[Since President Biden took office, the media have run a constant
stream of news stories about how high various prices were and telling
their audiences that this has led to mass suffering.]
[[link removed]]

WAGES AND PRICES: WHO IS KEEPING UP WITH WHAT?  
[[link removed]]


 

Dean Baker
December 18, 2023
Center for Economic and Policy Research
[[link removed]]

*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

_ Since President Biden took office, the media have run a constant
stream of news stories about how high various prices were and telling
their audiences that this has led to mass suffering. _

, Bureau of Labor Statistics and author’s calculations.

 

Since President Biden took office, the media have run a constant
stream of news stories about how high various prices were and telling
their audiences that this has led to mass suffering. These stories
appear less frequently now, although we still hear Republican
politicians and people posting in social media that they are paying $5
for a gallon of gas or $90 for a turkey.

It is impossible to know what specific people pay for an item. Who
knows, some stores charge outrageous prices and maybe people purchased
a specialty item rather than the standard fare version.

But, it’s not worth spending time on the anomalies. We do have good
data on the averages from the Bureau of Labor Statistics (BLS), which
puts a great deal of effort into tracking prices and rents around the
country. I thought it would be worth just posting some of the price
increases on key items since the pandemic and comparing them with wage
increases for various groups of workers.

Source: Bureau of Labor Statistics and author’s calculations.

The graph above shows the increase in the average hourly wage since
February of 2020 for all workers, for production and non-supervisory
workers, and for production and non-supervisory workers in the hotel
and restaurant industries. The average hourly wage for all workers
increased 19.4 percent, for production and non-supervisory workers it
increased 21.9 percent, and for workers in the hotel and restaurant
industry it increased 31.6 percent.

There are a couple of points worth making here before comparing these
increases to the price increases over this period. First, the 19.4
percent increase for all workers is a hair more than the 18.8 percent
rise in the overall Consumer Price Index over this this period, but
clearly not a great picture. However, it is a better story than many
periods in the past, like the 1980s, early 1990s, and 2000s, when
wages were not keeping pace with prices.

It is also important to remember that we were hit with a worldwide
pandemic during this period. The impact of the pandemic caused wages
to fall behind prices in almost every other country. As some people
may recall, we actually had rationing (anyone got toilet paper?) in
2020 at the start of the pandemic. So, coming out slightly ahead is
not a bad picture when confronted with a natural disaster.

The other point is that, in contrast to the pattern for most of the
last four decades, lower-paid workers are doing better now than
higher-paid workers. The category of production and non-supervisory
workers includes roughly 80 percent of the workforce force. It
excludes managers and higher-paid professionals like doctors and
lawyers. In the last three and half years, this group is doing better
on average than the 20 percent at the top. This has
substantially reduced [[link removed]] the wage
inequality we have seen develop since 1980.  

This story is seen even more clearly with the 31.6 percent rise in the
pay for production and non-supervisory workers in the hotel and
restaurant industries. This is the lowest-paying major sector in the
economy. The tight labor market has forced employers in this sector to
cough up more money to get and keep the workers they need to run their
businesses.

Okay, now for the comparisons. The 30.4 percent rise in gas prices
would outpace the wage increases for most workers, but the workers in
the hotel and restaurant industry still come out slightly ahead. It is
worth noting that gas prices are hugely erratic.

Gas prices were relatively low at the start of the period and then
were driven up by supply disruptions associated with the reopening
from the pandemic (the Trump administration negotiated
[[link removed]] worldwide supply
reductions during the pandemic) and then the Russian invasion of
Ukraine. Prices have been falling sharply in recent months, as supply
returned to normal (U.S. production is at a record high). The December
prices are likely to be a few percentage points lower than the
November data shown here, as prices are continuing to fall.

Food prices rose on average 24.7 percent since the pandemic. There
were shortages of many items early in the pandemic. We expect
shortages to lead to rising prices, but it seems that major
manufacturers also took advantage of these shortages to jack up their
profit margins. As the supply chain problems have been largely ended,
profit margins are still elevated. This has caused most workers’ pay
to lag somewhat behind food prices.

Here too it is worth noting that prices are hugely erratic. Since
February, the price of store-bought food has increased at just a 0.7
percent annual rate. It is likely that wage increases will break even
with food prices in the next year.

