Wages are rising, but expenses are growing faster. In July, the U.S. Consumer Price Index reached 3.4% year over year, outpacing the 3.2% increase in hourly earnings. The latest gap is eroding the purchasing power of American workers, reopening an issue that was never fully resolved after the pandemic shock and has now been exacerbated by recent increases in oil and fuel prices linked to the conflict with Iran. The trap of standard raises The scale of the problem is highlighted by a study conducted by the University of Chicago’s Booth School of Business in partnership with payroll and data-processing giant ADP, which analyzed the paychecks of 16 million employees. The research shows that corporate pay practices tend to remain rigid: companies typically grant predetermined annual raises, usually between 2% and 4%, without adjusting them when inflation accelerates. Even during 2021–2022, when inflation peaked at 9.1%, its highest level in four decades, wages suffered a decline of more than 4% in real terms. That loss has never been fully recovered: by the end of 2024, 37% of the workers in the sample were still earning less than they had four years earlier. Because annual raises tend to remain fixed at around 3%, they create a structural shortfall whenever inflation rises above that threshold, turning what appears to be a pay increase into an effective reduction in disposable income. The cost shift onto workers This mismatch effectively shifts part of the burden of inflation from companies to workers. When hourly productivity remains unchanged but wages grow more slowly than the cost of living, companies can protect their profit margins while workers absorb the impact of higher raw-material and energy costs. Erik Hurst, a labor economist at the University of Chicago’s Booth School of Business and a co-author of the study, told CBS News: “Workers were already behind the eight ball in terms of affordability, even going into inflationary pressures that started earlier this year from the war in Iran.” Hurst also pointed to University of Michigan data showing an 8% drop in consumer confidence in August, driven in part by the perception of a gradual loss of purchasing power amid historically low unemployment. The hidden cost of job mobility To limit the erosion of their wages, some workers choose to switch jobs—the only option that ADP data show can consistently deliver pay increases in line with inflation. But the research also highlights the hidden costs of professional mobility, including the time spent searching for a new position, logistical adjustments and the need to adapt to a new workplace. When productivity holds steady but a paycheck loses value with every expense, the room for maneuver in everyday life gradually shrinks. It is not simply a matter of sacrifice or effort at work. Instead, workers are left with the very real feeling that they have to run twice as fast just to stay in the same place.