Wage hikes lighten the burden of inflation, but it still weighs on some workers
Wage hikes lighten the burden of inflation, but it still weighs on some workers
How flush consumers feel financially at this point will help determine how good this holiday season is for retailers and the economy overall.
Recent data sheds some light on this: Average hourly earnings have increased 4% over the last year, whereas prices increased only 3.1%. While that means that folks are gaining purchasing power, that may not make consumers up and down the income ladder feel more financially secure.
Last year, as prices rose, so did wages — especially for low-income workers. Leisure and hospitality pay shot up by double digits.
But no longer. “At the bottom, we’re absolutely seeing those gains are stalling out,” said Tulane economist Gary Hoover.
That’s squeezing many families’ finances, per Robert Frick at Navy Federal Credit Union.
“Our lower-income members are really struggling, and the main reason for that is the rate of inflation has come down, but the weight of inflation keeps going up,” he said.
That “weight” is the cumulative effect of two years of sharp price hikes — for food and transportation and rent. Those costs “make up a huge percentage of lower-income people’s budgets,” said Frick.
And adjusting to higher prices is hard, said Gary Hoover. “Some folks are hoping that prices are going to start falling, to return to where they were before.”
Thing is, once prices go up, they rarely come down again.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
