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Have Wages Kept Up With Inflation?

This is a syndicated repost published with the permission of Statista | Infographics. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

One of the reasons why people are so concerned with inflation is the fact that high inflation hits consumers right where it hurts: the wallet. In times of high inflation, when prices increase faster than nominal wages, real wages go down, meaning that workers see (and feel) the purchasing power of their income decline.

During the current inflation crisis, this has been the case from April 2021 to April 2023, when average real hourly earnings declined for 25 consecutive months on a year-over-year basis. In May 2023, real wages began to rise again as nominal wage growth outpaced inflation once again as it normally should.

By looking at cumulative wage growth and price increases since January 2020, we can answer the question whether or not wages have kept up with inflation over the past four and half years. The answer is: yes, but just barely. While nominal wages have increased 22.7 percent since the beginning of 2020, consumer prices have also surged by 21.0 percent on aggregate. This leaves real wage growth at a meager 1.5 percent for the entirety of the past four and half years, which is equivalent to an annual (real) pay increase of 0.3 percent.

This chart shows the cumulative change in nominal and real wages as well as the Consumer Price Index in the United States since January 2020.

Inflation and wage growth in the United States

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