How wages compare with inflation since 2020

Wages have largely kept pace with inflation since the Covid-19 pandemic began in 2020, but for many workers, that hasn’t felt like much of a gain.

Price increases and wage increases have fluctuated over the past five years, with inflation-adjusted wages generally remaining nearly flat since 2020.

Inflation, meanwhile, reached a post-pandemic peak of 9.1% in June 2022, but has since declined. New inflation data released on Tuesday shows that consumer prices increased by 2.7% on an annual basis in December. Consumer Price IndexIt tracks the prices of things people buy on a regular basis, from groceries to rent to gas to medical care.

That brings it closer to the Fed’s 2% target, but even so inflation has remained above that level since then. February 2021and many households are feeling the pressure.

Slower inflation doesn’t mean prices are falling; It means they rise more slowly. Cumulative CPI inflation has increased since the beginning of 2020 about 25%by checking one of the following fastest increases over decades. These high prices are now part of daily household budgets, especially for basic needs such as food and shelter.

“Even as inflation slows, prices continue to rise, which remains a persistent source of frustration,” Bankrate financial analyst Stephen Kates told CNBC Make It.

Since the first quarter of 2020, CPI-adjusted wages have remained largely flat across many common metrics, according to analysis by . Hamilton ProjectA nonpartisan economic research group.

These metrics include the closely watched Employment Cost Index, which tracks wage changes over time for the same group of jobs; This makes it a useful way to see how wages are rising relative to inflation. According to the US Bureau of Labor Statistics.

The ECI shows the inflation-adjusted total change since the beginning of 2020, along with other common metrics:

• Employment Cost Index: –0.19%
• Average weekly earnings: +0.41%
• Average hourly earnings: +0.44%
• Total compensation including benefits: +1.25%

Taken together, the data shows that inflation-adjusted wage growth since 2020 has been close to zero.

But for many workers, “fixed” wages feel delayed, not fixed. Take average weekly earnings, for example: Inflation-adjusted pay is only slightly higher than five years ago; This means gains for some workers and little or none for others.

Kates says these unequal outcomes become even clearer when wages are broken down by income level. Wage growth for low-wage workers has slowed more sharply than for higher earners in recent years. on data From the Federal Reserve Bank of Atlanta. For households with less room in their budgets, slower wage growth makes it harder to afford higher prices for daily needs.

“Average wage data masks a variety of outcomes across the total worker population. When wages are broken down into quartiles, the lowest-income quintile sees little or no inflation-adjusted growth,” says Kates.

For many workers, “it feels like a recession because it is,” he says.

The combination of modest wage growth and high price levels may help explain why sentiment around household finances remains weak. One November poll Of 1,114 Americans on YouGov, 53% said their household income covered expenses, while 32% said it fell behind.

Similarly, 62 percent of working Americans say their income does not cover household expenses, according to a December survey Bank rate survey. While 65 percent of those who do not expect their financial situation to improve in 2026 stated that inflation was the main reason, the proportion of those who pointed to factors such as government policies or stagnant income was around 30 percent.

For many Americans, stable real wages mean they are no longer losing ground as quickly as they once did; but they cannot make any progress.

Federal Reserve Chairman Jerome Powell accepted This breaks the connection. Even as inflation slows, many households are still grappling with “the high cost built in due to high inflation in 2022 and 2023,” he said in a December speech.

“We’re going to have to have a number of years where real compensation is higher, significantly positive, for people to start feeling good about affordability,” Powell said.

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