Wages can’t keep pace with inflation
Among of the biggest losers when inflation starts to rise are workers’ paychecks. Trying to keep wages in line with galloping prices lead to an inflation spiral in the 1970s. And while recent inflation data isn’t nearly that bad, and wages have risen in for many in the last year, overall the data paint an ugly picture for some wage earners:
Average pay also jumped significantly in 2021 — to more than $31 an hour, a 4.7% annual increase, the Labor Department reported…
Despite that pay bump, higher consumer prices ate into household budgets. In effect, the average worker got a 2.4% pay cut last year, according to seasonally adjusted data published by the Labor Department.
“In what was the best year for wage growth that we have seen in many, many years, it still comes up as a loss for many households,” said Greg McBride, chief financial analyst for Bankrate. “Their expenses increased even faster and chewed up all of the benefit of whatever pay raise they had seen.”
And it’s where inflation looks “stickier” – or less likely to decline – that could extend the pain to more and more people:
Staples like rent and groceries are harder to avoid. (Their costs were up 3.3% and 6.5% on the year, respectively.) Consumers may change buying behavior to reduce the budget sting, perhaps substituting chicken or fish for beef (which jumped 19%), for instance.
An increase in annual rent may prove longer-lasting than in other areas, according to economists. Even a small increase in percentage terms can quickly erode any paycheck gains for lower-earning renters, McBride said.
Clipping coupons…eating out less…scrimping on this and that to make sure the rent gets paid…inflation is insidious when it’s not outright oppressive. These are the real wages of running the economy so hot, for so long, on so much loose money and stimulus.