Inflation Takes Bite Out of Wages

Nominal earnings rose for most workers, however, when adjusting for inflation, a different picture emerges.

By Nate Griffin – November 17th, 2021

Key Points:

• Nominal Wages rose, but inflation has been running near decade long highs.

• High quit rate in Leisure and Hospitality caused largest sector gains in real wages.

• Leisure and Hospitality still have lowest average wages of any major industry.

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The economy in 2021 is still struggling to find balance between inflationary pressures and production challenges that were borne out of the COVID-19 pandemic.

Rising import prices, global supply chain bottlenecks, labor shortages, rising housing prices, and other major challenges are still affecting the economy.

The November release of the Employment Situation from the Bureau of Labor Statistics provides insight into the hourly earnings of workers in various industries.

Real Wage Gains

Nominally, wages rose for nearly ever sector, however, the rising cost of living is eating into nearly everyone's paychecks.

The report shows that, between October 2020 and October 2021, real wages fell for almost every industry except for Leisure and Hospitality.

Many food-service related businesses are struggling to find workers right now. The combination of high demand for in-restaurant dining, often lower wages, and understaffed venues is causing stress levels in the sector to reach a boiling point. This is creating a mass exodus from the field.

The quit rate for the leisure and hospitality industry is nearly double the average, and a record 892,000 workers left their job in august of this year. This labor shortage has helped to put pressure on real wages, which rose by nearly 5% in that field.

One challenge in measuring real wages, however, is in understanding how individual workers are affected by increasing prices. Much of the increases in price levels are caused by rising used car prices and energy-related products like automotive fuel and natural gas. Therefore, it is likely that lower wage workers are disproportionately affected by inflation.

Average Wages

Workers in Professional, Financial and Information services reported the highest average earnings.

Workers in Mining and Logging reported the highest goods producing wages at $36 per hour.