Despite the fact that inflation has come down notably from its peak and wage growth has been outpacing price increases for quite some time, the past few years of elevated inflation, high costs of living and stagnant real wages have left a lasting impression on Americans’ minds. So much so that their optimism regarding future (real) income growth is near all-time lows.
According to the University of Michigan’s Surveys of Consumers, 31 percent of Americans see a zero percent chance that their family’s income will increase by more than the rate of inflation in the next five years or so, up from rates in the low teens typically seen before the pandemic. Another 26 percent see a 1 to 24-percent chance of their real income growing over the next five years, meaning that almost 6 in 10 Americans see a very low chance of their income outpacing inflation in the near future.
On average, the respondents saw a 27-percent chance of real wage growth, down from more than 40 in 2019 and a long-term average of 37 percent since 2000. The good news is that real wages are actually growing and, at least on average, have been growing since 2023. The problem is that the wage level still hasn’t caught up to where it was when the inflation surge started in 2021, which is why it doesn’t feel that way.
