Worker pay has fallen in 2021 when adjusted for inflation

Jason Furman (PIIE) and Wilson Powell III (Harvard Kennedy School)

July 30, 2021
Worker pay has fallen in 2021 when adjusted for inflation

Real worker compensation—pay adjusted to reflect changes in prices—increased in the early months of the pandemic. Compensation continued to rise at close to the pre-pandemic trend while prices fell, meaning higher worker pay in real terms. But that trend has since reversed. Real total compensation for civilian workers is now well below its pre-pandemic level, indicating paychecks aren't going as far as they used to.

Price increases have outpaced compensation growth in 2021, causing real compensation to fall. In June 2021, real compensation was 0.7 percent below December 2019 levels, and 2 percent below its pre-pandemic trend. Although there is some indication that worker pay has grown faster in lower-wage jobs, real compensation has fallen behind its pre-pandemic trend in all private sectors except leisure and hospitality.

This PIIE Chart was adapted from Jason Furman and Wilson Powell III's blog, "US workers are getting large raises, but not enough to keep up with higher inflation."

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Jason Furman Senior Research Staff
Wilson Powell III Former Research Staff

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