Most Americans last year earned about the same wages as they did in 2019 after adjusting for inflation, according to an analysis of Bureau of Labor Statistics data.
Economists say the Pew Stateline analysis lends credence to the worry that real wages have fallen for most workers over the past four years, despite some relocating to states with lower taxes and inflation-adjusted wages rebounding in May 2023.
Wages have risen nearly 10% nationwide since March 2021 while consumer prices have soared 17.5%, said Curtis Dubay, chief economist at the U.S. Chamber of Commerce, a business lobbying group.
“Inflation still outpaces wage growth since inflation took off in earnest in March of 2021,” Mr. Dubay said. “So while we’ve had solid, above-inflation wage gains for 18 months now, people feel like they’ve fallen behind because prices have grown more than wages over the last 3 1/2 years.”
Bruce Yandle, a former executive director of the Federal Trade Commission and retired business school dean at Clemson University, blamed “more money being printed than goods and services produced” during the pandemic.
“In the period being discussed, politicians starting with [Donald] Trump and going forward with [President] Biden printed money and shipped it out to the American people, and they tried to spend it,” said Mr. Yandle, a fellow at George Mason University’s free-market Mercatus Center.
Financial analysts have warned that federal stimulus funding added billions of dollars to the national debt and deficit as lawmakers paid workers not to work. As a result, millions of working Americans have exhausted their savings and run up credit card debt as their purchasing power declines and the nation inches toward a recession.
In its analysis this month, Pew Stateline compared wage increases in states with the 19.3% inflation rate from 2019 to 2023, the most recent year of available federal data.
The nonprofit news service found that wages increased during these years by 16.8% in North Dakota, 17.5% in Wyoming, 18.1% in Connecticut and Michigan, 18.2% in New Jersey, 18.6% in Maryland and Rhode Island, 18.9% in Minnesota and New York, and 19% in Oklahoma and Pennsylvania.
Wages outpaced the 19.3% inflation rate in some “scenic states,” where remote workers with high salaries fled during COVID to escape soaring living costs. Wages rose 28.3% in Montana, 28% in New Hampshire, 27.3% in Florida, 27.2% in Washington, 26.7% in Maine, 26.5% in Vermont, 25.7% in Utah, 24.8% in Arizona and 24.6% in West Virginia.
The numbers show hundreds of thousands of people relocated from “high cost, highly regulated states” like New York and California to more rural enclaves, said Marc Joffe, a policy analyst at the libertarian Cato Institute.
“A lot of these are retirees not competing for jobs or professionals whose jobs moved with them,” said Mr. Joffe, a former finance industry researcher. “So, the new arrivals increase the demand for services and labor, while not contributing as much to the supply of labor.”
Getting up to business?
None of the states Pew Stateline flagged for stagnant wages responded to requests for comment.
Public officials in states with strong wage growth touted their states’ natural beauty and business-friendly policies for drawing new residents.
“Our secret to success is common sense,” said New Hampshire Gov. Chris Sununu, a Republican. “We’ve gotten government out of the way and allowed small businesses across the state to thrive.”
Heather Johnson, Maine’s commissioner of economic and community development, said workers earning between $34,000 to $40,000 a year in her state experienced 8.1% real wage growth from 2021 to 2022.
“I think when people can live wherever they want and keep their jobs, they come to Maine because it’s beautiful and has a high quality of living,” said Ms. Johnson, a former tech industry executive appointed by Democratic Gov. Janet Mills in 2019. “We have outdoor recreation, agriculture, art, tourist spots — you name it.”
She said expansion in Maine’s recreation and tourism manufacturing industries contributed to net growth in residents and workers.
In Arizona, a spokesperson for Democratic Gov. Katie Hobbs credited her policies for increasing weekly wages by $257 from $1,035 in 2019 to $1,292 in 2023.
“We are working to attract smart investments in targeted industries such as advanced manufacturing, construction, and renewables,” said Liliana Soto, the governor’s press secretary. “These efforts will help drive growth in other sectors like healthcare and education.”
Some fast-growing states paid workers less than others before the pandemic, setting up more dramatic increases.
Pew Stateline found that Montana workers received an average raise of $260 a week from $918 in 2019 to $1,178 last year, the sharpest increase in the country. That raised the state from 45th to 39th nationally for weekly wages as it added residents from New York and California.
Sen. Steve Daines of Montana credited Gov. Greg Gianforte, a fellow Republican, for keeping people in the workforce with “good-paying jobs.”
“The country could benefit from the governor’s pro-growth agenda since many Americans are still living paycheck-to-paycheck and feeling the pinch of sky-high prices at the grocery store and the gas pump,” Mr. Daines said.
’Wage-price spiral’
Real wages have risen fastest in states with low taxes that kept businesses open during the pandemic, according to the American Legislative Exchange Council, a network of conservative state lawmakers and investors.
The nonprofit advocacy group noted that New Hampshire, Florida and Washington state do not tax individual income. The group said that should provide a blueprint for other states and federal policies.
“We know the U.S. economy was still on a strong growth trajectory until the infamous, forced lockdowns from many state and local governments in March of 2020,” said Jonathan Williams, ALEC’s chief economist.
Pew Stateline said real wages “increased steeply early in the pandemic” as health restrictions kept service workers home and employers increased compensation to compete for essential workers.
Real wages cooled in late 2020 and 2021, as inflation soared to new heights.
According to economists, the end of federal pandemic stimulus checks hurt workers, leaving them with nothing to cover record price increases for food and housing.
“What that tells us is that high inflation over the past 3 1/2 years has devastated both wages and salaries, resulting in stagnation in Americans’ purchasing power,” said Peter C. Earle, senior economist for the free-market American Institute for Economic Research.
Sean Higgins, an analyst at the libertarian Competitive Enterprise Institute, said the Pew Stateline findings suggest that lawmakers should “stop bumping up wages” and start cutting federal spending “to get the deficit under control.”
He attributed the growing poverty of U.S. workers to minimum wage increases, runaway pandemic spending and “an incredibly tight labor market” as more older workers retire.
“It’s a sign of a wage-price spiral when rising wages cause inflation that drives up prices and erodes the value of money, causing demands for more money,” Mr. Higgins said. “It’s just a classic example of inflation eating up wages.”
• Sean Salai can be reached at ssalai@washingtontimes.com.