Broker Check
Real Life, Real Answers...and Real Wages

Real Life, Real Answers...and Real Wages

May 30, 2023

In August 1987, shortly after finishing studies at the University of Akron, and still working as a bank teller at Huntington Bank’s branch on the Kent car strip, I answered a help wanted ad and had a job interview to start a career as a financial advisor. It turns out the company that I was interviewing with was John Hancock Life Insurance. They had hired a CFP to start a financial planning division, which they called their “Real Life, Real Answers” division. 35 years later, I still have the book outlining their process in my office.

I was 22 years old, and it took me approximately two years to figure out John Hancock‘s 1980s version of financial planning was to create a proprietary software program that answered all of the financial planning questions that clients posed with how much John Hancock life insurance, disability insurance, and/or annuities they should purchase. So much for “real life, real answers”. 

Today, employees are looking at another “real life” dilemma. We are being told through various government statistics that wages are rising faster than we have seen in many years. This may be true. However, real wages, which mean earnings after the negative impact of inflation, paint a very different picture.

In our chart below, we look at the 2018-2019 trend for real, inflation-adjusted, wages. If worker’s wages had continued to grow at the pre-pandemic trend after the onset of the COVID-19, coronavirus pandemic in early 2020, today’s wages would be tracking the orange dotted line. This chart is provided by Jason Furman, who was a senior economic adviser to former President Barack Obama.


As you can see, by March 2023 wages were 5% below the trend over the last three years. This is not because wages haven’t risen. It is because they have not risen as much as inflation has. This means that even though workers are getting larger dollar amounts in their paychecks in nominal terms, they can buy less gasoline, groceries, and postage stamps than they did just three years ago.

As inflation continues to fall from the highest pace that we have seen in more than 40 years, we will continue to watch and see if higher wage growth will help close the gap from where we were pre-pandemic. This is an important topic, as consumer spending makes up nearly 2/3 of GDP growth. When a worker’s income is falling behind inflation, it means that they have less money to spend on goods and services. This will slow economic growth over time.

We wanted to remind you of this important trend and put it in context of all the news and noise that you hear daily from the talking heads on cable news outlets and online. Real wage growth is what matters. It is what provides real means and real answers for people trying to make ends meet in today's economy. As always, if you have questions about what this means to you and your family in real life, please do not hesitate to reach out to your CFP at Impel Wealth Management. We are here for you as we continue “Moving Life Forward”.

© 2023 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.