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Inflation Outpacing Wages Says Federal Reserve

Inflation Outpacing Wages Says Federal Reserve
A single one-dollar bill in a men's leather wallet presents inflation, a lower wage rate, a currency war concept, global economic crisis situation. | Image by Vasiq Eqbal, Shutterstock

Americans are having trouble keeping their wages from feeling the eroding effects of inflation, according to the Federal Reserve Bank of Dallas. Despite wages rising at the fastest pace in decades, inflation continues to outpace gains by American workers, the Dallas Fed reports.

Within the past two years, the U.S. inflation rate has risen by over 7%, leaving Americans with higher prices and less value to each dollar they earn. Data collected by the Fed found that while inflation steadily rose, the wage growth index for workers was scattered. Though some workers nearly doubled their wages, a large population saw wage cuts ranging from 10% to 50%.

By overlaying the inflation rate with the reported wage growth, Fed analysts found that a wage increase of roughly 9% was necessary to keep up with the current rate of inflation. More than half, 53.4%, of workers fall below this line, meaning that the national wage growth is not benefitting at least half of the workers.

“Over the past 25 years, on average, 44.6 percent of surveyed workers experienced negative real wage growth over the prior 12 months,” the report reads. The “real” wage growth means an increase or decrease in relation to the inflation rate of the given time period. According to the data, the last time the percentage of workers suffering from real wage decay was this high (53.4%) was in 2011.

“While the past 25 years have witnessed episodes that show either a greater incidence or larger magnitude of real wage declines, the current time period is unparalleled in terms of the challenge employed workers face.”

In a survey conducted by the University of Houston, many Texans aren’t feeling too hot about the future of inflation. In the survey, 45.6% of Texans responded that they believed inflation would continue through the next decade. Only 12.9% said they think that current wages are sufficient to outpace growing inflation.

Frankly, no easy solution to the growing inflation levels has appeared yet. Some, such as Mark Wolfe, the executive director of the National Energy Assistance Directors Association, argue that rising energy costs will worsen living conditions for Americans in poverty. Wolfe suggests that the government quickly initiate programs that help impoverished Americans retrofit new energy-saving equipment into homes.

House Republicans over the summer frequently proposed their steps to fight so-called “Biden-flation,” such as using unspent COVID-19 relief funds to shrink deficits, stopping tax hikes, and focusing on domestic manufacturing.          

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