Workers are taking home less money than before the pandemic because of soaring inflation.
Despite employers spending 4% more on wages and benefits this past year, inflation has outpaced those increases, meaning the amount of real wages that workers earn has been trending downward.
President Barack Obama’s Council of Economic Advisers Chairman Jason Furman wrote about the discrepancy on Twitter after the numbers from the employment-cost index were published Friday morning.
ECONOMY GREW AT 5.7% IN 2021, FASTEST PACE SINCE 1984
He pointed out that while the face value of compensation and wages is above trend and continuing to rise rapidly, real compensation and wages have been in decline for most of the pandemic.
Inflation has been rising even more rapidly so real compensation and wages have been falling since mid-2020 and are now lower than they were prior to the pandemic and well below their pre-pandemic trend. pic.twitter.com/uwlPaVNrqv
— Jason Furman (@jasonfurman) January 28, 2022
The personal consumption expenditures index, the Federal Reserve’s preferred measure of inflation, was up 5.8% in December, slightly more than the previous month and the fastest pace of inflation since 1982.
Furman has raised concerns about inflation in the past. He said he thought President Joe Biden’s fiscal stimulus spending back in March was a “mistake” because of the possibility it would exacerbate higher prices.
Rep. Kevin Brady of Texas, the top Republican on the Ways and Means Committee, criticized Biden following Friday’s report.
“Just one year of President Biden’s bungled economy has wiped away three years of Americans’ wage gains, with inflation growing at the fastest pace since 1982,” Brady said. “The threat of crippling tax hikes and more runaway spending only worsens our labor shortage, supply chain crisis, and inflation.”
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Friday’s numbers come the same week as the Federal Reserve meeting in which officials signaled the first of several interest rate hikes designed to tamp down inflation is coming “soon,” which is presumed to be in March.
