Have Paychecks Kept Pace With Inflation? Here’s What Bankrate’s 2025 Wage To Inflation Index Found

Three years ago, when inflation was rising at the fastest pace in almost half a century, Lori Schkufza could still see the silver-linings. She had a full-time job with benefits as a digital animator. Even though her expenses had grown, her income had increased, too.

Those “trade-offs” — as she puts it — were the complicated bargain many Americans faced as the economy roared back from the pandemic. Jobs were abundant, and wages were rising at a rapid pace. But so were prices, for everything from rent and gas to utilities and groceries.

Four years after prices first surged, Americans may still be in the hole. The latest wage to inflation gap stands at -1.2 percentage points, according to Bankrate’s Wage To Inflation Index, indicating that paychecks haven’t quite kept up with price increases over the past four years.

Bankrate’s index is designed to answer a question government data doesn’t fully address: Have paychecks kept pace with inflation? A positive reading means wages are gaining ground on prices, boosting purchasing power. A negative reading means the opposite: even with bigger paychecks, workers can afford less than they could back then.

The index reflects the trajectory of wages and prices since the start of 2021, when the economy reopened from the pandemic and inflation began surging. Prices have risen 22.7 percent since then, while wages have grown 21.5 percent (lagging prices by 1.2 percentage points) over the same period, according to Bankrate’s analysis of Bureau of Labor Statistics data from the consumer price index (CPI) and employment cost index (ECI).

Wages are catching up to inflation, but progress has slowed

For years now, many workers have weighed whether their bigger paychecks were worth the higher bills. Half of adults (50 percent) told Bankrate in a 2023 survey that their overall financial situation had gotten worse since the 2020 presidential election.

Even today, as inflation has slowed, over half of Americans (56%) say the U.S. economy is on the wrong track, according to Bankrate’s Consumer Sentiment Survey. One in 4 (26%) say it’s on the right track and 17% say they don’t know.

“A wage increase is something you earn. Inflation is something that happens to you,” said Martha Gimbel, executive director of the Yale Budget Lab. “It feels unfair to people that their hard-earned wage increase is getting eaten up by something that’s not their fault.”

The gap between wages and inflation has been closing, as paychecks continue rising faster than inflation. Back in the second quarter of 2022, the gap stood as wide as -4.8 percentage points, when prices had risen 12.6 percent since the beginning of 2021 versus a 7.8 percent increase in wages.

But Schkufza’s story illustrates an emerging roadblock in Americans’ ongoing recovery of their purchasing power: a slowing job market.

As many stay in their current jobs and companies pull back on hiring, wage growth has cooled off. Paychecks rose 3.5 percent between the second quarters of 2023 and 2024, down from a 4.1 percent pace in the prior-year period. Meanwhile, prices are up 2.7 percent over the same period, down slightly from a 3 percent increase the year before.

“There were challenges associated with the rapid wage growth that we saw a couple years ago,” said Tara Sinclair, a George Washington University economics professor and the former deputy assistant secretary for macroeconomics at the Treasury Department. “But on the other hand, people are now looking back at that time relatively fondly. They remember when they were getting raises. The grass is always greener, and people always want faster wage gains.”

If those trends continue, workers’ paychecks will fully catch back up to total post-pandemic inflation by the third quarter of 2026, according to Bankrate’s projections.

Hotter inflation from tariffs could threaten Americans’ progress, too

Economists and Federal Reserve officials alike are also on edge about inflation becoming a problem again, as President Donald Trump lifts tariffs to the highest level since the Great Depression.

“They may be less than people estimate or more than people estimate, but they will never be zero,” Fed Chair Jerome Powell said in July, referring to tariff-driven cost increases. Someone will have to pay for these higher import taxes down the line, he continued. That could be the retailer, the company, the importer or the exporter — but it could also be American consumers.

Even if retailers refrain from fully passing along those higher import taxes, Americans could still pay the price — especially if companies pull back on compensation or wage hikes as a way to eat the cost, according to Laura Ullrich, director of economic research at the Indeed Hiring Lab and a former economist at the Richmond Fed.

“They (consumers) might not accept much, if any, price increase,” Ullrich said. “If they don’t, then the business has to figure out how to absorb that tariff while trying to maintain profit margins. Compensation is certainly part of that equation.”

These are the industries where pay has kept with inflation

Not all workers have lost ground to inflation.

