Real wages fall for U.S. workers despite 3.4% pay rise
Labor Department data shows inflation is eroding purchasing power for private and government employees.
By Mariam Saleh ·
Las Vegas, NV. U.S. Department of Labor data released today shows that workers' real pay has shrunk over the past year, even as total compensation increased. The report covers the 12-month period ending in September 2026.
Total compensation for civilian workers rose 3.4% during that timeframe. This figure includes both wages and benefits. Wages and salaries specifically increased by 3.1%, while the cost of benefits climbed 3.9%.
Inflation has outpaced these pay gains. For private-sector employees, inflation-adjusted wages and salaries fell 0.6% over the last year. State and local government workers saw a similar decline, with real wages slipping 0.5%.
The Labor Department identifies the Employment Cost Index as a key measure of wage and benefit pressures. The Federal Reserve monitors this index closely when setting monetary policy. The central bank raised its benchmark interest rate for the first time since 2023 six weeks ago to combat high inflation.
The Fed indicated that another rate hike could occur later this year. This move aims to tame inflation without triggering a sharp slowdown in hiring or wage growth. Government data reported in October showed that consumer inflation accelerated in September as goods and services became more expensive.
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