“Inflation is outpacing wages again. Many workers were already behind.”

What actually happened

A University of Chicago/ADP study of 16 million payroll records found real wages fell more than 4% between February 2021 and June 2022, and that 37% of workers examined still earned less in inflation-adjusted terms in December 2024 than four years prior. The article reports that oil and gas prices, pushed up by the Iran war, have driven July's CPI to 3.4% annually, edging past the 3.2% rise in hourly wages over the same period.

Key facts

• From February 2021 to June 2022, real wages fell by more than 4%, according to the paper from the University of Chicago and ADP researchers.
• The analysis found that 37% of workers whose payroll records researchers examined earned less in inflation-adjusted terms in December 2024 than they had four years earlier.
• The Iran war has reignited inflation by raising oil and gasoline prices, which pushed the Consumer Price Index to an annual pace of 3.4% in July. That outpaced the 3.2% increase in workers' hourly wages over the same period, leading to a decline in workers' real wages.
• Before the pandemic, workers were typically given pay increases of about 2% to 4%, but when inflation hit a 40-year high of 9.1% in June 2021, companies stuck with their regular pay hikes.
• In August, consumer sentiment dipped about 8%, reversing two months of improvement, according to the University of Michigan.

What to watch for

• Whether the 3.4%/3.2% gap widens or closes as oil prices move, since the current inflation bump is tied to a specific geopolitical shock rather than the broad, multi-driver inflation of 2021-2022.
• Follow-up CPI and ADP wage prints in the coming months will show whether this is a brief real-wage dip or another prolonged erosion like the one the study documents.
• Watch for whether companies again hold pay raises to their standard 2-4% "norm" despite the CPI uptick, which the study identifies as the actual mechanism behind lasting real-wage losses.