For nearly two years wages have not kept pace with inflation.

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Hourly Earnings vs CPI data from BLS, chart by Mish

CPI vs Hourly Earnings Chart Notes 

• The blue line is year-over-year gains or losses in average private hourly earnings.
• The green line is year-over-year gains or losses in average private hourly earnings of production and nonsupervisory workers.
• The BLS calculates two measures of inflation pertinent to the above chart. The first is called CPI-U (red line) or CPI for all urban consumers. The second is CPI-W (yellow line) for urban clerical workers. 
• All data is not seasonally adjusted as is typical for year-over-year comparisons.

Statistical Mirage

Wages jumped in the first few month of the Covid pandemic because proportionally far more lower paid employees were laid off. 

Restaurant and hotel workers, etc., were heavily laid off in the pandemic vs higher paid employees who could work from homes. 

Wages did not really jump in this period via pay increases. Rather, wages rose because more low-wage employees lost their jobs. 

Real Hourly Earnings 

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Year-over-year calculation of wages minus inflation by Mish from BLS data.

Real Hourly Earnings Chart Notes 

• Real means inflation-adjusted.
• Real hourly private wages are calculated by subtracting year-over-year CPI-U from year-over-year private wages.
• Real hourly production and nonsupervisory wages are calculated by subtracting year-over-year CPI-W from year-over-year production and nonsupervisory wages.

Real wages for all workers as well as production and nonsupervisory workers have been negative for 21 months starting April of 2021.

How Long Will High Inflation Persist? 

It's not where we are that matters most but where we are headed. For discussion, please see How Long Will High Inflation Persist? What Happened to the Great Moderation?

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