Inflation surge is gobbling up many Americans' pay raises

A tight U.S. labor market is helping drive substantial raises for millions of Americans, with workers' typical hourly earnings jumping nearly 5% in the last year. The only problem? Inflation is not only erasing much or all of those gains, but pushing many workers into the red.

Once inflation is accounted for — or "real wages" — average hourly earnings decreased 1.2% from October 2020 to October 2021, the Bureau of Labor Statistics said last week. Those wages represent income after accounting for the impact of rising prices and illustrate a person's actual purchasing power.