The impact of inflation on low-wage workers

Kevin Delaney, Charter Co-Founder & CEO, explains how higher wages for low-wage workers are undercut by inflation.

Video transcript

[MUSIC PLAYING]

ZACK GUZMAN: Welcome back to Yahoo Finance Live. If you've been out spending any money out in the pandemic as we recover from it, you may have noticed prices continuing to rise. We have of course, been talking about inflation, and what the Fed expects to see on that front.

But when you do the math, and add up wage increases with inflation, increasingly, we're seeing workers, at least in the bottom rung of the economy, fall behind with real wages actually falling the month of August relative to a year ago. And for more on that and how wages might need to rise a little bit more to alleviate that, I'll bring on the CEO and Co-founder of Charter. Kevin Delaney Joins the show once again here with us.

And Kevin I mean, this is something we've talked about in the past. It hasn't been as hot when we look at inflation. So really, not all that drastic when you compare maybe wage growth to prices, but different story now.

KEVIN DELANEY: Yeah, well, so the good news has been that we've seen wages rise after stagnating for years. Wages really rise significantly for the lowest paid members of the workforce. And so for the lowest paid 25% of the workforce, their wages are up about 4.8% over the last year. And you've seen this in the headlines about companies like Walmart, and Amazon, and others raising their minimum wage.

Now, that seems like really good news. But the important thing to understand is that inflation in August was up 5.3% from a year earlier. This is consumer price inflation. And basically, what this means is, that there's still a gap. If you're getting a 4.8% wage increase, but prices for things that consumers are paying are up 5.3%, that there's actually a gap in your real wages are actually declining. And that's basically what you can buy with your wages.

ZACK GUZMAN: And we've heard President Biden even talking about that. You know, you strip out food and energy costs, as they are volatile. But you know, that's something that the American consumer can't strip out from buying if they want to eat, or get anywhere. So I mean, when you look at that, he's called out maybe a need to look into it.

We've talked with energy experts, just kind of talking about road supply and demand. But I mean, it's important you can't really overlook where you're seeing the pricing pressure now.

KEVIN DELANEY: No, and if you look at consumer prices, you know, as you say, they're up about 5.3% over a year ago. But if you look at the categories that people just have to spend on that are not discretionary, they tend to be things like food, and gas, and rent. And if you look at those three categories, those are the categories which actually have some of the highest increases in prices over the last year, year and a half.

And so the actual impact is probably even greater than the overall consumer price index number suggests. So the breakdown is particularly tough for people. And this is the lowest 25% of workers. It turns out that wage increases for higher paid workers are averaging around 2.1% over the last year, against that over 5% wage increase. So it's something that you know, is impacting the lowest paid workers more direly, but actually, is impacting pretty much everyone.

ZACK GUZMAN: All right. Kevin Delaney, Charter Co-founder and CEO, bringing us the latest there at the look at real wages in this recovery. Appreciate that.