Inflation eats up most of Minnesota workers' wage gains

Inflation is matching increases in Minnesota workers' average hourly earnings nearly dollar-for-dollar, meaning workers are seeing little real benefit from their paycheck gains.

The average hourly wage was $33.43 in October, up 6.3 percent from a year earlier and 8.7 percent over the past two years, according to Minnesota Department of Employment and Economic Development data. U.S. inflation, measured by the Consumer Price Index, was up 6.2 percent for the year and 7.5 percent for the two-year period.

"Wages have shown strong growth during the recovery, with increases tracking this very sharp rise in inflation," said Oriane Casale, the director of labor market information for the Minnesota Department of Employment and Economic Development. "High-demand, low-wage jobs are seeing even stronger wage growth than jobs overall." 

Indeed, the average wage for production and retail workers in Minnesota increased 7.7 percent for the year and 12.1 percent over two years, while food service wages were up even more: 9.7 percent over a year earlier and 13.9 percent in the past two years.

At the same time, prices from the gas pump to the produce aisle have escalated in recent months. Inflation concerns are politically problematic to President Joe Biden's administration as the economy recovers from the COVID-19 pandemic.

Biden on Tuesday announced plans to release 50 million gallons of oil from the U.S.'s strategic reserve, as the administration looks to control gas prices that have spiked 60 percent over the past year.

Energy costs are a significant driver of inflation, with the cost of natural gas up by 28 percent. Meanwhile, food prices have risen 5.3 percent over the year, with grocery costs up 5.4 percent.

For Minnesotans struggling with food insecurity, the higher grocery costs may be a tipping point. Colleen Moriarty, executive director of Hunger Solutions Minnesota, said food shelves in the state were on pace for 3.8 million visits this year, rivaling the pandemic-fueled recession year of 2020.

Visits may increase further as federal pandemic benefits go away, she said.

"I think as you see the federal supports drop off that you’ll see the numbers at the food shelves start to rise again," Moriarty told reporters Thursday. "We also see right after the holidays a fall-off (in donations), so if that coincides with some of these federal supports not being accessible to people, that will be an issue."

Inflation is not hitting evenly. The price of goods -- like cars and furniture -- is up 8.4 percent year-over-year, while services have increased a more modest 3.2 percent. Americans are on a buying spree after the pandemic, including many goods purchased from home.