Mar 22, 2022 - Economy

Wage increases are not keeping up with inflation

Percentage change in average cost of gas and rent compared to hourly earnings
Reproduced from the Urban Institute; Note: Gas and hourly earnings are seasonally adjusted; Chart: Axios Visuals

U.S. wages are increasing, but not nearly enough to keep up with the soaring cost of gasoline and rent, according to a new analysis by the Urban Institute.

Why it matters: Low-income households — disproportionately people of color — are likely to feel the squeeze the most, writes senior research associate Yonah Freemark in the organization's Urban Wire blog post.

  • Higher prices for gas and rent are shrinking these families' budgets for other daily needs, like food.

The challenge: Most low-income workers commute by car — as do 3 out of 4 Americans — but despite the pain at the pump, the price of an electric vehicle is out of reach for many, even if they'll save on fuel in the long run.

  • Families under the federal poverty level are also much more likely to rent their homes than to own them, meaning higher housing costs as landlords raise rents.

By the numbers: The U.S. inflation rate reached 7.9% in February 2022, the highest level since 1982.

  • Housing and transportation are the two largest expenditures for most households, often accounting for at least half of families' overall spending.
  • Gas prices increased by almost 40% between February 2021 and February 2022, says the Urban Institute, citing U.S. Bureau of Labor Statistics data.
  • By January 2022, rents in the average metropolitan area zip code had increased by 15% over the prior year.
  • Hourly wages rose only about 5% over that time, Freemark writes.

What to watch: Policymakers at the local, state and federal levels could ease the burden for low-income families with rent stabilization programs and more affordable and accessible public transportation options.

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