Edward Conard

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Leaked Amazon memo warns the company is running out of people to hire

AI Summary. Internal Amazon research warns the company could exhaust its available US warehouse labor pool, with employee attrition reaching 159% versus 59% turnover in the broader US warehouse sector. The research estimates a $1 increase in minimum wage would expand the hiring pool by 7%, while cutting attrition to earlier levels would extend the hiring runway by three years.

Jason Del Rey Vox
Date Posted:
June 28, 2022
Is Database:
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Amazon’s attrition rate soared to 159% in 2020, outpacing the 59% US warehouse sector turnover, highlighting a critical labor challenge. @JasonDelRey

Amazon’s attrition rate soared to 159% in 2020, outpacing the 59% US warehouse sector turnover, highlighting a...

Is high warehouse worker turnover exhausting the available labor pool?

Core argument: Amazon's attrition rate reached 159% in 2020, versus 59% turnover in the broader US warehouse sector, with Phoenix attrition rising from 128% in 2019 to 205% in 2020.

Amazon's attrition rate soared to 159% in 2020, significantly higher than the 59% turnover in the broader US warehouse sector, highlighting a critical labor challenge. Internal research warns that Amazon may deplete its US labor pool by 2024, risking service quality and growth. Attrition in Phoenix rose from 128% in 2019 to 205% in 2020, exacerbating labor shortages. Amazon's strategy of rapid workforce turnover, once seen as beneficial, now threatens its operational stability. To mitigate this, Amazon could raise wages, enhance automation, or improve employee retention. A $1 increase in minimum wage could expand the hiring pool by 7%, while reducing attrition to 2019 levels could extend hiring runway by three years. The company's reliance on a vast workforce underscores the urgency of addressing these issues to maintain its e-commerce dominance.

Takeaways by Macro Roundup® AI

  1. Amazon's attrition rate reached 159% in 2020, versus 59% turnover in the broader US warehouse sector, with Phoenix attrition rising from 128% in 2019 to 205% in 2020.
  2. Internal Amazon research warns the company may deplete its US labor pool by 2024, risking service quality and growth.
  3. Amazon's internal research indicates a $1 increase in minimum wage could expand its hiring pool by 7%, while reducing attrition to 2019 levels could extend its hiring runway by three years.

Jason Del Rey, "Leaked Amazon memo warns the company is running out of people to hire,"Vox, June 17, 2022, https://www.vox.com/recode/23170900/leaked-amazon-memo-warehouses-hiring-shortage

Leaked Amazon memo warns the company is running out of people to hire

Amazon is facing a looming crisis: It could run out of people to hire in its US warehouses by 2024, according to leaked Amazon internal research from mid-2021 that Recode reviewed. If that happens, the online retailer’s service quality and growth plans could be at risk, and its e-commerce dominance along with it.

Raising wages and increasing warehouse automation are two of the six “levers” Amazon could pull to delay this labor crisis by a few years, but only a series of sweeping changes to how the company does business and manages its employees will significantly alter the timeline, Amazon staff predicted.

“If we continue business as usual, Amazon will deplete the available labor supply in the US network by 2024,” the research, which hasn’t previously been reported, says.

The report warned that Amazon’s labor crisis was especially imminent in a few locales, with internal models showing that the company was expected to exhaust its entire available labor pool in the Phoenix, Arizona, metro area by the end of 2021, and in the Inland Empire region of California, roughly 60 miles east of Los Angeles, by the end of 2022. Amazon’s internal report calculated the available pool of workers based on characteristics like income levels and a household’s proximity to current or planned Amazon facilities; the pool does not include the entire US adult population.

Amazon spokesperson Rena Lunak didn’t refute the contents of the internal report Recode obtained but declined to comment on it.

The research provides a rare glimpse into the staffing challenges that Amazon is now facing behind its slick veil of one-click online shopping and same-day Prime delivery. And it pointedly reveals how much of Amazon’s business success and its longtime position as a darling of Wall Street investors is dependent on its workforce of more than 1 million people who pick, pack, and ship its customers’ orders nearly 24/7.

The leaked internal findings also serve as a cautionary tale for other employers who seek to emulate the Amazon Way of management, which emphasizes worker productivity over just about everything else and churns through the equivalent of its entire front-line workforce year after year.

In the past, that churn wasn’t a problem for Amazon — it was even desirable at some points. Amazon founder and former CEO Jeff Bezos saw his warehouse workforce as necessary but replaceable, and feared that workers who remained at the company too long would turn complacent or, worse, disgruntled, according to reporting by the New York Times. But now, as the internal report Recode reviewed shows, some inside Amazon are realizing that strategy won’t work much longer, especially if leaders truly want to transform it into “Earth’s best employer,” as Bezos proclaimed in 2021.

