(The Center Square) – Inflation has outpaced wages for nearly two years, recently released federal data shows.
A closer look at federal wage and pricing data shows workers are making less overall, as the prices for all kinds of goods and services rise faster than average hourly wages.
The U.S. Bureau of Labor Statistics tracks “real” average hourly earnings, which are wages of Americans with rising inflation taken into account.
“From February 2022 to February 2023, real average hourly earnings decreased 0.3 percent, seasonally adjusted,” BLS said. “The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 1.2-percent decrease in real average weekly earnings over this period.”
According to the BLS inflation calculator, since Biden has taken office, the dollar has lost about 15% of its purchasing power. To put it another way, what cost Americans $100 to buy in January 2021 now costs $115.
For some goods, like groceries and energy, the picture is even worse. While workers have seen sizeable pay raises, inflation has risen faster.
Last year, hourly wages increased about 5% but inflation rose 7%.
Critics blame the Biden administration’s trillions of dollars in federal spending and the money-printing that supports it.
“My comment is that as Milton Friedman pointed out, inflation is always and everywhere a monetary phenomenon,” Gary Wolfram, an economics professor at Hillsdale College, told The Center Square. “It is when the money supply increases faster than output. For two years, 20 and 21, the money supply, M2, grew by 40%, peaking in early 2022. Since then it has been declining. As inflation appears with a variable lag, again as Friedman noted, inflation began to be a problem. However, we are beginning to see a slowing of inflation due to the decline in the money supply and will this will continue. I am concerned that the Fed’s approach of raising interest rates in order to slow economic activity is actually slowing the reduction in inflation by reducing output.”
Supply chain issues and the Russian invasion of Ukraine have also played a role in increasing the cost as certain goods as well.
Biden’s latest budget proposed trillions in federal spending. Biden has touted the rising wages and deficit cuts, but inflation is still rising faster than wages and the national debt is expected to surpass $50 trillion within a decade.
“We must act now to stop reckless [government] spending and relieve Montanans of the crushing weight of inflation that is taking a bite out of their paychecks,” Sen. Steve Daines, R-Montana, wrote on Twitter.
Experts say this year could be another of high inflation and overall falling wages.
“There was some optimism after the release of February’s Consumer Price Index that inflation is moderating,” Randall Holcombe, an economic expert at the Independent Institute, told The Center Square. “Year over year, the inflation rate was 6% in February. But looking at just the first two months of the year, the Consumer Price Index has already risen 1.36%. If that keeps up for the rest of the year, we’ll be looking at more than 8% inflation for the year. It’s too early to declare that we have inflation under control.”