Wage Growth Competes with Inflation; Examining the Gap Between Low and High Earners in Minnesota

New research shows Minnesota's wage gaps are better than the nation as a whole


January 13, 2023

St. Paul – The Minnesota Department of Employment and Economic Development (DEED) today published three research articles related to the historic rate of wage increases, exploring how they compare with inflation for real buying power and how wages are distributed from low-income to high-income Minnesotans. This research helps improve understanding of wage increases in offsetting inflation, as well as measuring wage inequality in Minnesota.

The first two in a series of wage distribution research articles by Labor Market Information (LMI) Office Economist Mustapha Hammida were published today. The first article in the series sets the stage by describing the distribution of hourly wages of Minnesota workers in the year before the COVID-19 pandemic. It offers for the first time an illustration of the shape of such a distribution and its properties, including wage inequality. The second article in the series analyzes how the Pandemic Recession affected the distribution of hourly wages of Minnesota workers and how the recent rise in inflation is influencing growth in hourly wages of workers. Additional articles in this wage distribution series will be published in upcoming issues of DEED's Minnesota Economic Trends.

"Wage growth has not kept pace with inflation across the country, and we know Minnesotans have been hit by higher prices at the pump, the grocery store, and in most every shopping experience," said DEED Commissioner Steve Grove. "Learning that Minnesota has less wage inequality between low and high-earners than the nation as a whole, and that we're trending in the right direction, is a hopeful sign as we work to empower equitable growth in our economy coming out of the pandemic recession."

Total private sector wages have been increasing faster than at any time since such data started being tracked in 2006. Over the year in November 2022, private sector wages increased 5.7% in Minnesota; however, they fell short of inflation, which increased 8.3% over the same period. The Consumer Price Index for All Urban Consumers (CPI-U), which is a common measure of inflation, was just released today showing a continued slowing of inflation. The CPI-U declined 0.1% in December on a seasonally adjusted basis and over the year (OTY) it was up 6.5%, significantly smaller than the 8.3% OTY measured in November and the smallest OTY increase since October 2021.

While inflation growth appears to be slowing, wages will have to continue increasing for real wage growth to occur. Post-Pandemic Recession Wage and Inflation Growth by Assistant LMI Director Oriane Casale and Labor Market Analyst Luke Greiner reviews wage growth in Minnesota and the U.S. with comparisons between industries and across states, where available.

Read other DEED LMI research articles in the current and past editions of the quarterly publication Minnesota Economic Trends.

DEED is the state’s principal economic development agency, promoting business recruitment, expansion and retention, workforce development, international trade and community development. For more details about the agency and its services, visit the DEED website, the JoinUsMn.com website, or follow us on Twitter.


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