Wages Rise 4.2 Percent in 1 Year, but Inflation Slightly Outpaces Any Gains

Wages and salaries increased 4.2 percent in the year ending in September, marking a record gain in what Americans are earning, the Associated Press reported. But a report from the Labor Department released Friday shows that while earnings increased, prices increased even more in the same time period, with 4.4 percent gains.

The COVID-19 pandemic has caused a severe labor shortage in America, forcing companies to offer higher pay to entice workers to fill the near-record number of open positions. People seeking jobs have been given the power to demand better paychecks, more benefits and even schedule flexibility among other perks, the AP reported.

Meanwhile, faced with more job openings than unemployed people, according to government data, businesses are forced to work even harder to recruit people for open positions. An 1.5 percent increase in wages in just the three months ending in September was the highest on records that go back 20 years.

Despite the increased leverage workers have gained in the job market, with the ability to demand Inflation in the past year was 3.6 percent, not including the erratic food and energy categories, according to the AP.

For more reporting from the Associated Press, see below.

The 1.5 percent increase in the three months ending in September is up sharply from 0.9 percent in the previous quarter. The value of benefits rose 0.9 percent in the July-September quarter, more than double the preceding three months.

Higher inflation is eating away at some of the wage increases, but overall pay is keeping up with rising prices. The 1.5 percent increase in wages and salaries in the third quarter is ahead of the 1.2 percent increase in inflation during that period, economists said.

Millions of Americans are responding to rising wages by quitting their jobs for better-paying positions. In August, nearly 3 percent of American workers quit their jobs, a record high. A higher number also means that companies have to raise pay to keep their employees.

Workers who switch jobs are seeing some of the sharpest income gains in decades. According to the Federal Reserve Bank of Atlanta, in September job-switchers saw their pay jump 5.4 percent compared with a year earlier. That's up from just 3.4 percent in May and the biggest increase in nearly 20 years. For those who stayed in their jobs, pay rose 3.5 percent.

Lower-income workers at restaurants, bars and retail stores are seeing some of the largest income gains, but the wage increases are spreading. According to Oxford Economics, the proportion of jobs receiving a monthly pay rise of 0.5 percent for six months has jumped to 40 percent, from about 9 percent before the pandemic.