‘Make your moves as soon as possible’: US workers earned just 12 cents more in 2022 than they did in 1972 — adjusted for inflation. 3 ways to boost your purchasing power in 2023
Persistent inflation is still making headline this year. But price levels have long been rising in this country — eroding the real wage of working Americans.
According to CNBC, American workers were earning an average of $27.45 per hour in June of 2022. Back in 1972, the same workers made an average of $3.88 an hour.
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That’s serious wage growth right?
Not so fast. Those numbers are nominal wages that haven’t taken into account inflation.
When adjusted for inflation, American workers are earning just 12 cents more today than they did in 1972.
In other words, real wages — wages in terms of the number of goods and services that can be bought — have essentially been stagnant for 50 years.
“When the average American is not seeing his or her living standards increase over a period of decades, that’s something that should concern us all,” Harry Holzer, professor of public policy at Georgetown University, told CNBC last year
Fast forward to December of 2022, the average hourly earnings went up slightly to $28.07, according to the latest Bureau of Labor Statistics data. And while the inflation rate has decreased to 6.5% from 7.1% in November , it is still much higher than the Fed's target rate of approximately 2%.
To further tame inflation, the U.S. Federal Reserve has said they will continue to raise interest rates in the coming months.
But Americans can also take matters into their own hands. Here’s a look at three ways to mitigate the impact of inflation.
Invest in passive income
Inflation erodes the purchasing power of cash. So if you have some spare cash, putting it to work might be better than stashing it under the mattress.
Real estate is a well-known hedge against inflation. As the price of raw materials and labor goes up, new properties are more expensive to build. And that drives up the price of existing real estate.
Well-chosen properties can provide more than just price appreciation. Investors also get to earn a steady stream of rental income. But being a landlord does come with its hassles, like fixing leaky faucets and dealing with difficult tenants.
The good news? Renting out single-family homes and condos isn't the only way to invest in real estate.
Prime commercial real estate, for example, has outperformed the S&P 500 over a 25-year period. With the help of new platforms, these kinds of opportunities are now available to retail investors and not just the ultra rich.
With a single investment, investors can own institutional-quality properties leased by brands like CVS, Kroger and Walmart — and collect stable grocery store-anchored income on a quarterly basis.
Read more: Here's the average salary each generation says they need to feel 'financially healthy.' Gen Z requires a whopping $171K/year — but how do your own expectations compare?
Switch jobs
Analysis by the Pew Research Center reveals that switching jobs could be a clever way to boost your income. The data seems to suggest that 60% of people who switched jobs or employers between 2021 and 2022 saw their pay rise, while fewer than half who stayed saw any wage growth during this period.
Andy Challenger, senior vice president at outplacement firm Challenger, Gray & Christmas, told CNBC earlier this month that sooner is better than later for those looking to switch jobs this year due to the risk of a decline in the job market.
“Today is better than it’s going to be six months from now,” Challenger said. “So I would try to make your moves as soon as possible.”
Which means if you’re looking to beat inflation, leaving your current role or employer for better opportunities may be your best bet at getting the salary increase you’re hoping for.
Pick up a side gig
Supplemental income or side gigs have never been this popular. In fact, federal labor data revealed that as of September, 420,000 people were working two full-time jobs simultaneously. These workers were putting in roughly 70 hours a week to boost their income.
You don’t need another full-time job to beat inflation. A simple side gig like tutoring could be worth $100 an hour, while dog walking could net you as much as $1,000 a month, as SideHusl, an online gig platform, told CBS News.
A flexible freelance role can help you boost your income far above the rate of inflation.
A precious path to protection
With the economy in such a volatile state amid high inflation and stock market uncertainty, your 401(k) or IRA — and your retirement itself — could be at risk.
You could try to adjust your retirement accounts for better protection, but there’s a lesser-known alternative that could pay off big.
A Gold IRA is a type of individual retirement account that allows you to invest in gold and other precious metals in physical forms, such as coins, instead of stocks, mutual funds and other traditional investments.
It’s a great alternative because unlike the U.S. dollar, which has lost 98% of its purchasing power since 1971, gold’s purchasing power remains more stable over time.
Opting for a Gold IRA gives you the opportunity to both diversify your portfolio and stabilize your finances — and gold tends to yield less risk than other alternative investments.
If you want to open a Gold IRA, there are reputable services that’ll let you roll over your current 401(k) or IRA into this new account.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
