Nation & World

Inflation wiping out wage growth

'Real' hourly wages dropping since beginning of the year

Chart showing wage growth since 1964.
Chart showing wage growth since 1964.

WASHINGTON — U.S. workers’ paychecks are worth less than they were a year ago, the Labor Department reported Friday, as modest wage gains have failed to keep pace with inflation.

Inflation rose 2.9 percent from July 2017 to July 2018, the Labor Department said, while average hourly pay increased 2.7 percent over the same period.

The lack of real wage gains comes despite a strong economy, with sustained growth and an unemployment rate of 3.9 percent — one of the lowest levels in decades.

The Labor Department tracks average hourly pay adjusted for inflation, which is known as the “real wage.”

According to the federal government, the real average hourly wage was $10.78 in July 2017 and $10.76 in July 2018. Real wages have been on a sharp decline since the start of the year.

“Despite the strong labor market, wage growth has lagged economists’ expectations,” wrote Pew Research in a report this week.

“In fact, despite some ups and downs over the past several decades, today’s real average wage has about the same purchasing power it did 40 years ago.”

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Since 2000, only the top quarter of wage earners have seen any true increase in their pay once you account for inflation, Pew reports. For the middle class, it’s been years of stagnation, and the latest trends aren’t encouraging.

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