Employment income does not keep up with rising prices

The inflation rate in the United States increased by 0.1% in August compared to July, as measured by the monthly consumer price index of the United States Department of Labor.

The index stands at 8.3% year-on-year, keeping pressure firmly on consumers and businesses to absorb higher prices on everything from food prices to medical bills.

The tightening of employers’ payrolls does not help. Seemingly endless waves of high CPI numbers have caught up with consumers where it matters most — in their paychecks, which typically don’t keep up with inflation.

According new data from Bankrate, 55% of working Americans say their income power is declining, particularly in terms of household spending. Only 33% of the U.S. workforce said their wages had kept up with or exceeded the rise in high prices due to inflation.

“Inflation at the highest levels in more than four decades has stripped the purchasing power of households from all walks of life,” says Greg McBride, CFA, chief financial analyst for Bankrate. “Even half of those who receive a raise, get a promotion or take on new responsibilities said the higher salary was less than the increase in household expenses.

Workers seek relief, but companies are slow to help

With all the headlines about U.S. household budgets lagging in times of inflation, media attention hasn’t fallen on a key underlying question: why workers’ paychecks are underperforming. compared to the current price increase? »

“Inflation has removed the political and media coverage that corporations have hid behind to avoid raising workers’ wages over the past decade,” said Andrew Duffy, behavioral and labor economics expert and CEO of spark plug, an employee motivation services company. “Whereas the traditional economics textbook says that in a competitive labor market, higher profits alone should translate into higher compensation for workers. Yet corporate America has managed to avoid raising wages for years, except in outlier sectors like technology.

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The current labor shortage has forced companies to offer higher wages to attract employees to their workforce. But that doesn’t help as much as company executives might think.

“Unfortunately, these expected wage increases are only half of the impact workers have had on their purchasing power due to inflation, so they will continue to suffer significant economic consequences,” Duffy said.

In the current inflationary environment, the United States workers are seeking extra income by any means necessary, whether it’s moonlighting as an Uber driver, resigning for a better-paying job in their existing industry, or quitting their industry altogether, Duffy noted.

“Unfortunately, each of these strategies creates a risk for the employee,” he said. “If their work performance suffers due to exhaustion from multiple jobs, they may be targets for layoffs.”

Real risks ahead for workers

American career professionals looking to jump ship for better pay might want to think twice — at least until the economy improves and rising prices stabilize.

“As the labor market clears, job mobility will ease, putting further pressure on real wages at a time when most workers are struggling to get to the next paycheck. payroll,” said Jeanniey Walden, chief innovation officer at DailyPay, an on-demand payroll provider for businesses.

Current employment trends show a general slowdown in hiring as companies are more strategic in which departments, products and initiatives to invest resources in.

“We will see increased investment in revenue-generating roles and product development as the job market for highly skilled talent remains high and competitive, but highly selective,” Walden said. “If you quit a job just for a raise and don’t consider the culture or mission of the company, you run the risk of burning out early and not being as engaged.”

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