Will wages continue to keep up with inflation?

Amanda Peacher Dec 15, 2021
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Experts don't expect wage growth to stall given how many workers remain on the sidelines while companies have jobs to fill. Robyn Beck/AFP via Getty Images

Will wages continue to keep up with inflation?

Amanda Peacher Dec 15, 2021
Heard on:
Experts don't expect wage growth to stall given how many workers remain on the sidelines while companies have jobs to fill. Robyn Beck/AFP via Getty Images
HTML EMBED:
COPY

Inflation continues to hit Americans hard, with the latest consumer price index showing an increase of 6.8% over the previous 12 months.

But wages have gone up too, and in some sectors, wage increases are actually outpacing inflation. The Marketplace crystal ball doesn’t tell us what will happen with inflation. But if it does keep going, will wages keep pace?

Workers in hospitality and leisure have seen their wages climb more than 12% in the last year. That’s definitely more than inflation. But for a lot of these workers, pay raises have been long in coming.

“These jobs, for a long time, have seen their wages stagnate in real terms,” said Arin Dube, an economics professor at the University of Massachusetts, Amherst. “So it is a welcome change to see folks who’ve really struggled at least see some gains during these difficult times.”

Some low-wage workers may be able to stash away money in savings. Others may be hit hard by rising prices, according to Rebecca Dixon, executive director of the National Employment Law Project.

“That really does depend on what the mix of their expenses are. For instance, whether or not they have natural gas or gasoline as part of their budget,” she said.

Both of which are more expensive these days, along with rents. Such increases in fixed costs can quickly eat away at bigger paychecks.

But for now, there’s no reason to suspect that wage gains will slow down. Remember, a lot of workers quit because of the pandemic — they retired or stayed home to take care of kids and haven’t returned.

“And that’s essentially creating a vacuum,” said Luke Tilley, chief economist at Wilmington Trust. He said that labor vacuum pressures employers to woo new hires with more money.

“So companies are still in the mood to hire right now. Job openings are very high, and companies are counting on inflation to come back down,” he said.

If that happens, low-income workers will be in a good spot — earning even more, in many cases, and still beating inflation.

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