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Wage growth in the United States has lagged behind inflation in most countries. President Biden’s term The current average hourly wage is below the level in January 2021.
But for all of last year since the pandemic, wage growth has outpaced inflation, a fact the White House is celebrating as Biden seeks reelection to a second term in November.
“Inflation is down two-thirds from its peak, with annual core inflation at its lowest level since May 2021,” Biden said last month when the Labor Department released its consumer price index. has risen faster than prices since last year and the pandemic.” CPI report for February.
“Prices for major household purchases such as gasoline, milk, eggs and electronics are lower than they were a year ago,” the president said. “While inflation is falling, unemployment is at its highest level in more than 50 years. It remains below %.”
US economy adds 303,000 jobs in March, bigger than expected
Mr. Biden speaks in the Roosevelt Room of the White House in Washington, DC, on August 24, 2022. (Alex Wong/Getty Images/Getty Images)
Wages rose 4.1% in March from a year earlier and employers added 303,000 jobs, more than economists expected.of Unemployment rate According to the Labor Department, the rate fell to 3.8% from 3.9% in February. These strong numbers continue strong employment and wage growth trends, even though Americans’ average hourly wages have not kept pace with consumer price increases.
As of February 2024, the country’s “real” average hourly wage, adjusted for inflation, was $11.11, a decrease of 29 cents, or -2.54%, from $11.40 in January 2021.
Wage growth outpaced inflation in the first three months of Biden’s term. However, since April 2021, American workers have seen 25 consecutive months of negative real wage growth, averaging -2.0%.
“From April 2021 to April 2023, prices rose faster than inflation, and workers’ incomes fell by about 4% in real terms,” said Julia Pollack, chief economist at ZipRecruiter. “Since May 2023, wages have once again grown at a faster pace than prices.”
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The line chart above shows the annual percentage change in the average hourly wage for all employees compared to the annual percentage change in the Consumer Price Index (CPI) for all urban consumers from 2021 to 2024. (Fox News/Fox News)
Although the current inflation rate has fallen from its peak of 9.1%, the consumer price index has increased by a staggering 18.49% compared to January 2021, just before prices began to soar. Average hourly wages for all employees increased by 15.9% over the same period.
Inflation puts severe economic pressure on most U.S. households, especially low-income Americans, who face substantial wage cuts when prices rise. Before the pandemic, workers were accustomed to wages rising faster than inflation.
“Workers have become accustomed to annual wage increases to keep pace with inflation, and then further wage increases to capture productivity growth. , wage growth also rose as employers had to put more effort into recruiting,” Pollack said. “Wage growth in 2019 therefore exceeded inflation by about 1.5 percentage points.”
Real wage growth over the past two months was 1.2% and 1.1%, hovering around pre-pandemic averages. But Pollack noted that not all workers are seeing wage increases at the same pace.
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“Employees in the information, manufacturing, construction and retail trades have now seen their wages grow slower than inflation and have declined in real terms since the pandemic, while wages for leisure and hospitality workers have increased by 28.9% since the pandemic. %, in real terms 8.9%, about twice the rate expected before the pandemic,” she said.
“Overall, the lowest income earners have seen their wages grow faster than the middle and top earners, even though the wealth gap has widened since the pandemic due to strong gains in the housing and stock markets. Wage inequality has narrowed.” Wealth experienced by wealthy families. ”
Looking ahead, Pollack said there are three main reasons for real wage growth. Inflation is slowing faster than wage growth. Productivity growth is high. Low unemployment rates also keep wages rising, allowing businesses to hire competitively.
“There are still risks, for example, that the recent rise in oil prices could lead to higher inflation and undermine some of the progress workers have made recently,” Pollack said. “But for the most part, wage growth appears to be heading in the right direction for now, thanks to normalizing inflation and a tightening labor market.”
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As jobs and wages rise, Biden called on Congress to do more to lower costs for Americans, especially the middle class. In his State of the Union address last month, the president vowed to lower the cost of prescription drugs, build 2 million new housing units to lower rents and cut taxes for Americans earning less than $400,000, while also cutting taxes for corporations and the wealthy. announced a plan to increase taxes.
Former President Donald Trump, the Republican presidential candidate, is calling for additional tax cuts to stimulate economic growth and higher tariffs on imported goods to protect American jobs and boost manufacturing.
