Why inflation has the middle class so on edge

For all employees in the private sector, average hourly wages were up 5.7% in January over the last 12 months. Apart from a couple of months early in the pandemic, that is the fastest wage growth in at least 15 years. But the better pay was more than offset by inflation, which means most saw a loss of purchasing power.

And that was a startling and unsettling change after a decade or more of stability, during which wage gains generally were small but inflation was only about 2% per year.

Workers on the lower end of the income scale, who are hit hardest when inflation rises, have gotten the biggest bump up in earnings, especially in industries such as hospitality.

But middle-income households may feel as if they got pay cuts. Like other school districts facing labor shortages, Stafford’s system sharply boosted starting pay to attract new teachers, but veterans like her got raises that amounted to about 2%.