The Biden Pay Cut: American Wage Gains Still Falling Short of Inflation

WASHINGTON, DC - AUGUST 02: U.S. President Joe Biden returns to the White House on August 02, 2021 in Washington, DC. President Biden is returning from a weekend trip to Camp David. (Photo by Kevin Dietsch/Getty Images)
Kevin Dietsch/Getty Images

The July jobs report was the strongest in the history of the Biden administration — and yet real wages likely fell once again.

Average hourly earnings rose 0.4 percent in July. Compared with a year ago, average hourly wages were up 4.0 percent.

But those gains have likely been consumed by inflation. The consumer price index rose 0.9 percent in June and prices were up 5.4 percent from a year ago. So even a mild amount of inflation in July will mean that workers are still falling behind.

Conservative critics have described this as a stealth tax hike or a Biden pay cut.

“The mainstream media is celebrating President Biden’s supposedly strong jobs report but ignoring how it reveals falling real wages for American workers. Thanks to growing inflation due to Democrats’ reckless spending, workers are making less money this month,” said Alfredo Ortiz, president and CEO of the Job Creators Network. “This ‘Biden pay cut’ puts workers further behind. Democrats’ proposed several trillion dollars in additional spending threaten to hurt these ordinary Americans even more. Ignore the celebrating over the jobs report. The real story is falling wages and standards of living under Biden.”

This could explain why the workforce participation rate is not climbing even though wages are rising at a rapid pace, especially when compared to last summer, the inflation-adjusted average wage has gone negative in recent month.

One exception is leisure and hospitality, where the monthly gains have been very strong for several months running. These relatively low paying jobs have seen a big boost in compensation. Compared with February 2020, the last prepandemic month, wages are up 10 percent. Compared to a year ago, when much of the sector was still shut down, wages are up around 13 perent. On a monthly basis, wages rose 1.4 percent in July after shooting up 2.5 percent in June. So in this sector, at least, wages are rising faster than inflation.

The government will report the Consumer Price Index for July next week.

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