Most workers in the United States have seen their wages fall behind inflation in the past year, according to a recent report by the Federal Reserve Bank of Dallas.
“For the 53.4 percent of such workers in second quarter 2022, the median decline (that is, half of the declines were larger and half smaller) in real wage growth was 8.6 percent,” the report said.
“The average median decline over the last 25 years is 6.5 percent, with real wage declines typically falling in the range of 5.7 to 6.8 percent,” the Fed said.
The only other periods during the past 25 years when the decline in real wages was more severe than in the second quarter of 2022 were during the Great Recession around 2008, and in 2015, which were also the result of inflation turning negative.
The proportion of workers with negative real wage growth spiked to 55.5 percent during post-COVID-19 recovery and is currently at 53.4 percent. The last time the percentage was this high was in 2011. “The current time period is unparalleled in terms of the challenge employed workers face,” the Fed wrote.
Living Paycheck to Paycheck
The Fed has been raising interest rates as a measure to reign in inflationary pressures as well as wage growth. Some policymakers are especially worried about a wage-price spiral, a situation in which higher prices push up wages which then pushes up prices even more.“It seems to me wrong for Powell to say we’re going to crush wage increases, we’re going to crush the worker, when that is not the cause of the inflation. The cause of the inflation was excessive monetary accommodation for the last two years,” Siegel said.
Three in five U.S. consumers were found to be living paycheck to paycheck in August, with almost a fifth saying that they found it difficult to pay bills.
