Employers are seeing worker shortages, employees have quit their jobs in record numbers, and labor force participation remains below its pre-pandemic level. This tight labor market is putting upward pressure on wages and allowing wage growth, particularly for the lowest earners, to accelerate at a pace not seen since the global financial crisis.
Wage growth is a healthy phenomenon. Although it poses challenges to businesses still recovering from pandemic shutdowns, it has not held the private sector back. Industrial production continues to expand and is already back to pre-pandemic levels. There is concern that wage growth has not kept pace with increases in overall prices, but as the economy gets back on track, workers may finally be able to take back lost bargaining power and secure wages that better reflect current conditions.
This PIIE Chart is based on Katheryn (Kadee) Russ's op-ed, Is inflation ruining your Thanksgiving appetite?