FACT CHECK: Are Wages Keeping Up With Inflation?
During a Sept. 21 interview with Fox Business host Maria Bartiromo, 2024 hopeful and former Vice President Mike Pence claimed wages are not keeping up with inflation.
Data suggests that, while inflation remains higher than anticipated, wages are also growing or are steady. An economics expert from the Cato Institute suggests that the slowdown in wages could be the result of the pandemic’s lingering effects or inflation as a whole.
The Federal Reserve has paused its interest rate hikes as inflation appears to be slowing down, according to NBC News. The bank’s main policy rate stands at 5.25 to 5.50%, the outlet reported.
Pence made the claim during an interview on Fox Business, saying, “the truth is that wages have not been keeping up with inflation.”
The claim is unsubstantiated. Back in January, CNN reported wages declined 1.2% over the year ending in December after adjusting for rising prices. Despite the seemingly negative statistic, inflation appeared to be coming down, as inflation-adjusted pay fell 3% in September, according to the outlet. Citing data from the Bureau of Labor Statistics (BLS), wages for civilian workers increased 5.1% for the year ending in December.
More recent data from Statista showing the relationship between inflation and wage growth from January 2020 to August 2023 placed wage growth at 3.8% and inflation at 2.5% in January 2020 versus 5.3% wage growth and 3.7% inflation in August 2023. In comparison, wage growth in September 2021 was 4.2%, and inflation was 5.4%, whereas in April 2022 wages were 6% and inflation was 8.3%, according to the same data.
A Sept. 19 blog post from the Public Policy Institute of California highlights that in the western United States, wage growth is struggling to compete with inflation, and workers are not necessarily making more money than they did prior to the global COVID-19 pandemic.
“Average hourly wages for private-sector workers have increased 15% relative to January 2020—shortly before pandemic shutdowns disrupted the economy. But inflation-adjusted wages are down 2%,” the blog post reads.
A July 2023 article from Marketplace indicated inflation had decreased to 3% with wages growing 1.2% faster during the previous month. The article noted that real wages remained “flat.”
In September 2023, USA Today suggested wage growth is outpacing inflation but Americans are not feeling the effects due to factors such as high interest rates, an end to COVID-19-related federal aid, and return to in-person work, among others. The outlet cited a Harris Poll survey in which workers admitted they were “spending warily” because they haven’t caught up to large run-ups in prices.
Preliminary August 2023 data from the BLS shows that employees’ average hourly earnings are $11.04. PolitiFact reported in August 2023 that while wages have outpaced inflation if compared to before the COVID-19 pandemic, but that ” since [Biden] was inaugurated — inflation-adjusted wages have not increased.” (RELATED: Did Joe Biden Eliminate $1.7 Trillion Of The Federal Debt?)
Dr. Jai Kedia, an economics expert from the Cato Institute questioned whether real wages are not keeping up with inflation or if they are coming back to a pre-COVID-19 pandemic trend in a phone interview with Check Your Fact.
Kedia said real wages have been falling since the COVID-19 pandemic but have experienced a recent uptick beginning in 2022.
“If we look at the data from the second quarter of 2020 at the start of lockdown, there was an artificial surge in bargaining power for workers because there was a shortage of workers, so real wages spiked. They completely jumped in that one quarter representing the fact the government forced a shutdown in an otherwise normal economy,” Kedia explained.
“Are real wages not keeping up with inflation or are they just coming back to a pre-pandemic trend? It requires a much more nuanced analysis than just looking at the data given,” he said, referencing median weekly real earnings for wage and salary workers 16 years and older who are employed full time.
“The question is what is the source of the wage reductions? It’s possible that wages are not keeping up with inflation, or is it a matter of readjusting to what a normal state would be as result of the pandemic? When lockdowns started, the massive spike in real wages was unsustainable. You would expect to see them come down, but things are obviously much worse because of inflation. Which of those two is the dominating effect?” Kedia added.
A White House spokesperson directed Check Your fact to an Sept. 3 interview that Council of Economic Advisers (CEA) Chair Jared Bernstein did with Fox News’s Shannon Bream. There, he claimed that “real wages are up” and criticized Pence.
“So real wages are up. That’s the first thing to be clear about. Real wages are higher than they were before the pandemic and they’re especially hard for middle and low wage workers,” Bernstein said. He added that “for the last three to four months, inflation, wages are rising faster than prices” and that “[inflation] is certainly not ahead of wages. And that’s the key point. Wages are beating inflation.”
Check Your Fact has contacted Pence’s campaign manager, BLS, the U.S. Chamber of Commerce, and multiple economics experts for comment. We will update this piece accordingly if one is received.