To be sure, part of Amazon’s turnover issue relates to how some employees view working in a warehouse as a brief pit stop on the way to better things. But some workers have long complained of stresses unique to Amazon’s workplace, from the pace and repetition of the labor to the unrelenting computerized surveillance of workers’ every move to comparatively high injury rates. In a company survey of 31,000 workers who left Amazon that was referenced in the report, some former Amazon workers say it’s worse to work at Amazon than some big-name competitors like Walmart or FedEx. In that survey, those who joined another employer soon after leaving the tech giant “rated Amazon significantly worse on work fitting skills or interests, demands of the work, shift length and shift schedule.”

With traditional competitors ramping up their investments in e-commerce warehouses, Amazon is no longer a slam-dunk top choice for those seeking work in these types of facilities and the starting minimum wage that comes along with it. And that dynamic is already playing out in some parts of the country.

Danger zones

In the Inland Empire region of California, for example, Amazon may cycle through every worker who’d be interested in applying for a warehouse job by the end of 2022, the internal report warned. One of the reasons is that Amazon is increasingly finding itself in a bidding war for workers with rivals in the area, which is a key logistics region because it is within a two-hour drive of 20 million potential customers and two of the largest container ports in the US.

“We are hearing a lot of workers say, ‘I can just go across the street to Target or Walmart,’” said Sheheryar Kaoosji, co-executive director of an Inland Empire nonprofit called the Warehouse Worker Resource Center. Kaoosji added that Walmart is offering some workers with past warehouse experience as much as $25 an hour. An Amazon executive told Reuters in late 2021 that the company was bumping the average starting wage for new hires in the US to more than $18 an hour, attributing the decision to intense competition among employers. He also said Amazon had increased hiring bonuses to as much as $3,000 in some geographies.

And internal forecasts showed the situation was dire in Phoenix, Arizona, with Amazon projected to exhaust its entire potential workforce by the end of 2021. The Phoenix metro area has been a key market for Amazon since it opened its first warehouse there in 2007. The company currently operates more than 20 facilities in the region. But attrition at Amazon’s facilities in the area grew from 128 percent in 2019 to 205 percent in 2020, as the pandemic upended labor markets and online shopping boomed, putting pressure on fulfillment center employees.

As a result, Amazon seemed to have reversed, or stopped enforcing, some workplace policies at Phoenix warehouses amid the labor shortage, according to a former manager.

“They were so concerned about attrition and losing people that they rolled back all the policies that us as managers had to enforce,” Michael Garrigan, a former entry-level manager at Amazon warehouses in Phoenix from 2020 to early 2022, told Recode. “There was a joke among the … managers that it didn’t matter what got written up for because we knew HR was gonna exempt it. It was almost impossible to get fired as a worker.”

Lunak, the Amazon spokesperson, declined to comment on Garrigan’s claims.

The internal research also identified the regions surrounding Memphis, Tennessee, and Wilmington, Delaware, as areas where Amazon was on the cusp of exhausting local warehouse labor availability. Amazon’s models used for this internal research were 94 percent accurate in predicting the US geographies where Amazon was significantly understaffed in the lead-up to the Amazon Prime Day shopping event in June 2021, the report noted, which contributed to delivery delays for customers in those markets. The warnings about Amazon’s labor supply shortages indicate that in at least some markets, Amazon shipments could face more severe delays in the future.

Despite its looming labor crisis, Amazon temporarily overcorrected in some markets, going from understaffed to overstaffed. Amazon’s chief financial officer had previously said that the company was understaffed by 10,000 employees during the end of 2021, before the omicron Covid-19 variant had wreaked havoc on much of the US. But in April, the company revealed that it was actually overstaffed in some areas in early 2022 as the first wave of omicron subsided and employees returning from sick leave worked alongside new hires who had been recruited to backfill their roles.

Amazon spokespeople have said that the company will count on natural attrition rates to solve much of the current overstaffing problem, and the Wall Street Journal reported on Thursday that a top company official pitched a plan internally to “ out its worker base through attrition.” It’s unclear where exactly Amazon is overstaffed and how long it will take to rightsize its workforce, but it seems unlikely that it is thinning staff in competitive locales like Phoenix and the Inland Empire where it had already exhausted much of the labor pool. It’s also unclear how the current economic climate will impact consumer spending and, relatedly, Amazon’s hiring needs.

For better or worse, the approach of reducing the temporary overstaffing issue through attrition should work for Amazon because it has long churned through its workers at a rapid clip. Amazon’s attrition rates were 123 percent in 2019 before jumping to 159 percent in 2020, according to internal data in the report Recode obtained, while turnover rates across the US transportation and warehouse sectors were much lower: 46 percent and 59 percent respectively in 2019 and 2020, according to Bureau of Labor Statistics estimates.