The third category shown is rents, which have risen on average by 20.7
percent. This is a bit more than the rate of wage growth for all
workers, but more than a percentage point less than the increase for
production and non-supervisory workers. It is more than 10.0
percentage points less than the wage growth seen by workers in the
hotel and restaurant industries.

Here too there is a better story on the way. Rents shot up in 2021 as
people working from home decided they needed more space and were
prepared to spend some of the money they saved commuting to get
themselves larger apartments or houses. This was a one-time effect.

While people are still working from home, the number is no longer
surging. And much new housing is coming on line after pandemic
disruptions limited supply in 2021-2022. The result is that rents have
stabilized and in many areas are actually falling
[[link removed]]. The rent
indexes in the CPI will lag the market, since they measure rents in
all units, however we can already see the stabilization in the rents
of units that turn over. This will show up in the CPI next year.

Source: Bureau of Labor Statistics and author’s calculations.

The graph above shows the prices of some of the food items that have
been highlighted by the media when they rose rapidly earlier in the
recovery. The price of bread has risen 28.8 percent since the
pandemic, outpacing most workers’ wages, but not those of the
low-paid workers in the hotel and restaurant industry. This was driven
in part by a jump in wheat prices following Russia’s invasion of
Ukraine, but wheat prices are now back to their pre-invasion level.
This is an area where increased profit margins are likely a big deal.

The next item is beef, the price of which has risen by 30.3 percent.
Here there is more of an explanation with the price of the underlying
commodity, with wholesale prices having also risen
[[link removed]] by close to 30 percent.
Interestingly, most of this rise was in 2020, when much of the economy
was shutdown.  

Chicken prices have risen by 30.3 percent since the start of the
pandemic, but this is also a case where good news is on the way. The
big issue here was an Avian flu epidemic that devastated the chicken
stock. This has more recently been brought under control. The stocks
have been rebuilt and chicken prices have been flat over the last
year.

Egg prices are largely the same story. They soared last year,
capturing headlines and were highlighted in numerous news stories. In
the last year, prices have plummeted, and egg prices are now up by
24.7 percent since the start of the pandemic. We can look forward to
egg prices being stable or falling somewhat in the next year.

The last item is milk, which also captured headlines when its price
rose rapidly in 2021 and 2022. This was likely driven largely by
supply chain disruptions, as people were buying more milk in stores
and less in restaurants. Milk prices have since stabilized and have
fallen over the last year. They are now up by 20.4 percent since the
start of the pandemic, somewhat more than the rise in wages for all
workers, but slightly less than the increase for production and
non-supervisory workers and more than 10.0 percentage points less than
the wage increase for workers in the hotel and restaurant industries.

This is a very quick snapshot of some wage increases and the prices of
some items that have featured prominently in news stories. There are
many items whose price has risen far less than wages, like appliances,
clothing, and college tuition. The prices of these items have not
gotten much attention, but they are also part of people’s shopping
basket.

Obviously, everything is not great in the economy, but most people are
coming out ahead of inflation. With wages still growing at a healthy
pace and inflation slowing, it looks like the picture will improve
further in 2024, as we push the pandemic further into the past.  

Productivity has grown at an extraordinary 4.4 percent annual rate in
the last two quarters. That compares to an average of rate of just 1.1
percent in the decade prior to the pandemic. We expect wages to
roughly keep pace with productivity. No one expects the 4.4 percent
rate to continue, and the productivity data are highly erratic, but
with the spread of AI and other new technologies, it is plausible that
we are on a faster productivity growth path.

Also, if we can sustain a tight labor market (we’ve had 22 months of
below 4.0 percent unemployment, the longest stretch in half a
century), we should expect to see profit margins eroded, as income
shifts back from profits to wages. In short, we look to be on a
promising economic path, but bad things can always happen.

