Wages vs. Inflation in the US
The Bureau of Labor Statistics has published average weekly wage data since 2006. Since then, average wages outpaced inflation 71.3% of the time (the top half of this chart). Most recently, wage growth has been faster than inflation in every month since February 2024.
But let’s talk about the outliers in 2020 and 2022:
- In May 2020, wages increased 7.6% over the previous year while inflation was at 0.2%, a record-high gap of 7.4 percentage points. This spike was attributed to pandemic labor market disruptions that disproportionately affected lower-wage jobs.
- The biggest negative gap (-4.3 percentage points) was in June 2022, when nominal wages grew by 4.8% year over year while inflation hit 9.1%.
We can measure the effect of inflation on wage growth by comparing the nominal average weekly wage to its inflation-adjusted (or “real” wage) equivalent. Since March 2006, the nominal average wage rose from $686 to $1,225, a 78.7% increase. Once adjusted to February 2025 dollars, it went from $1,095 to $1,225, a 11.9% increase. So the nominal wage growth was $540, but the real wage growth was $130.
But more recently, between February 2024 and February 2025, the nominal average wage grew from $1,185 to $1,225 — $40 more a week, a growth rate of 3.4%. Accounting for inflation, the real wage growth was 0.58% or an additional $7 a week.