Chart of the Day: Inflation Keeps Going Up, But Wages Are Going Down

Inflation in July rose 2.9 percent, its highest level in seven years. Core inflation, which doesn’t include food and energy, rose 2.33 percent, its highest level in ten years.

This is not cause for panic, but there’s unquestionably some acceleration in the inflation numbers now. This means two things. First, the Fed is now more likely to tap on the brakes a little harder, which will cause the economy to slow down. Second, since employers seem to have no intention of ever raising nominal wages more than about 2 percent, the real earnings of blue-collar workers are going to continue to fall behind. Here this is in chart form:

No matter what the inflation level is, employers raise wages between 2-2.5 percent. They seem to be stuck on this as a “reasonable” number after experiencing years of the great moderation during the 90s and aughts. But as inflation goes up, this means that workers are getting no real wage increases at all. Or, even worse, they’re getting effective pay cuts, as they did in June and July.

Think about this. The economy is growing at its fastest rate in years. Unemployment is below 4 percent, its lowest point in years. Corporate profits are breaking records. By any normal measure, this is a very high-pressure economy. And yet blue-collar workers have gotten a pay cut over the past two months. Anyone care to explain that?

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate