Inflationary Impacts in 2021
As Capital Region companies grappled with higher labor costs, did these larger paychecks offset the high levels of inflation coming out of the pandemic?
Over the last year or so, it has been hard to drive past a fast-food restaurant without noticing not only “help wanted” signs, but also that these notices often advertised wages that were unheard of before the pandemic began: $13, $14, $15 per hour for entry-level work, as well as robust benefits like college tuition reimbursement. This was just a microcosm of a pattern seen around the country of companies in all industries raising wages to compete for a seemingly shrinking pool of talent, and Louisiana was not immune from this pattern.
However, these increased wages didn’t come about in a vacuum. They were necessary because fewer people had to work – data shows that households have more than $2.5 trillion in savings in excess of what they did pre-pandemic[1], due in large part to stimulus programs aimed to keep the economy afloat during lockdowns. The glut of money in bank accounts, higher wages, as well as international factors like supply chain issues and the Russian invasion of Ukraine, have caused the prices of goods and services to rise; presently, we have the highest inflation rate in about 40 years.
What’s Growing Faster, Wages or the Price of Goods?
Unfortunately, new data shows that the answer locally is the same as it is nationally: inflation is eating up local wage increases, and then some. Based on Bureau of Labor Statistics releases, the Capital Region saw strong year-over-year wage increases overall from Q4 2020 to Q4 2021 – about $63 per week, or more than $3,300 annually. This came out to a rise in wages of 5.3% year-over-year.
This notable increase failed to keep pace with inflation over the same time period. In Q4 2021, year-over-year inflation averaged out to about 6.7%, a bit higher than the Capital Region’s 5.3% average wage increase. While those employed in some parishes are certainly better off than they were in terms of spending power – Ascension, West Baton Rouge, Pointe Coupee, and St. Helena all saw wage increases eclipse the inflation rate – overall, workers in the Capital Region appeared to have about 1.4% less spending power than they did a year earlier. This same pattern is seen on a national scale over the same timeframe, where wages for all workers in the country grew at 6.1%, again lower than the 6.7% inflation rate.
How Can Households Get Back their Spending Power?
While there’s not much individuals can do to combat big macroeconomic trends, there is still notable opportunity to increase your household’s spending power, especially in a job market that so heavily favors jobseekers. There are currently more than 32,000 open jobs in the Capital Region, a number of them high-wage: there is massive demand for all types of nurses, software developers, commercial truck drives, and other skilled trades, all of which can be found at BR Works, the region’s most comprehensive job pairing website.
In addition, the state of Louisiana is launching the M.J. Foster Promise Program on July 1, 2022. This program provides financial assistance of up to $3,200 per year for training for short-term credential coursework aligned with high-demand jobs within the state. As the home to two strong career and technical colleges, Baton Rouge Community College and River Parishes Community College, regional residents have a great opportunity to improve their career prospects without incurring significant costs or debt. Although inflation will continue to be a concern in the immediate future, Capital Region residents have meaningful opportunities to take advantage of the strong jobseeker labor market or upskill to begin a new higher-wage career to combat the rising costs of goods and services.
[1] Bolstered balance sheets: Assessing household finances since 2019, Brookings, March 22, 2022