Labor strikes are on the rise as numerous union contracts approach their expiration dates. One of the primary focal points in these negotiations revolves around the demand for better wages.
Over the past two years, workers across the United States have faced the burden of inflation. The cost of nearly everything has skyrocketed while their incomes have struggled to keep pace.
As of August, the consumer price index—a measure of price changes for a range of goods and services—has surged by a staggering 16.6% since the beginning of 2021. In contrast, average hourly earnings for employees in private sectors have only increased by 13%.
However, the growth in hourly pay doesn’t necessarily translate to an increase in take-home income. Unbeknownst to many, there is an underlying trend in the labor market following the pandemic—a decrease in average working hours.
Between January 2021 and last month, average weekly working hours for employees in private sectors dropped from 35 hours to 34.4 hours. While this may seem small, when multiplied by over 133 million workers, it results in a reduction of a staggering 80 million working hours every week.
Taking into account both hourly pay and working hours, the average weekly earnings for American workers—representing the actual money they bring home—have only increased by 11% since the start of 2021. This signifies a significant erosion of consumers’ purchasing power.
Fortunately, there is some positive news: as inflation begins to cool down, workers’ pay is gradually catching up, outpacing consumer price increases since the summer.
Based on estimates, September’s consumer price index is anticipated to rise by 3.6% compared to the previous year. Meanwhile, average hourly earnings for private employees have climbed by 4.2%, and weekly earnings have seen a 3.6% increase as of September, according to the latest data from the Bureau of Labor Statistics.
Nevertheless, there is still a substantial gap to bridge, and it will undoubtedly take time. Personal finance website Bankrate predicts that workers’ wages will not fully recover their purchasing power losses since the onset of inflation until the fourth quarter of 2024.
Job Market and Income Growth
The impact of inflation on the job market is not evenly distributed across sectors. Among the 10 major sectors, leisure and hospitality stands out as the only one where income has outpaced inflation. Since the beginning of 2021, workers in leisure and hospitality have experienced a notable 22% increase in their weekly earnings, which is six percentage points higher than the rise in consumer prices.
On the other hand, the information sector, which encompasses media and telecom companies, has witnessed the slowest income growth, registering only a 4.5% increase. Nevertheless, it’s worth highlighting that information workers enjoy the highest pay across all sectors, with an average weekly earnings of $1,747 as of September. This amount is triple the earnings of leisure and hospitality workers, even after considering their recent gains.
Focusing on the more than 370 job categories tracked by the BLS, only a quarter of them have observed faster growth in weekly earnings compared to inflation.
Wage Increases and Decreases Across Industries
Certain job categories have experienced significant wage increases in recent times. These include bus drivers, toy wholesalers, hotel workers, and individuals employed in media-related industries. On the other hand, several industries have witnessed a decline in weekly earnings, such as video and sound recording, spectator sports, information services, and performing arts.
It is important to note that changes in weekly income can be influenced by both hourly pay rates and the number of working hours.
For instance, employees in spectator sports have seen their hourly earnings decrease by 15% since 2021, while also working an average of five fewer hours per week. Consequently, their weekly income has dropped by 28%. Conversely, hotel workers are now earning 27% more per hour while working two additional hours each week. As a result, they have enjoyed a significant 38% boost in their weekly income.
To gain a clearer understanding of which jobs have experienced the most substantial pay increases since the onset of inflation, refer to the chart below.
Remember, when it comes to navigating the job market and evaluating income growth, it is crucial to consider both hourly wages and working hours.
