Inflation, partly fueled by higher gasoline prices, is wiping out wage and benefit gains. | Paul Brennan/Pixabay
Inflation, partly fueled by higher gasoline prices, is wiping out wage and benefit gains. | Paul Brennan/Pixabay
It's called the inflation tax.
On April 29, the U.S. Labor Department's Bureaus of Labor Statistics (BLS) released the Employment Cost Index which showed that during the first quarter of 2022, worker compensation grew at a record pace.
The index is an economic series released quarterly that outlines the growth of total employee compensation, a recent report from Investopedia said.
Wages and salaries rose 5% for private workers during the preceding 12 months ending in March 2022, while the same index rose 3% during the 12 months ending in March 2021, the BLS report said. The cost of benefits also went up by 4.1% in the same 12 months, compared to a 2.5% increase the year before.
But the Wall Street Journal Editorial Board pointed out that inflation is wiping out the wage and benefit gains.
"That sounds better than it is, however, because inflation has erased the purchasing power of those raises," the Editorial Board said. "Inflation-adjusted private wages and salaries fell 3.3% for the 12 months through March, and inflation-adjusted benefits fell 4%. Employees are making more but they can buy fewer goods and services with it. This is what economists mean when they call inflation a tax.”
And because the increases don't mean much when adjusted for inflation, "private employers are paying a lot more to keep workers, who have bargaining power amid a labor shortage," the WSJ Editorial Board said.
A separate report from the Commerce Department was also released on April 29, the Board noted. It found that real personal disposable income dropped in all but one of the last six months and fell by 0.4% in March. In actual monetary terms, the April 2021 disposable income per capita was $48,641 in 2012 chained dollars. In March of this year, that amount had dropped by $2,644, bringing the disposable income per capita to $45,997.
The price of gasoline continues to be a key indicator of the nation's inflation problem.
As of May 6, the national average for a gallon of gas was $4.28, and in Pennsylvania it averaged $4.46, a AAA report said. At this point last year, the average cost in Pennsylvania was $3.02.
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