Wages in America have been unable to keep up with inflation. A new report by the Atlanta Fed found that 40% of America’s workforce now earns less than the inflation-adjusted cost of living, which is primarily affecting the lowest earners. Wages outpace inflation in thriving economic conditions, but we are amid a wave of stagflation.
The Wage Tracker data found that 57% of the US workforce experienced pay increases that did outpace the cost of living, but the remaining 43% are facing a decline or stagnation in lifestyle. Nominal wage growth was 3.4% from June 2024 to June 2025 while inflation was 2.7% for that same period, meaning that pay has outpaced inflation by a mere 0.7 percentage points. Last month, the three-month average annual growth in the Atlanta Fed Tracker was 4.2% or 1.5 percentage points above CPI. Real wage growth adjusted for inflation was around 0.7%, adding about $9 per week extra for the average American.
Low and middle-income households reported feeling the brunt of the price increase, with 76% of lower and moderate-income respondents declaring that their financial well-being is in jeopardy as the essentials are rising rapidly in comparison to pay.
Electrical engineers saw the highest increase in wages with a 6.3% rise, followed by legal and marketing with an increase of 5.1%, and project management at 4.6%. Physicians and surgeons saw the highest increases amid COVID, but that pay growth trend has not continued as they are earning only 0.8% more this year on average. Driving (1%), software development (1.4%), and logistic support (1.7%) were among the slowest growing categories. Naturally, many of these professionals were already earning a living that outpaced any inflationary gains.
Wages were outpacing inflation as of early 2024, a stark turnaround from the historically high inflation felt in 2022. It is of no surprise that over half (52%) of Americans reported that they believe their income is not rising to meet inflation, with only 11% of respondents feeling that their wages are surpassing inflation. Northwestern Mutual’s 2025 Planning & Progress Study also found that 51% of US adults believe inflation will continue to rise in 2025. In comparison, only 25% believe prices will come down, while 24% believe it will stagnate.
Again, 57% of the workforce is experiencing a rise in pay that has outpaced inflation. The problem here is that low-wage earners lack the ability to increase their value at their place of employment. Companies are routinely outsourcing these roles to third-party nations like India where lower wages are sufficient to meet the cost of living. This risks an increase in the welfare state that ends up trickling down to the taxpayers.
