On Tuesday, the Federal Reserve Bank of Dallas released a report showing that inflation is outpacing wage gains for American workers.
Fed Economists: Inflation Eroding Most Americans’ Wage Gains
Americans' wages are losing ground to inflation at a steep rate, a report on Tuesday from the Federal Reserve Bank of Dallas saidhttps://t.co/txtZRCxL8o
— Diana Allocco (@dianamee) October 5, 2022
The report noted that the median decline in wages, once inflation is accounted for, stands at more than 8.5 percent.
“Despite the stronger wage growth due to the tightness of the labor market, a majority of workers are finding their wages falling even further behind inflation,” said the bank. “For these workers, the median decline in real wages is a little more than 8.5%.”
While it is not unprecedented for wages to decrease relative to inflation, the report highlighted that “the current time period is unparalleled in terms of the challenge employed workers face.”
According to the report, the average median decrease in real wages over the last 25 years stands at 6.5 percent, and the range of real wage declines usually remains between 5.7 percent and 6.8 percent.
The Fed continues to raise interest rates in order to fight inflation. At a September meeting, the central bank predicted that they will raise the interest rate to 4.4 percent by the end of the year, and 4.6 percent for next year.
John Williams, the president of the New York Fed, discussed the effect that the rising interest rates will have on unemployment.
While acknowledging that unemployment will probably see a bump of around 0.8 percent, “history teaches us that price stability is essential to achieving maximum employment over the longer term.”
Williams also expressed that inflation is particularly devastating for some Americans, saying “those who can least afford the essentials—like food, gas, and housing—suffer the most.”
At a meeting in New York on Tuesday, San Francisco Fed leader Mary Daly expressed concern about the plateauing of wage gains, pointing out that the wage gains that the economy is seeing now are not as rapid as America saw right after the pandemic ended.
Daly said businesses are giving smaller wage gains in the current economy, and enticing workers through other means, such as improved work conditions.