Here’s why salaries in the U.S. don’t keep up with inflation

Inflation in the United States hit a record high in June 2022. Consumer prices soared by 9.1% compared with a year prior — the largest annual increase since 1981. While wages are rising, they’re not keeping up with inflation. Wage growth has been consistent with an inflation rate of about 4.5%. Meanwhile, as of November, inflation was at 7.1%.

Americans are feeling the brunt at the grocery store and gas station and with rent payments, too. Two-thirds of workers said their pay isn’t keeping up with these higher prices. So why aren’t salaries keeping up with inflation?

Corporations are still raising salaries and offering other perks to retain employees, but they’re not necessarily factoring in the cost of living, as that’s not typically how compensation determination works. Instead, organizations focus on the cost of labor and the competitive landscape in making these decisions.

Watch this video, as CNBC’s Emily Lorsch explains why salaries in the U.S. don’t keep up with inflation.