Workers are finally seeing real wage gains, but millions still struggle to pay the bills

Labor Day was created over a century ago to commemorate the achievements of the American workforce, and in 2023 the nation's 167 million workers have something to celebrate: wage gains that are putting them ahead of inflation. 

Wage growth has been particularly strong for low-paid workers since March 2020, when the pandemic shut down the U.S. economy, said Elise Gould, senior economist at the Economic Policy Institute. Because of government stimulus such as expanded unemployment benefits, low-paid workers had a stronger safety net as they looked for better-paying jobs. As a result, many employers have boosted pay during the past three years.

Despite those gains, millions of workers are still struggling to pay the bills, with almost 4 in 10 Americans recently telling the U.S. Census that they were having difficulties meeting their household expenses. Although pay increases are staying ahead of inflation this year, low- and middle-wage workers have generally not kept up with the cost of living over the prior four decades, according to EPI research. 

"Low and middle-wage workers continue to struggle to make ends meet, even thought there have been some gains that we'd love to see continue for lower wage workers," Gould told CBS MoneyWatch. "Many people have seen very little increase in the last five decades."

The average worker earned an average hourly wage of $28.96 in July, an increase of 4.8% from a year ago, according to government data. Over the same period, inflation rose 3.3%, meaning that the typical worker's pay is staying ahead of price increases. That's critical because "real," or inflation-adjusted wage growth translates into a higher standard of living, Gould noted. Over time, that could help U.S. workers improve their housing, buy new cars or invest in education, for example.

Minimum wage frozen at $7.25 

Between 2019 and 2022, lower paid workers experienced historically strong wage growth, with real hourly wages for people in the bottom 10% of income earners growing 9% — significantly faster than in any other period of economic disruption in the prior four decades, EPI found. 

Still, millions of low-paid workers are still subject to the federal minimum wage of $7.25 an hour, which hasn't changed since 2009. Although many states have raised the local minimum wage, in about 20 states the federal minimum remains the law. Even if low-wage workers are getting raises in those states, they lack the legal protection that backs a baseline wage of higher than $7.25 an hour, Gould said. 

"If there's a downturn and if you don't lock in those wage grains, then there isn't going to be that economic security going forward," she noted.

Meanwhile, some labor advocates are pushing for a new federal minimum wage of $17 an hour, arguing that the higher pay would help workers keep up with inflation and erase some of the disparities between Black and women workers, who tend to make lower wages than White male employees. 

Called the Raise the Wage Act, the proposed law would benefit 28 million workers by boosting the pay floor in the U.S. to $17 an hour by 2028, according to Senator Bernie Sanders, an independent from Vermont who is supporting the bill. 

Unions and new deals

At the same time, the U.S. has seen a resurgence in labor organizing, with workers participating in union drives at companies including Amazon, Starbucks and Trader Joe's. 

More than 2,500 union representation petitions were filed with the National Labor Relations Board in fiscal year 2022, an increase of 53% from the prior year and the highest since 2016, the NLRB said.

Some notable wins this year for unionized workers include the new UPS contract, which averted a strike and which will provide drivers with an average of $170,000 in annual pay and benefits by the end of the five-year contract agreement. 

"You are seeing a lot of organizing activities across the country — it takes a while to turn into contracts so it's a long game, but I certainly see it as a positive sign to lock into something in the stronger economy," Gould noted.

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