How Do Periods of Inflation, Recession Affect Real Earnings?

Bengali, Leila; Duzhak, Evgeniya A.

Journal Article

How Do Periods of Inflation, Recession Affect Real Earnings?

Abstract: Households can lose spending power if they suffer job losses during recessions or when the cost of living rises at times of high inflation. One way to assess the historical roles these two factors have played in eroding economy-wide earnings is by breaking down the cumulative growth in inflation-adjusted household earnings into three components: nominal earnings growth, inflation, and employment growth. Analyzing the results suggests that periods of high inflation may undermine economy-wide real earnings growth more than mild recessions.

Keywords: covid19; pandemics; inflation; recessions; earnings; households;