Amid inflation that is spiraling out of control, real wages for Americans have dropped by nearly 3%.
“Inflation ran 8.5% in the year ending last month, while nominal wages grew only 5.6%, a decline in inflation-adjusted wages of 2.7%,” Jason Furman at Harvard University, one of President Barack Obama’s top economists, wrote in a Wall Street Journal article.
“This presents a serious challenge to the ‘hot economy’ thesis that tighter labor markets lead to rising real wages. This idea has never been as popular among academic economists as it is among Washington policy makers. A hot economy is surely better than a cold one, but the costs of an overheating economy might be larger than policy makers have appreciated,” he wrote.
Earlier this week, the Labor Department announced the consumer price index (CPI), which measures what Americans pay for everyday items such as food and gas, soared to the highest level in 41 years. The CPI leapt 8.5% from a year ago, according to data released Tuesday. Taking out food and energy, the CPI still increased by 6.5%.
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