Politics

Workers Are Being Paid At Highest Levels In Ten Years But Inflation Is Still Gobbling Paychecks

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Robert Donachie Capitol Hill and Health Care Reporter

American workers are being paid at the highest levels in nearly a decade, but inflationary pressure is eating away at those gains.

Worker compensation reached an almost decade high in the second quarter of 2018, according to the Bureau of Labor Statistics June data released Tuesday. The Employment Cost Index (ECI) — a measure of the change of labor, specifically defined as compensation per employee work hour — rose 0.6 percent for civilian workers in June, marking the highest level since the third quarter of 2008.

One thing economists have consistently noted during the recovery since the Great Recession is that, while employment and investment have steadily increased, wage growth was missing. That has changed over the past 18 months, with a steady rise in the ECI over the period. Wages and salaries grew 0.5 percent in the second quarter and 2.8 percent in the year. (RELATED: Economists Said America’s Economy Couldn’t Grow At This Rate)

Inflation is also rising in tandem with increasing wages and salaries. The cost of everything from clothing to ice cream to gasoline is rising faster than U.S. workers’ wages, foreshadowing a potentially serious problem for America’s economy.

The Department of Labor released its newest version of the Consumer Price Index (CPI) on June 12 and found that inflation on all items increased 2.9 percent from a year earlier. Average hourly earnings rose 2.7 percent over the same period, according to Bureau of Labor Statistics June data. That is, notably, 0.2 percent less than inflation rose.

In the simplest definition, inflation describes the situation where prices are increasing and the purchasing power of a currency is falling. If both aren’t moving at parity and inflation continues to outpace wage growth, the benefit workers get from higher paychecks could be offset with higher costs.

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