- Although inflation has gone up throughout the pandemic, wages have also been increasing.
- Even after adjusting for inflation, wages have been above pre-pandemic levels for nonsupervisory workers.
- It shows that while inflation is a force to be reckoned with, so is the current worker pressure on pay.
- See more stories on Insider’s business page.
Inflation has been on the rise, but so are wages, especially in the leisure and hospitality industry.
Looking back over the course of the pandemic, wage growth has outpaced the rate of inflation. The higher inflation seen through the summer, which some economists have cited in saying that American workers are seeing wage gains eaten up, just showed its first real signs of cooling in July.
The Consumer Price Index (CPI) was up just 0.5% in July on a month-over-month basis – lower than the 0.9% rise in June – which is a point in favor of “team transitory,” the camp of economists arguing that the summer inflation surge won’t be permanent. Members of this team include President Joe Biden and Federal Reserve Chair Jerome Powell.
The Center for American Progress recently noted that “inflation has only a limited and temporary effect on people’s wallets” while income growth has “offset much of the bump in prices.”
Insider took a look at just how much average hourly earnings of production and nonsupervisory workers have grown after adjusting for inflation. Using the Consumer Price Index for all urban consumers (CPI-U), the following chart shows wages for nonsupervisory workers since 2019:
Real hourly wages for nonsupervisory workers have grown by 2.5% from February 2020 to $25.83 in July 2021 versus an increase of 7.8% during that same time using nominal wages. Over just a month, real wages didn't really change but in terms of nominal amounts, going up by 0.4%.
Hourly pay has particularly gone up in leisure and hospitality, as employers in that space try to attract workers with higher pay and signing bonuses. Average earnings for nonsupervisory workers in restaurants even crossed $15 per hour recently. The following chart shows wages over time for nonsupervisory workers in just leisure and hospitality:
Wages for nonsupervisory workers have increased by 1.4% from June 2021 to July 2021, but this growth is only 0.9% after adjusting for inflation. Real wages have increased from $15.68 before the pandemic to $16.47, a wage growth of 5.0%. Without adjusting for inflation, this growth is 10.5%. Although wage growth isn't as high when adjusting for inflation, real wages in the leisure and hospitality industry have in fact been increasing over time.
It's important to consider that as we move closer to a post-pandemic world, inflation could be a whole different force than the one we experienced from the 1980s to 2020. Deflationary trends may no longer be as certain as they were in that era, as supply chains struggle to recover, for one thing.
But it may be a new era for labor, as well.
While inflation is somewhat keeping pace with wage hikes, the increase in sectors like leisure and hospitality seems to show that pressure from workers seeking higher pay during a hot labor market has a stronger hand than inflation. Workers are seizing that opportunity, quitting en masse and telling their jobs to "shove it" as wages continue to soar.
When the pandemic is finally over, it may have left behind a world where wages outpace inflation.