Inflation is outpacing wages again. Many workers were already behind.
Summary
American workers’ pay is not keeping up with rising prices again, a problem that started during the pandemic. Many workers are still earning less when adjusted for inflation than they did several years ago, as companies tend to give small, regular pay raises instead of raises that match inflation.Key Facts
- From February 2021 to June 2022, real wages (paychecks’ buying power) dropped by over 4%.
- 37% of workers earned less in inflation-adjusted terms in December 2024 than they did four years earlier.
- Rising oil and gasoline prices due to the Iran war pushed inflation higher, reaching 3.4% annual increase in July.
- Workers’ hourly wages rose 3.2% in the same period, less than inflation, causing real wage losses.
- Many companies give standard wage raises around 3%, which works only if inflation is low.
- When inflation rises above the usual raise rate, workers effectively lose purchasing power.
- Workers who change jobs tend to get pay increases closer to inflation but face other challenges.
- Despite low unemployment, low real wages hurt how consumers feel about the economy.
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