Wages Up: But are Employees Better Off?
The U.S. Bureau of Labor Statistics released its “Employment Cost Index” report on Friday, July 29th, for the second quarter of 2022. According to this report, “Wages and salaries increased 5.3 percent for the 12-month period ending in June 2022… Benefit costs increased 4.8 percent over the year.” This was on top of a 3.2 percent increase in wages for the 12-month period ending in June 2021.
In most recent years, this would be a good thing for employees, but with inflation currently running at over 9% for the year ending in June 2022, workers are actually losing 3.8% in purchasing power. (9.1% inflation minus 5.3% wage increase equals -3.8% purchasing power.) So the answer is that in 2022 workers are NOT better off.
Annual Inflation was 5.4% in June of 2021, so a 3.2% increase in wages left workers 2.2% in the hole last year as well.
The following table shows the annual increase in Total Civilian Compensation (i.e. Wages & Benefits) each June compared to the inflation rate for that year.
| Year | Wages Increase |
Annual Inflation |
Net Gain (or Loss) in Purchasing Power |
| 2022 | 5.3% | 9.1% | -3.8% |
| 2021 | 3.2% | 5.4% | -2.2% |
| 2020 | 2.9% | 0.7% | 2.2% |
| 2019 | 2.9% | 1.7% | 1.2% |
| 2018 | 2.8% | 2.9% | -0.1% |
| 2017 | 2.3% | 1.6% | 0.7% |
| 2016 | 2.5% | 1.0% | 1.5% |
| 2015 | 2.1% | 0.1% | 2.0% |
| 2014 | 1.8% | 2.1% | -0.3% |
| 2013 | 1.7% | 1.8% | -0.1% |
| 2012 | 1.7% | 1.7% | 0.0% |
| 2011 | 1.6% | 3.6% | -2.0% |
| 2010 | 1.6% | 1.1% | 0.5% |
| 2009 | 1.8% | -1.4% | 3.2% |
| 2008 | 3.2% | 5.0% | -1.8% |
| 2007 | 3.4% | 2.7% | 0.7% |
| 2006 | 2.8% | 4.3% | -1.5% |
| 2005 | 2.5% | 2.5% | 0.0% |
| 2004 | 2.6% | 3.3% | -0.7% |
| 2003 | 2.7% | 2.1% | 0.6% |
| 2002 | 3.5% | 1.1% | 2.4% |
| 2001 | 3.6% | 3.3% | 0.3% |
As we can see from the table above, the last two years are the worst purchasing power losses for wage earners this millennium. Surprisingly, from 2015 through 2020, wage earners either gained purchasing power or lost relatively minor (unnoticeable) amounts, i.e. the -0.1% loss in purchasing power in 2018.
2012-2014 saw small losses in purchasing power as the economy experienced an anemic recovery, and workers were glad just to have a job, even if they lost purchasing power.
2011 had a significant loss in purchasing power of -2.0%, and 2008 lost -1.8% (in addition to a market crash and major job losses). It is interesting to note that 2009 with its deflation (and despite a recession), still had major wage increases, resulting in significant gains in purchasing power (for those who still had jobs).
Other major losses were 2006 at -1.5% and 2004 at -0.7%. 2001 and 2003 saw small gains in purchasing power while 2002 actually saw significant gains. Over the period from 2001 through 2020, wages increased 58.1%, while inflation officially increased by 44.8%. But based on the BLS’ “Constant Dollar Wage Calculations,” wages and salaries increased by an inflation-adjusted 9.1% over the period of 2001 through 2020. Despite this, the narrative is that the average worker is “falling behind,” which actually wasn’t true for the last 20 years but appears to be coming true in the last couple of years. The BLS “Constant Dollar Wage Index fell from 106.6 in Q2 2020 to 100.7 in Q2 2022 for a 5.5% loss in income purchasing power over that two-year period.
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