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Wages still haven’t caught up with inflation, four years after the pandemic caused prices to soar and created a cost-of-living crisis for many households, a new study finds.Americans on average are earning 1.2 percentage points below the rise in the cost of living over the past four years, which means that the typical worker’s pay increases over that time haven’t yet caught up to higher prices, according to Bankrate’s 2025 Wage to Inflation Index. The findings come as Americans remain sour about the economy, with 55% rating it as either very or fairly bad, according to a July poll from CBS News. Three-quarters said their incomes haven’t kept up with inflation, while a majority also said they’ve seen prices creep higher in recent weeks and also expect that to continue. But some professions are falling further behind than others, with educators seeing the biggest gap between income growth and inflation during the past four years, the study found. Teachers have long struggled with a “wage gap,” meaning that they typically earn less than college graduates working in other fields, due to issues such as constraints on school funding, according to the left-leaning Economic Policy Institute.”Wage growth is often a reflection of who has the power in the labor market,” Bankrate economic analyst Sarah Foster told CBS MoneyWatch. “If there are more job openings than workers to fill them, businesses will often lift pay to retain or attract talent.”
She added, “On the flip side, if there are too few job openings, companies don’t have to work as hard to keep workers because they have nowhere to really go.”Overall, the 1.2 percentage point gap between the typical workers’ pay growth and inflation during the past four years signals that many households are continuing to feel financial strain, Foster added. Even before the pandemic, millions of Americans were struggling to save for emergencies.”Wages not keeping up with inflation translate to outright purchasing-power destruction,” Foster said. “These are funds that households could be using to stash away for their goals, like saving for retirement and a home, or building up their safety nets and emergency fund.”The professions that have outpaced inflation include those that saw a spike in demand after the pandemic, including leisure and hospitality workers, she added. “Health care, meanwhile, is driving job growth lately, accounting for 88% of private-sector payroll growth last month,” Foster said.
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Wage dissatisfactionOnly about 54% of Americans say they are satisfied with their current wages, according to a new analysis from Federal Reserve Bank of New York. That represents the lowest satisfaction level since the NY Fed began tracking the measure in 2014. Even high-income households, which contribute about half of all consumer spending and drive economic growth, are facing bigger financial hurdles, including surging delinquencies on credit cards and auto loans, according to recent research.For instance, the share of all new jobs that pay above-average wages has fallen to 7% this year, down from 38% prior to 2020, according to credit-scoring company VantageScore. That can make it tougher for professionals to find new jobs if they suffer a job loss, the group noted.Workers in white-collar industries like finance and business services “speak of a frozen job market,” Foster noted. “Employed workers in the sector can’t find anywhere else to go and unemployed workers struggle to find new work.”
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Aimee Picchi
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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