Wages are going up, but for some workers, the salary increase alone is barely making a difference.

“If you are working, you saw some big pay increases. However, for the lower-end and middle-income households, those pay increases from work were not enough on their own to keep up with higher costs.” That’s what Alexander Arnon, associate director of policy analysis for the Penn Wharton Budget Model, told me.

He is a co-author of the recent report, Did Wages Keep Up With Inflation in 2021? The wage growth rate is higher for the lowest-paid workers, whether it’s hourly or annual wages, Arnon explains. However, since they’re already starting way behind in pay levels, the higher growth rates translated into much smaller dollar amounts, he says.  

The other half of the equation is inflation and cost of living, Arnon says. 

“The inflation rates we’re seeing are higher for the lower-income households,” he says. In 2021, working households with income below $40,000 saw their cost of living rise 6.9%. That’s on par with the consumer price index reaching 7% in December 2021. Meanwhile, inflation fell to 6.1% for households with income above $150,000, the report found.

But working households with incomes below $20,000 faced the highest inflation rate of any group, according to the report. If these workers didn’t supplement their wage increases with other forms of income (such as the child tax credit), their purchasing power declined. In comparison, only households with incomes of $100,000 or more saw their annual wage income rise by significantly more than their consumption costs, the report found. 

When it comes to inflation, the key difference between lower-income and higher-income households is how much of their consumption budget is spent on energy and food, Arnon says. 

“Those are components of household spending that have seen the biggest price increases over the last year,” he explains. “And those make up a bigger part of the household budget from lower-income households.” Energy accounts for a smaller share of higher-income households’ spending, according to the report.

Wage increases continue

Over the past year, workers’ hourly pay has increased by 5.7%. Large companies like Amazon and Walmart have increased starting salaries for hourly workers. Following suit, on Monday, Target announced it is increasing starting wages up to $24 an hour. 

Arnon suggests the war for talent is playing a major role. Employers are having to increase pay to attract and retain workers, he says. Many economists, especially those who lived through the 1960s and 1970s, say a “nightmare scenario” is the “wage-price spiral” where workers demand higher compensation for inflation, which then drives up inflation, he explains. “But I don’t think we really have seen evidence of that yet,” Arnon says.

“I think there’s still some reason to be optimistic that we can eventually settle back into a more normal environment,” he says. Any advice for companies in the meantime? “Get ready to tough it out,” and accept that workers have the upper hand, Arnon says.

My previous piece on inflation got a lot of attention from readers. So, I’m curious to hear what you’re experiencing during high inflation. Send me an email.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

***If you missed an issue of CFO Daily, check out our archive here.

Big deal

A recent report by Robert Half (NYSE: RHI), a talent and business consulting firm, reveals several factors, including candidate ghosting, making hiring more difficult. A survey of more than 2,300 senior managers in the U.S. found 39% said it's more common for job candidates to cut off communication now than two years ago. Managers hiring for tech (48%) and administrative and customer support (42%) roles were most likely to report an increase in ghosting, the report found. More than half (56%) of employers missed out on a new hire for reasons including lack of schedule flexibility (40%).

Going deeper

Controllership in 2022 5x5: Insights and actions, a report by Deloitte, offers considerations about what to expect and what to focus on this year. One of the five insights—a greater focus on data integrity, strategy, and governance. High-quality data is becoming even more important as data is the foundation for finance, business insights, automation, and touchless operations, according to the report.

Leaderboard

Jai Agarwal was named CFO at Claros Mortgage Trust, Inc. (NYSE: CMTG). Agarwal will succeed J. Michael McGillis, who will continue in his role as president of CMTG. This appointment will be effective following the filing of the company’s annual report on form 10-K for the 2021 fiscal year, estimated to occur around March 15. Agarwal most recently served as the CFO, treasurer, and secretary of Apollo Commercial Real Estate Finance, Inc. Prior to joining Apollo, he was CFO and treasurer of CM Finance Inc. Agarwal also held several senior roles at Blackstone’s real estate finance group and Capital Trust, Inc. Earlier in his career, he held positions in finance and investments at iStar Inc.

Eric Bauer was named EVP and CFO at Sharps Compliance Corp. (Nasdaq: SMED), a waste management solutions provider. Bauer most recently served as EVP and CFO at Nuverra Environmental Solutions (NYSE: NES), which recently merged with Select Energy Services (NYSE: WTTR). Before that, he served as managing director of mergers and acquisitions advisory in the Midstream Energy Group at Evercore Partners. Prior to this role, Bauer worked in the Investment Banking Divisions at CITI and Lehman Brothers. He also served as a private equity professional at Avista Capital Partners.

Mehul Patel was named CFO at Minim, Inc., (Nasdaq: MINM), a creator of WiFi software and Motorola home networking products, effective March 21. Currently, Patel serves as VP of supply chain finance and transformation, for Verifone, a Fintech company. Prior to joining Verifone, Patel held the position of finance director for the Telecom Consumer Premise Equipment business unit at Motorola. During his 18 years at Motorola, he was a part of six acquisitions and saw the company’s name change from Motorola Home to Motorola Mobility, a Google Company, to ARRIS and in 2019 to CommScope.

Overheard

"We now have a bit more clarity on sanctions and security in the region ... this means all operations in Russia end."

—A spokesperson for Swedish truck maker AB Volvo on the company, which generates about 3% of its sales in Russia and has a factory located there, halting all production and sales in Russia due to the crisis, as told to Reuters.