According to federal data, the average American’s wage is on the decline due to inflation.
The Bureau of Labor Statistics found that “average hourly earnings” in the United States rose from $29.35 in June 2020 to $30.40 in June 2021 — a 3.6% increase. However, when factoring in inflation — specifically through the Consumer Price Index, which has risen by 5.3% since June 2020 — “real average hourly earnings” have diminished by 1.7% over the past year, despite a robust economic recovery during the same period.
For an American earning $50,000 per year, the agency’s findings imply the equivalent of an $850 cut in yearly wages.
The decline in real wages has been worsening for most of 2021. As of December, real average hourly earnings had risen year-over-year by 4.2%. In January, February, March, April, and May, the year-over-year rates declined to 3.8%, 3.4%, 1.6%, -1.7%, and -2.6% respectively, before improving to -1.7% in June.
Between January and June, the year-over-year inflation rate nearly quadrupled from 1.4% to 5.3%. As Moody’s Investors Service vice president William Foster explained to CNBC: “Inflation is a tax. That’s the best way to think about it.”
Inflation — the erosion of a currency’s purchasing power over time — is particularly noticeable for members of the working class, who hold a greater percentage of their assets in the form of cash rather than land, securities, and other investments that are largely immune to the effects of rising price levels.
During a speech last week, Biden brushed off growing concerns about inflation:
We also know that as our economy has come roaring back, we’ve seen some price increases. Some folks have raised worries that this could be a sign of persistent inflation. But that’s not our view. Our experts believe and the data shows that most of the price increases we’ve seen are — were expected and expected to be temporary.
Now, I want to be clear: My administration understands that if we were to ever experience unchecked inflation over the long term that would pose real challenges to our economy. So while we’re confident that isn’t what we are seeing today, we’re going to remain vigilant about any response that is needed.
Despite rising levels of inflation, the Federal Reserve has declined to increase its near-zero interest rate target or taper its $120 billion monthly asset purchases — both of which increase the supply of the dollar in the American economy.