You got a raise last year or switched jobs to get one. Congratulations! You’re one of the many Americans who saw their paychecks get bigger. Unfortunately, unless your wages or salary grew much higher than the national
average of 4.5 percent last year, inflation likely canceled it out. That means that while you might be making more money, you can buy less stuff with it.
That’s bad news for you, but it’s also probably bad news for your boss. Employers are struggling to retain and attract workers
amid the Great Resignation, a broad term to describe the past couple of years, when workers have been quick to leave for better pay or greener pastures. If inflation continues apace, we could be trapped in a cycle of rising wages only to see those gains wiped out by inflation. If inflation calms down, as
economists expect, the situation could lead to much-needed real wage gains for American workers.
For now, inflation is again at a 40-year high, with prices on average
7.9 percent higher than they were a year ago. That figure takes into account a whole basket of goods and services, so it will affect people differently based on what they purchase, but as a whole, price increases outpaced typical wage growth. Price hikes were especially high for things like fuel, food, and rent and grew even faster than that average. Inflation is only expected to get worse as
gas prices rise significantly due to Russia’s war in Ukraine.
To put it another way, if you made $20 an hour in 2020 and worked 40 hours a week every week of the year, you would have earned $41,600. For the purposes of this thought experiment, let’s assume you paid no taxes or Social Security and purchased literally nothing else. That means your total wages would have been enough to purchase a new vehicle outright at the end of December 2020, when they cost $41,000 on average,
according to Kelley Blue Book.
