Inflation Erodes Workers’ Pay Increases

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7—That's how many months inflation-adjusted hourly earnings have fallen, showing that rising prices are steadily eroding workers' buying power despite wage increases.

The Balance

That's how many months inflation-adjusted hourly earnings have decreased, showing that rising prices are steadily eroding workers' buying power despite wage increases, according to new data from the government.

Inflation-adjusted average hourly wages fell 0.1% in July compared to June, the Bureau of Labor Statistics reported Wednesday. While average wages rose 0.4% before accounting for inflation, the pay hikes didn’t keep up with prices, which, as measured by the Consumer Price Index, rose 0.5% in July. In fact, inflation has outpaced hourly earnings growth for all of 2021 so far.

“Ultimately workers care about the difference between wages and prices,” Jason Furman, a Harvard economics professor and former top advisor to President Barack Obama, posted on Twitter. “And right now prices are going up faster than wages.”

Employers have been boosting pay to attract talent as the economy recovers from the pandemic. However, the pandemic’s disruption of supply chains has led to shortages of everything from houses to computer chips, resulting in rising prices across a broad swath of things people buy.

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