_DEAN BAKER, is Senior Economist and co-founded CEPR in 1999. His
areas of research include housing and macroeconomics, intellectual
property, Social Security, Medicare and European labor markets. He is
the author of several books, including Rigged: How Globalization and
the Rules of the Modern Economy Were Structured to Make the Rich
Richer [[link removed]]. His blog, “Beat
the Press [[link removed]],”
provides commentary on economic reporting. He received his B.A. from
Swarthmore College and his Ph.D. in Economics from the University of
Michigan._

_His analyses have appeared in many major publications, including
the Atlantic Monthly, the Washington Post, the London Financial
Times, and the New York Daily News._

_Dean has written several books including Getting Back to Full
Employment: A Better Bargain for Working People
[[link removed]] (with
Jared Bernstein, Center for Economic and Policy Research 2013), The
End of Loser Liberalism: Making Markets Progressive
[[link removed]] (Center
for Economic and Policy Research 2011), Taking Economics Seriously
[[link removed]] (MIT
Press 2010) which thinks through what we might gain if we took the
ideological blinders off of basic economic principles; and False
Profits: Recovering from the Bubble Economy
[[link removed]] (PoliPoint Press
2010) about what caused — and how to fix — the current economic
crisis. In 2009, he wrote Plunder and Blunder: The Rise and Fall of
the Bubble Economy
[[link removed]] (PoliPoint
Press), which chronicled the growth and collapse of the stock and
housing bubbles and explained how policy blunders and greed led to the
catastrophic — but completely predictable — market meltdowns. He
also wrote a chapter (“From Financial Crisis to Opportunity”)
in Thinking Big: Progressive Ideas for a New Era 
[[link removed]](Progressive
Ideas Network 2009). His previous books include The United States
Since 1980
[[link removed]] (Cambridge
University Press 2007); The Conservative Nanny State: How the Wealthy
Use the Government to Stay Rich and Get Richer
[[link removed]] (Center
for Economic and Policy Research 2006), and Social Security: The
Phony Crisis (with Mark Weisbrot, University of Chicago Press 1999).
His book Getting Prices Right: The Debate Over the Consumer Price
Index
[[link removed]] (editor,
M.E. Sharpe 1997) was a winner of a Choice Book Award as one of the
outstanding academic books of the year._

_Dean previously worked as a senior economist at the Economic Policy
Institute and an assistant professor at Bucknell University. He has
also worked as a consultant for the World Bank, the Joint Economic
Committee of the U.S. Congress, and the OECD’s Trade Union Advisory
Council. He was the author of the weekly online commentary on economic
reporting, the Economic Reporting Review (ERR), from 1996–2006._

_The Center for Economic and Policy Research (CEPR) was established in
1999 to promote democratic debate on the most important economic and
social issues that affect people’s lives. In order for citizens to
effectively exercise their voices in a democracy, they should be
informed about the problems and choices that they face. CEPR is
committed to presenting issues in an accurate and understandable
manner, so that the public is better prepared to choose among the
various policy options._

_Toward this end, CEPR conducts both professional research and public
education. The professional research is oriented towards filling
important gaps in the understanding of particular economic and social
problems, or the impact of specific policies. The public education
portion of CEPR’s mission is to present the findings of professional
research, both by CEPR and others, in a manner that allows broad
segments of the public to know exactly what is at stake in major
policy debates. An informed public should be able to choose policies
that lead to improving quality of life, both for people within the
United States and around the world._

_CEPR was co-founded by economists Dean Baker and Mark Weisbrot. Our
Advisory Board includes Nobel Laureate economists Robert Solow and
Joseph Stiglitz; Janet Gornick, Professor at the CUNY Graduate School
and Director of the Luxembourg Income Study; and Richard Freeman,
Professor of Economics at Harvard University._

_IFPTE, Local 70
Employees at CEPR are members of the nonprofit professional employees
union IFPTE Local 70. For more information on the union and other
organizations belonging to Local 70, visit NPEU.org._

_Donate to CEPR [[link removed]]_

* inflation
[[link removed]]
* wages
[[link removed]]
* prices
[[link removed]]
* Labor
[[link removed]]
* unemployment
[[link removed]]
* productivity
[[link removed]]

*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

 

 

 

INTERPRET THE WORLD AND CHANGE IT

 

 

Submit via web
[[link removed]]

Submit via email
Frequently asked questions
[[link removed]]

Manage subscription
[[link removed]]

Visit xxxxxx.org
[[link removed]]

Twitter [[link removed]]

Facebook [[link removed]]

 




[link removed]

To unsubscribe, click the following link:
[link removed]