Consequences Of Inflation Outpacing Wage Growth

Stimulus checks Inflation

According to the CPI, 2022 witnessed a hike of more than 8% in the cost of goods and services. Items got expensive. However, wages only increased by 4-5% which was not sufficient to cover the surging prices of gas and grocery.

When inflation starts to outpace the growth in wages, everything starts to seem expensive. People cannot afford everything and end up buying less. The living cost increases and savings go low. In order to beat inflation the rates are raised by the Fed which makes it difficult for people falling under the average category to borrow cash.

During inflation, cash goes cheap but housing and stocks remain of the same value. The stock market from 2020-22 snowballed, taking along with it the investors. Keeping the data by Fed in consideration the ones who still benefited from the inflation are homeowners because the values held by the properties kept pace.

How To Financially Stay Strong During Inflation?

Inflation digs into the power of purchasing. With the distribution of huge stimulus checks by the government, people spent lavishly and prices were inflated by the businesses. Now the stimulus has gotten over with and the prices of goods are still labeled with the hiked-up prices. This would not have been an issue if the wages too remained undeclined. However, if the income does not support you, it is next to impossible for you to afford as much.

One’s living cost is bound to increase. When wage growth is outpaced by inflation, bills become difficult to clear. Discretionary expenditures can be cut down but bills for housing and energy cannot be neglected and comes under the necessary category. When the price of the rent rises by 6% but your work gives you a hike of only 4%, the choices become very limited.