April's Wage Report

Real Wages Fall slightly from the previous month.

By Nate Griffin – May 21st, 2022

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The Bureau of Labor Statistics released its monthly Real Earnings report for the month of April. The report shows that real wages fell slightly from the previous month.

Real hourly wages (in 1982 dollars) were $11.03, a decline of 1 cent from the previous month, even though nominal wages rose by 10 cents to $31.85.

Nominal hourly wages are up 5.5 percent from $30.20 from April 2021, however, real wages actually fell by 2.6 percent. The decline in real wages is due to inflationary pressures that have been making headlines recently.

Prices, according to the Consumer Price Index, rose by 8.2 percent for the month of April from April of 2021. The largest components of this rise are energy prices, which are up 30 percent, and food prices, up 10 percent from last year.

At the start of the pandemic, real wages increased by the largest amount in over a decade. Several factors play a role in analyzing real wages. First, many service sector jobs, which are typically lower paying, evaporated as restaurants, bars, retail and many other industries shut down or reduced hours.

But as the economy began opening up, the labor market became fiercely competitive, and now, according to data from the BLS, there are about 2 jobs per every unemployed person. Desperate for workers, employers have been more willing to increase wages. And initially that did cause real wage gains, however, inflation is slowly creeping in this petty pace, from day to day. The result is that real wages, on average, are lower today than at the start of the pandemic.

Some politicians have pointed to corporate greed, citing record corporate profits, which have increased nearly 40 percent since the beginning of the pandemic.

Supply side constraints such as the war in Ukraine, which has brought fears of food shortages, as well as lockdowns over COVID-19 in China are bringing up prices of imports.

The Biden administration released a plan on May 11th which aims at addressing some of the causes of inflation including rising energy and food prices, and prescription drug costs. But missing from this plan is any mention of fiscal or monetary policy.

Many economists believe that the expanding monetary supply, which has ballooned by about 41 since the pandemic, is responsible for much of the inflation.

Joshua Hendrickson, Assistant Professor of Economics at the University of Mississippi, analyzes 50 years of inflationary data in a recent article. He claims that inflation is solely caused by Federal Reserve policies, he states that "Contractionary monetary policy, as evident in the significant declines in the growth of the money supply, brought down the rate of inflation."

At any rate, Inflation will likely continue to be a dominante issue for the foreseeable near-term, continuing to take a bite out of wages.