Are wages outpacing inflation? Depends on what you do.

Justin Ho Jan 12, 2022
Heard on:
HTML EMBED:
COPY
While pay in leisure and hospitality is increasing faster than prices, sectors like construction and manufacturing are lagging behind. Paul J. Richards/AFP via Getty Images

Are wages outpacing inflation? Depends on what you do.

Justin Ho Jan 12, 2022
Heard on:
While pay in leisure and hospitality is increasing faster than prices, sectors like construction and manufacturing are lagging behind. Paul J. Richards/AFP via Getty Images
HTML EMBED:
COPY

On Wednesday, we learned that the average hourly pay rose 0.1% in December. We’re talking real wages — meaning that paychecks grew even when you factor in inflation. That said, we’re also talking about an average. Not everybody’s pay increased enough to cover those higher costs.

Whether you’ve received a raise lately depends on where you fall on the income spectrum.

“Lower-wage workers are seeing larger percentage increases than higher-wage workers,” said Liz Ann Sonders, chief investment strategist at Charles Schwab — a Marketplace underwriter.

She said it also depends on what you do. Take the leisure and hospitality industry, for instance. “Leisure and hospitality has, in general, seen the biggest increases in wages.”

And those workers have been making enough to outpace inflation, according to Sarah House, senior economist with Wells Fargo.

But in plenty of other industries, pay hasn’t kept up with prices. 

“Areas like information, mining industry, manufacturing, construction,” she said.

One way workers have beat inflation, House said, is by quitting their jobs and taking on new, higher-paid roles elsewhere.

“And so companies across the pay spectrum are really having to think about their compensation plans, in terms of attracting new employees but also keeping their existing ones,” she said.

As a result, those higher wages are likely to stick around, said economist Daniel Zhao at the job website Glassdoor.

“Most employers would actually even prefer to furlough or lay off workers rather than cut pay because they know it would have a dramatic impact on employee morale,” he said.

But Zhao added that it’s not enough for pay to stay where it is. Wages will have to keep rising along with prices.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.