U.S. Wage Growth Is Still Slow Despite Rising Inflation For 17 Months
It's been 17 months in a row since the average hourly wages (real) have been in the USA. In simple words, the workers are now being paid less while the inflation has been rising for the last 17 months! From everyday staples to luxury items, everything is getting expensive while the real wages have gone down!
These two things have made the perfect recipe for a decline in consumer spending. On the other hand, a major portion of the U.S. economy relies on high consumer spending - So, in simple words, the U.S. economy is declining due to the current economic conditions!
Experts believe that the Fed policy for combating inflation could hurt the American workers as well, who are already finding it hard to pay the balls!
Inflation And Wage Growth In the USA
Technically speaking, wages have been increasing in the USA if we only look at the dollar amounts. In March 2021, the average hourly wage was around $30, which increased to $32.36 in August 2022.
However, inflation has increased by 11.81% during the same period of time... Based on the inflation rate, if your monthly budget was $5000 before, you would now need around $5591 for the same budget.
Let's also not forget that it is not so easy to maintain the full 40-hour work week... Even if this happens, the average income has only increased by $368!
This tells us that the real average wages in the USA have actually declined and failed to keep up with the inflation!
But what's causing the inflation? A simple explanation is that too much money in the economy can cause an imbalance in the markets. This leads to more demand while the supply side remains the same! So by lowering the people's income, the demand can be lowered and thus can also help with inflation.
On paper, this theory works really well but let's not forget that it will make the life of an average American worker very difficult!