WARREN, Ohio – Low- to middle-income workers made strides in nominal wages following the Covid-19 pandemic, but some of that progress has been nullified by inflation, according to a report released Thursday by the Federal Reserve Bank of Cleveland.
The report states that the Federal Reserve Bank of Atlanta’s Wage Growth Tracker showed national nominal year-over-year growth for the lower half of the wage distribution had increased more than 7% in late 2022 and early 2023.
But the Cleveland Fed researchers concluded that with inflation, purchasing power for the bottom 40% of workers increased only by 4.5% from 2019 to 2024.
“This report shows that real hourly wages, they’re very modestly increasing, which is better than decreasing,” said A.J. Sumell, professor of economics at Youngstown State University. “But for the most part, people are just keeping up with inflation, and our standard of living is largely constant for most workers.”
Sumell said the report shows what many hourly wage earners have been feeling and saying.
“I think it’s confirming how most people are feeling – that we’re not improving, not really getting worse, but it’s pretty stagnant in terms of our purchasing power,” Sumell said.
Sumell said anecdotally that during the pandemic, local manufacturers and retail and restaurant owners had a hard time filling the need for employees, forcing them to offer bonuses and raise wages. But while wage increases continued, significant increases in inflation began to largely cancel that out, he said.
For the purpose of the report, the lower half of wage distribution includes all workers making less than $30 per hour in 2025.
Real wages, which is the nominal wage adjusted for inflation, for the bottom half of wage earners were relatively flat from 2001 to the mid-2010s, the report says. Additionally, there was relatively low inflation in 2019 and 2020, and real wage growth peaked in 2021.
According to the report, real hourly wages for workers in the bottom half of wage distribution on net rose by $1.34, $1.49 and $1.75 at the 10th, 25th and 50th percentiles, respectively, between the first quarter of 2020 and the third quarter of 2025. However, real hourly wage gains from 2015 to 2020 were 37 cents larger for workers in the 10th percentile, 41 cents higher for those in the 25 percentile and 66 cents higher for those in the 50th percentile.
Real wages declined by 4 cents for workers in the lower 10th percentile between the second and third quarters of 2025.
Although workers in the 25th percentile saw nominal gains in 2020 and 2021, real hourly wages are 60 cents below what would be expected based on prepandemic trends, according to the report.
For median-wage earners, hourly wage gains peaked in early 2021 before declining by more than $1 later in 2021. While some gains for 50th percentile workers were made in late 2022, 2023 and 2024, those wage gains would not return to their peak until 2025.
Despite high percentage growth following the pandemic, in all cases low- to mid-wage workers were seeing higher real wage gains prior to the pandemic compared with after it, the report concluded.
Although statistics always trail current events and data is still being collected, Sumell said gas price increases in 2026 and projected 4% inflation this year could mean a decrease in real wages.
“It’s likely the case that our real wages are actually going down,” Sumell said. “What this [report] reflects is that through 2025 we were barely keeping even, but now it’s likely going to be the case that, statistically, inflation is going to exceed nominal wages for most workers, which means real wages would actually decrease this year.”