Wednesday, July 14, 2021

Real wages decrease sharply - at least, if you include used vehicle prices


 - by New Deal democrat

As I pointed out yesterday, the big increase in inflation over the past few months has made the YoY change in real wages for nonsupervisory workers negative. Let’s take a little closer look.

Here is a graph of wages for nonsupervisory workers taking overall inflation into account, normed to 100 as of January 1973 (its peak previous to the pandemic):

Wages had been gradually increasing in real terms for several decades before the pandemic. The big surge in spring 2020 was due to the massive layoffs in the low wage sectors of the economy. Much of the decline since then has been attributable to their being rehired.

Here is a close-up over the past 2 years:

Average wages are still 2.4% higher than before the pandemic.

The same data YoY shows a decline of -3.9%:

But when we take used vehicles out of the inflation equation, YoY inflation is less explosive than the total number appears, at +3.9%:

So now here is the YoY% change in wages, leaving out used vehicles:

If you’re not in the market for a used vehicle, YoY real wages have risen ever so slightly (less than 0.1%).

I do expect the issue with vehicle prices to work itself out as microchips for vehicle manufacture become more available, but I have no insight as to how short or long a period of time that will be.

And of course, if you are looking to buy a house as well, you are really up the creek without a paddle.