The typical U.S. worker out-earned inflation by $1,400 a year, data shows
But over that same period, median weekly earnings, which include before-tax wages plus any commissions or tips, climbed 24%, for a gain of 2.3% beyond the inflation rate, the Treasury analysis found.
The last few years’ wage gains haven’t been equally distributed. But it is white-collar professionals who have seen a slowdown in their fortunes: Blue-collar workers — who continue to be in demand in many sectors — saw earnings climb 3.8% over the period, compared with 1.6% for the median worker in the 75th percentile.
“This solid increase continues to reflect an improvement in the purchasing power for the median worker since before the pandemic and is good news for American households, ” the department’s researchers wrote in an update to findings released in December that first highlighted the trend.
That doesn’t mean everyone has been feeling the benefits. While consumer confidence rose to a six-month high in August, according to data the Conference Board released Tuesday, it remains below pre-pandemic levels, with about equal shares of respondents now calling their family’s current financial situation “good” versus “bad.” It’s the latest sign that what some have called a “vibecession,” referring to the mismatch between a relatively solid economy and downbeat impressions of it, hasn’t fully abated.
With the rate of inflation slowing just as the 2024 presidential election heads into the home stretch, there’s no shortage of debate about what caused the run-up in prices in the early part of the pandemic. Many conservatives have blamed government spending, while progressives are increasingly casting corporate profits as a culprit. Vice President Kamala Harris, the Democratic presidential nominee, has proposed a ban on “price gouging” of groceries, looking to make the case that “excessive” price hikes have unduly squeezed household budgets.
Many economists generally put more blame for inflation on Covid-era supply-chain shocks that caused shortages of countless goods and services just as the health crisis scrambled ordinary demand patterns.
At any rate, even as prices have climbed, the typical American household has weathered the storm: Foreclosures and bankruptcies, though they have begun creeping upward, have yet to surpass pre-pandemic levels. Unemployment, too, has increased recently but remains at a historically low 4.3%.
And while some recession fears continue to simmer, it’s precisely because inflation has cooled without yet triggering mass layoffs — a scenario known as a “soft landing,” which many thought near impossible a year or two ago — that the Federal Reserve is set to begin lowering interest rates as soon as next month.
“Price stability has returned,” RSM Chief Economist Joe Brusuelas posted on X last week, adding, “the economy has an interesting way of trumping ideology and politics.”
Gould, of the EPI, said that a combination of factors — including states increasing their minimum wages and economic policies keeping the economy near full employment, including government spending — have allowed Americans’ purchasing power to come out ahead.
“Over the past four years, middle-wage workers have been beating inflation,” she said.
What’s more, rising pay has not necessarily hurt companies’ bottom lines: Corporate profits and stock market indexes are both at record highs. In fact, the EPI’s analysis of federal data shows labor’s share of business income is hovering at record lows.
That means many companies could afford to pay their workers even better, Gould said.
“There’s plenty of room for wages to rise even more and for workers to claw back some labor share that has gone to profit,” she said.
