Nominal Wage Adjustments during High Inflation and Tight Labor Markets

The U.S. economic recovery after COVID has been characterized by relatively high inflation and low unemployment. At the same time, average wages increased at a rapid pace during this period, faster than in previous years. Grigsby, Hurst, and Yildirmaz (2021) study nominal wage rigidity in the United States and document that before the pandemic, wage declines were rare and over 35 percent of workers would not receive a wage increase year over year. Given the larger-than-usual aggregate wage growth in the aftermath of the pandemic, we revisit these results and study the frequency and the magnitude of individual wage changes in a context of high inflation and tight labor markets. We find that individual wages increased more frequently and by a larger amount post-2021, but the pace and frequency of the increases moderated somewhat in 2023 compared to the previous year.