But in reality there are only workers inside Two industries — leisure and hospitality and retail — actually come out ahead when inflation is factored in.
Overall, the wages and salaries of employees in the private sector increased by 4.2% between December 2019 and last June, before accounting for rising prices, according to an analysis of quarterly Employment Cost Index data by Jason Furman, an economics professor at Harvard University.
However, Once inflation is factored in, paychecks actually shrunk by 1.2% over the period, the analysis found.
US consumer prices rose 9.1% year over year in June, the highest level in more than 40 years, according to the Bureau of Labor Statistics.
“Workers had more bargaining power to get higher wages, but corporations also had the power to set higher prices,” said Furman, also former chair of the Council of Economic Advisers in the Obama administration. “And prices beat wages.”
Where wages are rising
Leisure and hospitality workers, which include waiters, cooks and hotel workers, have been in high demand after being hit hard by job losses early in the pandemic as non-essential businesses shut down. According to Furman’s analysis, since December 2019 their wages have risen by 0.9% in inflation-adjusted terms.
While the broader economy has now regained all of the jobs lost during the pandemic, the leisure and hospitality sector is still down 1.2 million jobs, or 7.1 percent, from its February 2020 level, according to the Bureau of Labor Statistics’ monthly jobs report released Friday.
Retail workers such as salespeople, cashiers, and customer service representatives were also courted by employers. This has resulted in an inflation-adjusted wage increase of 0.2% for them. Employment in this sector is 208,000 higher than February 2020 levels.
But even workers in those industries have seen their pay rises erode this year as inflation continues to rise. Wage increases for leisure and hospitality workers and retail workers were 2% and 1.2%, respectively, in the two years to December 2021.
Employers in low-wage industries really needed to raise wages to hire and retain the staff needed to meet demand in 2021, said Skanda Amarnath, executive director of Employ America, which advocates for a high-wage and employment economy.
“Right now, the CPI is just way too strong compared to everything else,” he said of the consumer price index, a popular measure of inflation.
And where they fall
Across all other industries, inflation-adjusted wages have fallen since late 2019, led by utility workers with a 2.7% drop.
Workers in construction and information technology saw their payroll fall by 1.8%, while workers in manufacturing and finance saw a 1.7% drop.
Even wholesale workers like truck drivers, who were also in demand during the pandemic as supply chains went haywire, have lost ground. Their wages have fallen by 0.6% since December 2019. That’s a reversal from late 2021, when their wages had risen 0.1% in the previous two years.
The Labor Cost Index report is closely watched by the Federal Reserve to monitor the extent to which skyrocketing inflation is driving wages higher. The data will help the Fed determine how much to raise interest rates.
But the Fed looks at wage growth before the impact of inflation, and that has remained strong. The 5.3% increase over the year ended June was the highest since spring 1983.
Despite the fall in inflation-adjusted wages in most industries, the Fed is expected to hike rates further this year to try to slow inflation, economists say.