Workers may be seeing a more extensive paycheck in 2021. But in reality, the surging Inflation has made the standard of living down for an average American worker. The surging Inflation, which has reached the highest levels in the past forty years, is outpacing the wage increase. As a result, the purchasing power of an average American household has fallen.
Unremitting Inflation Wiped Out the increase in Workers’ Wages.
Inflation has surged the prices of household groceries. As a result, Inflation is hitting the senior citizens, pensioners and the average American harder.
According to Greg McBride, a chief financial analyst for Bankrate, the increase in wages, which has not been seen in many years, is not conforming to the ground situation. Instead, the growth has come up as a loss to the average American family. The surging prices of essential commodities have chewed up all of the benefits of whatever pay raise they had seen and decreased the purchasing power. He talked to CNBC and added that the standard of living has fallen compared to former years.
Actual average hourly earnings decreased by 2.4% from Dec. 2020 to Dec. 2021
As per the data released by the Bureau of Labor Statistics released on January 12, 2021, actual average hourly earnings (seasonally adjusted) decreased 2.4% from Dec. 2020 to Dec. 2021. The reason for this anomaly is blamed on the fact that actual earnings swing widely from household to household based on consumers’ jobs and how they spend their money, CNBC noted.
Jason Furman, an economist at Harvard University and former economic advisor to President Barack Obama, in a tweet in December 2021, said that the increase in wages among the lowest 25% earners outpaced consumer prices from Nov. 2019 through Nov. 2021. As a result, the rest of the workers saw a pay cut.
The inflation rate surged by 7% in the last year as per the Bureau of Labor Statistics data. The most significant contributor to this Inflation was surging food prices compared to the previous year. Food at home costs rose 6.5% over the past 12 months.
CNBC added that many economists feel the inflation and wage gains will taper off in 2022. However, there are many riders to this forecast. The biggest challenge will be maintaining the supply chain, and COVID-19 cases will decline to increase workers’ supply.