Wages are outpacing total pandemic-era inflation in four industries: retail trade (where the gap stands at +0.5 percentage point), health care and social assistance (+1.7 percentage point), leisure and hospitality (+4.1 percentage points) and food services and accommodation (+4.8 percentage points).

In those industries, workers are still in demand. Almost 6 out of every 10 (or 58 percent) of jobs created over the past 12 months were in health care and social assistance, while roughly 16 percent of jobs came from leisure and hospitality, which includes food services.

“Any price is a function of supply and demand,” Gimbel said. For wage growth, “it’s a function of how much people are willing to supply that thing and how much people are demanding of that thing.”

Gaps are widest in manufacturing (-2.5 percentage points), professional and business services (-2.8 percentage points), financial activities (-3.4 percentage points), construction (-3.6 percentage points) and education (-4.8 percentage points).

Workers in white-collar financial activities or professional and business services have encountered a slower pace of hiring. At the same time, the U.S. economy has fewer manufacturing jobs today than it did 12 months ago.

“We’re no longer in the ‘workers in control’ phase seen a few years ago when job openings vastly outnumbered unemployed jobseekers,” Hamrick said. “Raises are more modest, and many firms are more cautious, even if they’re not laying people off.”

Hoping to get a raise this year? Here are 4 key tips — from the economists and workers navigating today’s job market

Workers have been accustomed to their pay growing over time, and their paychecks are lower today than they would’ve been, had the pandemic not disrupted the U.S. economy at all, according to Sinclair. But even with those disruptions, pay rising as rapidly as it did after the worst recession since the Great Depression is “remarkable,” she says. Stimulus checks, scaled-up unemployment benefits and ultra-low interest rates helped the labor market recover faster than it typically does after a recession.

“Suppose the government had not responded so dramatically to supporting people’s incomes during the pandemic,” Sinclair said. “How many fewer jobs would we have gotten? How much less inflation would we have gotten? And would people have liked that outcome better? We’ll never really know how people would’ve felt about that.”

If you’re hoping to find a better-paying job, negotiate for a raise or earn more pay this year in general, here’s what both economists — and jobseekers — recommend.

1. Focus on upskilling and bringing value to your organization

In today’s cooler job market, job-hopping no longer guarantees a bigger paycheck. Wage gains for job switchers and job stayers are nearly identical, as companies scale back on how many workers they’re looking to hire, according to the Atlanta Fed’s wage growth tracker.

Workers are also more likely to receive a performance-based pay increase than a cost-of-living adjustment, according to Bankrate’s latest Pay Raise Survey.

Taken together, those shifts suggest workers might have better leverage if they learn how to demonstrate the value of their work and how it adds to their company’s profitability.

“Top performers, in the right roles, will always stand out and be the exception to the rule,” Hamrick says. “Positive results are your strongest bargaining chip. By being a star on your team, higher pay, as a retention tool, is a more likely result. It’s also about rewarding what’s been achieved.”

2. Rely on your personal connections and networking

Hiring has slowed to its lowest pace since 2013, according to the Labor Department. Yet, there were still 7.4 million job openings as of June 2025, a sign that opportunities exist, even if they’re harder to come by. Networking, building connections with people in your industry and keeping in touch with prior business contacts could be one way to help you stand out from others in the pile.

3. Stay patient, and keep track of your personal finances

Job hunts are taking longer and longer. One in four unemployed workers has now been jobless for more than six months, Labor Department data shows. 

“The economy has ups and downs, and different sectors have ups and downs,” Ullrich said. “There’s a temporary nature to much of this, but how long that will last is quite uncertain. Patience is going to be key.”

While you wait, your financial buffers can make or break your ability to stay selective. An emergency fund, for example, can help you avoid having to take a lower-paying job or a position you don’t like, just to bring in some income. 

Most experts recommend setting aside at least six months’ worth of expenses in a liquid and accessible savings account. Look closely at your budget and find expenses you can trim, then funnel that extra money into your safety net.

4. Think about your “you” factor

In a competitive job market — where AI may be making it easier for workers to mass-apply and companies keep getting flooded with candidates to fill fewer open positions — authenticity may be what helps you rise above the noise.

Take it from Schkufza, who says she is embracing her bold creative identity as a selling point.

“I’ve definitely changed my outreach and the way I sell myself,” she said. “If you want something that’s super sleek and perfectly polished, that is not me. But if you want to be brash and sometimes garish, that’s what you’ll get from me. Now is the moment to not play it safe. If everything is on fire, now is the time to take a chance and really go off the beaten path and just do something completely different.”