Inflation zaps California’s big pay raises of pandemic era



The “Looking Glass” ponders economic and real estate trends through two distinct lenses: the optimist’s “glass half-full” and the pessimist’s “glass half-empty.”

Buzz: The pandemic era’s large pay hikes for California workers look tiny after inflation’s huge bite.

Source: My trusty spreadsheet reviewed government stats on average weekly wages and inflation rates. The focus was comparing the pandemic era (2020 through 2022) to 2012-2019 – before the coronavirus struck and a time when folks bitterly complained about miserly pay increases.

Debate: Just how deep is inflation’s pain?

Glass half-full

Yes, raises have soared in the pandemic era for reasons ranging from a worker shortage, employees willing to switch bosses to get better pay, and a surprisingly robust economic rebound from coronavirus-related business limitations.

Ponder that California weekly wages grew at a 5.2% annual pace in the pandemic era, that’s the 15th-best among the states and beats the 4.7% national gain.

Compare those raises to what bosses handed out in pre-pandemic 2012-19. In those years, California’s weekly wages grew at an average 3% annual pace (also No. 15) vs. 2.6%-a-year nationally.

Glass half-empty

You know by now that inflation has soared since 2020.

And you know why: Everything from too much stimulus to a shortage of goods to soaring energy costs to distribution headaches to, yes, bosses passing along the cost of fattened raises to customers.

This ugly cost-of-living picture adds up to the Consumer Price Index jumping at an average 4.5% annual rate in 2020 through 2022 vs. a 1.6%-a-year inflationary pace in 2012-19.

That near tripling of inflation over this extended period took a serious bite out of what otherwise would seem to be generous raises. Let’s think about what economists call “real” pay increases – that’s wages after the cost of inflation.

California’s “real” raises in 2020-22 averaged only 0.7% a year. Nationally, raises after inflation were only 0.2%.

The cost-of-living drag makes 2012-19’s seemingly slim pay hikes look good. Why? Remember, inflation averaged only 1.6% a year in that period.

That translates to California’s “real” raises in those pre-pandemic years averaging 1.4%, topping the 1% rate nationally.

Bottom line

Larger raises make some workers feel better about their jobs but the overall reality is that inflation strips the buying power of recent pay hikes.



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