The latest consumer price index, released last week, showed inflation was 2.9% in 2024. Compare that to worker wages, which rose 3.9% over the same period, according to the latest jobs report from the Bureau of Labor Statistics.
The math is pretty simple: wage growth exceeded inflation by one percentage point. And the year before, in 2023, it was largely the same. This is good news for the American worker.
A big reason real wages continue to rise has to do with how managers run their companies today.
Elizabeth Heilig directs the West Newton Cinema in Newton, Massachusetts. Before the afternoon's films begin, she completes one of the venue's most important tasks: throwing popcorn.
Throwing it away causes the kernel bits that no one wants to fall to the ground. And while popcorn is still hand-scooped front of house, Heilig said other employee tasks are being automated thanks to technological upgrades.
“The Theater Management System (TMS) was installed literally on Wednesday last week. And we solved the problems. It is currently operational. You know, I’m keeping my fingers crossed,” she said.
With the new software, a single employee can monitor all six cinema screens at the same time.
“If we know what’s going on in each theater from a central location, it eliminates a lot of effort and troubleshooting,” Heilig said.
This means more films run on time without the need for more staff. In other words: a productivity gain. “This is what’s happening across the economy at the moment,” said Edward Hearn, senior labor economist at UKG.
“Labor productivity isn't everyone's number one metric that they want to talk about because it's kind of pointless. But I think it’s really the engine that drives things forward,” he said.
Hearn said companies have made a lot of capital investments in recent years – such as new production facilities or theater management software – to help employees get more done. In addition, some companies are still letting their employees work from home.
“That means people don't have to commute to the office or, you know, travel a lot or anything like that, which takes away from their time to actually do productive work,” he said.
And all that productivity is why wage growth continues to outpace inflation, said Betsey Stevenson, an economics professor at the University of Michigan.
“Real wage growth must result from productivity growth. Because we do more with less, we end up getting more,” she said.
American workers have done more with less for two years, Stevenson said. This is not the case in other countries.
“And that was the miracle of the U.S. economy. “Americans don’t realize how much other countries that have weathered the pandemic have experienced a decline in productivity and therefore a decline in real wages,” Stevenson said.
As long as U.S. productivity continues to rise, workers can expect their salaries to continue to outpace inflation, she said. So maybe an extra trip to the cinema this month.
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