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Editor’s Note: This story originally appeared on Smartest Dollar.

On the surface, the economy of the last two years has been extremely favorable to workers.

After spiking to nearly 15% early in the COVID-19 pandemic, the U.S. unemployment rate today sits around 3.5%. Despite employers’ urgency to hire, labor force participation has been slower to recover, and the “Great Resignation” has workers quitting at historic rates in search of better jobs.

With these factors contributing to a tight labor market, workers have more choice of job opportunities, and more employers have been raising wages to hire and retain employees. As a result, nominal wages are growing faster than at any point in at least two decades.

But rising inflation over the course of 2021 and 2022 has taken a bite out of rising wages. Year-over-year inflation (YoY), as measured by the Consumer Price Index, has hovered around or above 8% for much of 2022.

Prices for essential expenses like food, shelter, and energy have skyrocketed due to supply challenges. With prices rising so quickly, workers are discovering that their increased pay does not go as far as they had hoped.

While nominal wages continue to rise to record heights, inflation-adjusted wages have shown signs of decline. In non-adjusted dollars, average weekly wages spiked to $1,339 in the last quarter of 2020 and rose again to $1,418 in the last quarter of 2021. But in inflation-adjusted dollars, wages actually decreased by 0.8% over that span, from $1,429 to $1,418.

To determine the locations where pay is…

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