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Recent Numbers (2024)
Consumer Price Index (CPI):
Between 2021 and 2023, overall inflation was about 14%, but wage growth was generally lower, causing an average loss in purchasing power.
Real Earnings:
According to the U.S. Bureau of Labor Statistics (June 2024), real average hourly earnings are down about 3% from early 2021 for nonsupervisory workers.
Declining Purchasing Power of Americans
Over the past several years, the purchasing power of American workers has declined, mainly due to inflation outpacing wage growth. This means that, even if nominal wages are rising, the amount of goods and services people can actually buy with their income has often decreased.
Key Points
Inflation Outpacing Wages:
Since 2021, U.S. inflation surged to levels not seen in decades, particularly after the COVID-19 pandemic. While wages have increased, the rise in consumer prices (food, housing, fuel, etc.) has often been higher.
Source: U.S. Bureau of Labor Statistics, Pew Research Center
Real Wages are Down:
“Real wages” (wages adjusted for inflation) have stagnated or declined for most Americans since 2020. According to Pew Research (2023), median real hourly wages were lower in mid-2023 than before the pandemic, despite nominal wage increases.
Source: Pew Research Center
Cost of Essentials:
Basic costs like rent, groceries, and energy have risen faster than average wages. Many households report spending a higher share of income on essentials, leaving less for discretionary spending.
Source: Bloomberg, CNBC
Long-Term Trend:
Although wage growth has recently picked up in certain sectors, it has not consistently outpaced inflation since the 1970s. Real wage stagnation is a long-term issue in the U.S. economy.
Source: Economic Policy Institute