(Central Square) – New data shows that Americans are experiencing the biggest cut in wages in decades, largely due to inflation.
The Federal Reserve Bank of Dallas, one of several regional Fed banks across the country, has released new data on wages and prices, and it’s not good news for Americans.
“We found that real wages (adjusted for inflation) for most wage earners did not keep pace with inflation last year,” the bank said. “For these workers, the average drop in real wages is slightly more than 8.5 percent. Taken together, these results appear to be the most difficult wage earners have faced in 25 years.”
The Fed reported that more than half of Americans saw a decrease in wages in the past 12 months.
“How severe are the losses for workers who experience negative real wage growth?” – said the group. “For 53.4 percent of such workers, in the second quarter of 2022, the average drop (that is, half of the drop was larger and half smaller) in real wage growth was 8.6 percent. How does the severity of the fall in real wages in the second quarter of 2022 compare with the fall over the past 25 years? The average decline over the past 25 years is 6.5 percent, and real wage declines are typically in the 5.7 to 6.8 percent range…”
The bank pointed to the consumer price index, which has risen to its highest level in four decades since President Joe Biden took office. The latest Bureau of Labor Statistics consumer price index was up 8% over the previous 12 months.
Some costs, such as groceries, have risen even more.
“The home food index rose 13.5 percent over the past 12 months, the largest 12-month increase since the period ending in March 1979,” the BLS said. “The index of other food products at home grew by 16.7 percent, and the index of cereals and bakery products increased by 16.4 percent over the year. The remaining major food groups in grocery stores saw increases ranging from 9.4 percent (fruits and vegetables) to 16.2 percent (dairy and related products).”
Those price increases have outpaced wage growth, meaning some workers who even got a raise this year still didn’t see a raise big enough to offset inflationary price spikes.
“While the past 25 years have seen instances of either greater frequency or greater magnitude of declines in real wages, the current time period is unparalleled in terms of the challenges facing wage earners,” the Dallas Federal Reserve Bank said.