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.
These measurements of nominal and real wages are aggregated numbers. They comprise many, many individuals in many different job, industry and income categories. For some of those folks, they did better than the aggregated numbers. For others, they did worse.
ReplyDeleteI read something in the last couple of days to the effect that the demographic groups who drifted to Trump in the election were those who did worse. E.g. Black men's wages did not rise as much as the aggregate numbers. When I get time, I'll try to dig into that a bit.
Yes, am hearing similar things. Women's wages, according to one analysis, do not rise as fast or as high as men's. But I think that demographic needs to be cut more finely, between college-educated women more likely to have white-collar jobs in corporate America, and women working jobs in service industries (elder care, child care, janitorial and food service, etc). Well-off women voted Harris. Others not so much.
DeleteMost data about inflation don’t clearly explain the complications caused by the pandemic - the supply chain issues, the lockdowns, the bipartisan supported enormous stimulus during the pandemic and after to keep people, businesses and yes - churches afloat. All of these inflationary pressures built up and so inflation surged once the economy reopened completely. Biden gets the blame even though he had no control. The first stimulus packages came about during the trump era. He never wanted to face the fact that Covid wasn’t an ordinary flu because he didn’t w@nt a shut down of the economy. The states that didn’t shut down did marginally better than those that did but their mortality rates were much higher. The conservatives were pushing old people to risk their lives to save the economy.
ReplyDeleteBoth real and nominal wages were stagnant for many years during the very low inflation years. They can be measured many ways, which can change the apparent results. However, I found this report from the Economic Policy Institute ( friendly to labor interests) to be very interesting.
https://www.epi.org/publication/swa-wages-2023/