Blog Post

Insight: Are Utah’s Wages Pacing with High Inflation?

By Natalie Roney and Phil Dean

The COVID-19 pandemic and its economic repercussions continue to reverberate throughout the Utah and U.S. economies. In particular, labor shortages and high inflation remain top of mind for many Utahns as a return to “normal” economic conditions remains elusive. This post explores aspects of real (inflation-adjusted) wage indicators.

Various economic indicators provide a useful lens to analyze, interpret, and predict the state of the economy. While most provide value, each indicator also poses limitations. Some economic indicators may not tell the full story, particularly when an indicator’s multiple contributing factors are not equally considered. Although it takes more effort than a quick glance at a single indicator, considering a range of economic indicators is critical to truly understanding the economy. As discussed below, this is particularly true for real wage indicators.

High Inflation

For February 2022, the U.S. Bureau of Labor Statistics (BLS) estimates annual Consumer Price Index (CPI) inflation at 7.9% for the U.S. and at an even higher 9.7% for the Mountain region. While nominal wages increased over this period, businesses facing labor shortages and workers facing the continued real-world impacts of the highest consumer price inflation in four decades are thinking seriously about the impacts of high inflation on real (inflation-adjusted) wages.

Real Average Wages

A valuable economic indicator, real average wages is calculated using the U.S. Bureau of Economic Analysis (BEA) estimate of wages and salaries, divided by the BLS estimate of the number of non-farm workers, adjusted for inflation as measured by CPI. As Figure 1 shows, generally flat real average wages prevailed for the four-decade period between 1960 and the late 1990s (including during the high inflation of the 1970s and early 1980s), and have steadily increased over the past