Adjusted for inflation, wages have fallen every month since April 2021
The value of a dollar is what it can buy you. In economics, this is referred to as purchasing power. A dollar is worth more if it can buy you a lot of things and vice versa.
To account for the fact that the purchasing power of money changes over time, economic statistics often adjust for general price changes — also known as inflation. In times when prices are high, a dollar buys less, and is therefore worthless compared to when prices are low.
This is why even though wages have gone up during the pandemic, our money is buying less compared to last year. So, in purchasing power terms, wages have actually gone down. This is what the Bureau of Labor of statistics refers to as ‘Real Wages.’
According to the Bureau of Labor Statistics (BLS), prices were up 7.9 percent this February compared to last year. This means that anyone who did not get a raise of more than 7.9 percent experienced a drop in the real value of their wage.
It’s hard to know what percentage of workers have had raises of more than 7.9 percent, if the data exists at all. However, BLS data offers us a way to see whether, on average, wages after taking prices into account — real wages — are rising or falling.
And according to the BLS, real hourly wages in the U.S. have fallen every month since April 2021 due to high inflation. The biggest decline in real wages was in January of this year, at 3 percent.
While at the beginning, individuals could take solace in the idea that inflation was transitionary, this does not seem to be the case anymore. Inflation is likely to persist and continue eating away at people’s incomes.
Even more unfortunate is the fact that low-income individuals will be hit the hardest.