An increasing argument is that inflation is being incorporated into wage demand in a very tight labor market, which will cause wage prices to spiral upward. This result is reasonable, but I think it is useful to compare wages with CPI to see if wages are really abnormally high and start to rise in tandem with inflation.
If you examine the average hourly income of the private economy and do not keep the composition constant (including supervisory and non-productive workers), then in fact real wages appear to be high, but they are still falling in June.
figure 1: The average hourly income of the entire private industry is affected by the CPI-all (black) and the 2016-19 random trend (red), both of which are in the range of 1982-84 US dollars. Source: BLS calculated by FRED and the author.
However, once more attention is paid to front-line workers—that is, non-production and supervisory workers are excluded, and a little control over the composition of the department, a more complicated story will be discovered. Consider extreme manufacturing, accommodation, and food service.
figure 2: The average hourly earnings of manufacturing, production, and non-supervised workers are reduced by CPI-all (black) and the 2016-19 random trend (red), both of which are in the range of 1982-84 US dollars. Source: BLS calculated by FRED and the author.
image 3: The average hourly earnings of accommodation and catering services and non-supervised workers are affected by CPI-all (black) and the 2016-19 random trend (red), both of which were in the period 1982-84. Source: BLS calculated by FRED and the author.
CPI tightening manufacturing wages are falling and below the trend, while accommodation and food services are rising and above the trend. On the other hand, accommodation and catering services are still rising (to May) and above the trend-but only up 1%.
