekly roundup of all our articles.
The United States has been, by far, the most successful high-income economy since COVID with growth rates far exceeding the rest of the G7. But this growth did not lead to higher living standards and the American people felt the economy was getting worse going into last year’s election. So why didn’t Bidenomics raise American living standards?
Bidenomics didn’t raise wages quickly because of the type of investments that were made. They were mostly physical infrastructure investments that were concentrated in certain parts of the country. There are three key lessons for the UK: 1) Physical infrastructure investments take time to fully feed through to incomes, 2) Human infrastructure investments are faster at boosting wages and, 3) Investment needs to be in a broad set of places for everyone to benefit.
Biden became President in 2021, and had a two-part plan for transforming the US economy through investment. Firstly, physical infrastructure investments in transport, microchips, and clean energy. Secondly, human infrastructure investments in early years childcare, tax credit transfers, and social care. But only the first part of the plan, the physical infrastructure investment plans, were enacted. The Senate blocked the human infrastructure investments .
All else being equal, Biden’s investment should have led to rising wages in the short-term. But all else was not, of course, equal.
Lesson 1: Physical infrastructure investments take timeto fully feed through to incomes
Building physical infrastructure has short- and long-term effect on wages. The short-term impact on wages depends on how many people are employed in building it. Building a bridge, for example, means paying workers a salary, which they then spend in shops, driving up wages. The more people involved in building physical infrastructure, the wider the benefits.
All else being equal, Biden’s investment should have led to rising wages in the short-term. But all else was not, of course, equal. While Biden’s investments were taking effect, Putin’s invasion and supply chain blockages led to rapidly rising prices. Real wages and household incomes fell as prices rose.
Investing today means a short-term impact on wages for those who are employed and a general rise in wages years down the line.
Real GDP (i.e. over and above inflation) was rising rapidly as Biden’s investments were coming online. But as Biden’s investments were on physical infrastructure, these payments were largely going to capital rather than labour. The short-term impact on wages was not large enough to overcome the general rise in prices that everyone suffered.
Index of Real Earnings, GDP, and Household Income, 2019-2024

Sources: Federal Reserve Bank of St. Louis
Building physical infrastructure also has a long-term effect on wages as they make us more productive. A new bridge makes it easier to move goods and people around, but it takes time for the effects to be fully felt because you need to build the bridge first. The long-term impacts of Biden’s investments are just being felt as projects are completed with real wages also rising, but that is three years after the Bill was signed into law.
The first lesson for the UK is that physical infrastructure investments take time to fully feed through into wages. Investing today means a short-term impact on wages for those who are employed and a general rise in wages years down the line. For today’s Labour government, the economic impacts of GB energy, the UK’s clean energy company, are instructive here. There will be a short-term boost to wages as solar farms, grid connections, etc. are built and then a larger, long-term rise in (real) wages as energy bills fall.
Lesson 2: Human infrastructure investments have a larger, immediate effect on wages
An obvious (but underappreciated) point about physical infrastructure investments is that a large portion of it goes to physical stuff (like concrete). That is the “capital” in “capital investment”. Wages make up about 20 to 40 per cent of construction building costs. That means 60 to 80 per cent of physical infrastructure investments are not going on wages.
Hiring more nurses, doctors, and nursery workers in the UK are investments in human infrastructure that go directly to wages. This was largely missing in Biden’s plan.
A large amount of Biden’s physical infrastructure investments, by their very nature, went to material not people. The labour share of GDP only rose slightly after infrastructure spending came online in 2022 because only a relatively small portion (i.e 20 to 40 per cent) of the spending went on hiring people.
The US Labour Share of Income

Source: Bureau of Economic Analysis, Council of EconomicAdvisers
Labour Share of Income is wages and salaries as a proportion of Gross Domestic Income.
Human capital investments are, as the phrase suggests, more labour intensive. If you invest in early years childcare, that means paying people to look after and educate young children – around 80 per cent of nursery costs go to wages. Had more of Biden’s investment been spent on human infrastructure (as he’d planned), more of the expenditure would have gone to labour in the form of wages.
The second lesson for the UK, then, is that infrastructure investments feed far more quickly through to wages than physical infrastructure. Hiring more nurses, doctors, and nursery workers in the UK are investments in human infrastructure that go directly to wages. This was largely missing in Biden’s plan.
For investments to be felt across the country means they are made across the country. Building Crossrail in London has little impact on wages in Newcastle.
Lesson 3:Investments need to be widely made to be widely felt
Biden’s investments were concentrated in particular parts of the country. Many of his investments went to rural, Republican districts rather than inner city Democratic ones. That meant cities did not feel the benefits of the Bidenomics investments being made elsewhere in the country.
Non-residential Construction Investment by State & 2024 Election Result

Source: U.S. Census Bureau, Joseph Politano
For investments to be felt across the country means they made across the country. Building Crossrail in London has little impact on wages in Newcastle. By contrast, Labour’s plan to insulate millions of homes means building across the country as well as being a relatively labour-intensive form of construction.
That is the third lesson for the UK – investments need to be geographically dispersed to lead to higher wages for all.
Bidenomics did succeed in building a US economy that grew faster than any other G7 nation. But these investments did not lead to higher living standards across the country. That is because physical infrastructure investments take time to feed through to wages, they are not as labour-intensive as human infrastructure, and they were geographically concentrated. These are lessons we should learn from Bidenomics.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.
Image credit: Consolidated News Photos in Shutterstock
Enjoyed this post? Then sign up to our newsletter and receive a weekly roundup of all our articles.