The average American worker is coming out ahead in the ongoing battle between rising costs and wages.
Despite the pandemic-induced surge in prices for essentials like groceries and healthcare, wage growth has kept pace and slightly surpassed inflation.
A July analysis by the Treasury Department reveals that the median U.S. worker now enjoys an extra $1,400 annually compared to 2019, after accounting for inflation.
Blue-collar workers, in particular, have been the biggest winners in this scenario.
However, it’s not all rosy.
Many Americans, especially those not working or outside the median bracket, are still grappling with steep prices, high interest rates, and a challenging housing market.
These factors, coupled with a cooling job market, paint a more complex picture of the nation’s economic health.
“People might have been attached to prices of things where they were before,” says Elise Gould, senior economist at the Economic Policy Institute.
“They have a meaning even if those goods are still affordable. There may be expectations about how much things are supposed to cost that hasn’t caught up to reality, even if incomes have gone up.”
The Treasury’s findings confirm that consumer prices have jumped 21.7% from 2019 to mid-2024.
Yet, median weekly earnings, including wages, commissions, and tips, rose by 24% in the same period, marking a real gain of 2.3% over inflation.
This wage growth hasn’t been evenly distributed.
While white-collar professionals have seen slower increases, blue-collar workers have enjoyed a 3.8% rise, outpacing their higher-earning counterparts, who saw just a 1.6% bump.
“This solid increase continues to reflect an improvement in the purchasing power for the median worker since before the pandemic and is good news for American households,” noted the Treasury researchers in a recent update.
But not everyone is feeling the boost. Despite consumer confidence hitting a six-month high in August, it’s still below pre-pandemic levels.
The term “vibecession” has surfaced to describe the disconnect between economic indicators and public sentiment.
As inflation cools, just as the 2024 election nears, the debate over its causes intensifies.
While conservatives point to government spending, progressives are increasingly blaming corporate profits.
Vice President Kamala Harris, the Democratic nominee, has proposed banning “price gouging” on groceries, arguing that unchecked price hikes have strained household budgets.
Many economists, however, attribute the inflation spike to pandemic-related supply chain disruptions rather than political actions.
Despite these challenges, the typical American household has held firm. Foreclosures and bankruptcies, though on the rise, remain below pre-pandemic levels.
Unemployment, too, has edged up but stays historically low at 4.3%.
Recession worries linger, but the economy’s ability to cool inflation without triggering mass layoffs—a so-called “soft landing”—has prompted the Federal Reserve to consider lowering interest rates as early as next month.
“Price stability has returned,” tweeted RSM Chief Economist Joe Brusuelas, noting how the economy often defies ideological and political predictions.
Gould from EPI credits a mix of factors—like state-level minimum wage hikes and federal policies maintaining near-full employment—for boosting Americans’ purchasing power.
Over the past four years, middle-wage workers have outpaced inflation.
Interestingly, rising wages haven’t dented corporate profits.
Stock markets and company earnings are at record highs, while labor’s share of business income hovers near historic lows. Gould suggests there’s still room for worker pay to grow.
“There’s plenty of room for wages to rise even more and for workers to claw back some labor share that has gone to profit,” she says, hinting that the balance could tilt further in favor of labor in the years to come.
By weathering these economic shifts, the American business landscape continues to evolve, presenting both challenges and opportunities for workers and companies alike.
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