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Jul 23, 2022 - Economy

Young Americans are the winners of wage inflation

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Data: Federal Reserve Bank of Atlanta, Bureau of Labor Statistics; Note: Wage growth is the 12-month moving average of the median 12-month change in hourly wages. Price growth is the 12-month moving average of the 12-month change in the Consumer Price Index; Chart: Simran Parwani/Axios
Data: Federal Reserve Bank of Atlanta, Bureau of Labor Statistics; Note: Wage growth is the 12-month moving average of the median 12-month change in hourly wages. Price growth is the 12-month moving average of the 12-month change in the Consumer Price Index; Chart: Simran Parwani/Axios

Inflation creates winners and losers, writes Axios' Emily Peck, and right now young Americans can declare victory. Amid all the rumbling about wage growth failing to keep up with resurgent inflation, they've been more than holding their own.

The big picture: Wages grew 12% for the youngest workers in June, more than twice the rate for those between 24 and 54, according to data from the Atlanta Fed's wage growth tracker.

  • "I have two girls in their early 20s, over the last two years they’ve seen their wages more than double. I hope they don’t think this is normal," Crit Thomas, Global Market Strategist for Touchstone Investments, said in an email. He's over 55 and very much not keeping up with inflation, he added.
  • Younger Americans are outperforming the olds even in absolute dollar terms. A 3.7% raise on the over-55 median weekly wage of $1,240 is $46; a 12.5% increase on the under-24 median wage of $707 is $88.

Zoom out: It is normal for younger workers, who are just starting out and earning less, to see faster wage growth than their older, more experienced peers. But the spread has never been this wide (as the chart shows).

  • It helps that in this jobs recovery, the biggest gains are happening at the bottom — with hourly, low-wage, and less-educated workers getting wage increases that have mostly kept up with inflation.
  • Inflation is running at 7.2% if you calculate it the same way the Atlanta Fed calculates wage inflation — well behind the rate of wage growth for under-24s, and only 1.6 points behind the rate of wage growth for workers aged 25-54.

The bottom line: These aren't the groups who are likely to fare well in a downturn. They're doing fine amid inflation; a recession would be much worse for them.

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