Inflationary Trends Cut Into Rise in Wages

Economic Policy Brief #131 | By: Rosalind Gottfried | December 15, 2021

Header photo taken from: Center for American Progress




Follow us on our social media platforms above

Browse more economic policy briefs from the top dashboard

Economy now hiring

Photo taken from: Bridge Michigan

Policy Summary

Wages are increasing significantly in all sectors.  As workers have gradually rejoined the labor force, taking their time even as federal subsidies to unemployment benefits ended, starting wages and service work especially have seen large increases.  Wages increased 4.9% between October 2020 and October 2021.  Increases in restaurant and bar wages reached 12% and transportation and warehousing wages rose by 8%.  Private companies have increased their wages and project payroll increases of 3.9% in 2022.  

Raises in the private sector extend to managers, hourly workers, and regular employees.  Average wages in private companies climbed to $30.85 an hour in September.  The biggest wage jumps have been among newer workers under the age of 25 and among job switchers.  Job changers average an increase of 5.1% while stable employees saw only 3.7% gains.  Nonunion jobs increased at a faster rate than union jobs.  Even with these increases, the worker shortage is expected to continue through 2022. 

Good news?  Not as good as it sounds since inflation has cut into the impact of the raises so that they actually amount to only about .5-1%.  Inflation is at its highest since 1982 and the consumer price index, the measure indicating the cost of goods and services, has increased by 7.8% between February and October.  Wages will need to continue to increase if people are to sustain their usual food and heating budgets.  Inflation is not predicted to subside in the near future.

Policy Analysis

106857451 16164321232021 03 22t165444z 1660276391 rc2ggm90miqk rtrmadp 0 usa amazon labor

Photo taken from: CNBC

The current wage situation points to some interesting trends. Manufacturers have significantly increased wages, as have other low wage hourly industries, such as food service and warehousing but these relatively low paid sectors have workers who tend to be most vulnerable to the consequences of inflation.  Some observers have suggested that the country might see a return to wages being tied to the cost of living, as they were in the 1970s and 1980s.  

The sluggish response of unions may also have an impact on the future success of unionization efforts.  Finally, the prediction of sustained inflation might make for an anxious stock market, though that remains to be seen since so far it has held pretty steady, with some temporary fluctuations in response to pandemic news and inflation reports. 

Engagement Resources​

Click or tap on image to visit resource website.

the washington post squarelogo 1574698215042

In 2022, companies plan to give biggest raises in more than a decade


US wages are going up, and those who don’t adapt to the new reality will fail

marketplace org logo

Good news in the latest jobs report: Wages are up, especially in low-paying sectors

Subscribe Below to Our News Service

Pin It on Pinterest

Share This