Turnover in the US retail industry was slightly higher than that — 58 percent and nearly 70 percent respectively in 2019 and 2020 — but still only about half as bad as Amazon’s. The high rates of attrition “made some executives worry about running out of workers across America,” the New York Times reported in 2021, though the article did not include specific timelines.

The leaked report viewed by Recode reads like an attempted wake-up call — along with potential solutions to avert the crisis — for some company leaders who long exhibited a nonchalant attitude toward employee attrition.

No silver bullet

Amazon has a variety of potential solutions for its people problem, but they will require the company to shift its mindset and overcome practical or logistical challenges.

On the surface, simply employing its current workers for longer would be a big help. The turnover rate disparity between Amazon and industry averages shows there is ample opportunity for the company to keep employees longer and delay the arrival of the day when it won’t have workers left to recruit. This is not some unsolvable, mysterious problem; the BLS stats show that plenty of companies retain workers much better than Amazon does. In fact, Amazon’s own data shows that nearly 90 percent of new workers say they want to stay at their jobs for at least six months. If Amazon could bring attrition rates down to its 2019 levels, which were still above 100 percent, the company would gain three more years of hiring runway, according to the internal projections.

In other parts of the country, though, where labor shortages aren’t yet a certainty, remnants of Amazon’s longtime aggressive termination practices persist. It’s not uncommon for some of Amazon’s automated computer systems to automatically fire employees for a variety of minor infractions, without exception. Jose Pagan, a former Amazon employee at a warehouse in Bronx, New York, says he got the automated ax recently despite nothing but positive feedback from his managers.

Pagan began working at the Amazon delivery hub in October and, within two months, had been promoted to a role on the safety committee for the facility. The new role didn’t come with a pay raise, and is on top of a worker’s core tasks, but Pagan saw it as a stepping stone to an official promotion. But in April, Pagan told Recode, he took two days off to have an infected tooth looked at and ultimately removed.

The problem, he said, was that he only had seven hours of unpaid time off but ended up missing 20 hours of work; he had enough paid vacation time to cover the absence, but he said the company did not pull from that separate bank of days because Pagan would have had to apply for vacation time in advance. Pagan said he also had a doctor’s note but was told the company did not need to accept it as an excuse, even though he had been excused from work with a doctor’s note previously. He said he worked for another full week without issue, until he showed up one night for his overnight shift and his badge no longer worked. He was eventually told he had been terminated.

An HR manager told Pagan that there was nothing he could do about the termination but that Pagan should reapply for a job at the company in three months, per Amazon policy.

“We would love you back in 90 days,” Pagan says the HR staff member told him. In the meantime, Pagan should “do some GrubHub or Uber,” the HR employee said.

“I find the whole situation crazy,” said the 35-year-old Pagan, who was supporting his wife and daughter on his Amazon income. “They’re gonna lose a good worker for nothing.”

Lunak, the Amazon spokesperson, said the company is looking into Pagan’s case.

Besides changing termination or retention policies, increasing pay is another obvious lever that Amazon could pull to expand its labor pool. (All of these are things that workers calling for unionization have demanded from the company.) The report predicted that for every dollar Amazon bumps up its minimum wage, it adds 7 percent more workers to its potential hiring pool. If Amazon were to do a little better, and raise its hourly minimum by just $1.50, that too would expand its pool of potential workers enough to extend its hiring ability in the US by three years.

The internal document also suggested Amazon needs to become more efficient at hiring. At the time the report was written, Amazon needed 6.7 job applicants to apply to fill a single warehouse role. Around 9 percent of applicants were rejected either because they were former employees not permitted to be rehired or because they failed a drug test or had an unsatisfactory background check. (Later in 2021, Amazon said it would stop screening many of its warehouse worker applicants for marijuana use.)

Of course, Amazon could also simply reduce the number of workers it needs by speeding up automation in its warehouses — a controversial approach. Nonetheless, the report revealed that Amazon executives had already in 2021 set a “conservative” goal of improving warehouse productivity by 25 percent by the end of 2024, strictly through increased automation. Hitting that goal on its own would push back the labor crisis as well, but only slightly.

The research team also pondered improvements that could be made to how Amazon already utilizes its existing staff. Amazon’s warehouse staff worked, on average, a little more than 27 hours a week in 2020, according to internal data. If Amazon had increased that weekly number by just 10 percent, the company could have reduced new hires by 118,000 people, the internal report estimated. The report also referenced a team in Amazon’s HR division, called Hamilton, that is building tools to automatically transfer workers between nearby facilities based on staffing levels and order volume. The relocations would come in the form of both “permanent transfers and short-term assignments.”

Lastly, according to the report, Amazon’s HR staffing division wants to play a bigger role in influencing where new warehouses are located so they can ensure the available labor pool is large enough for the company’s needs. For some types of Amazon warehouses, there is little wiggle room. Amazon delivery stations, for example, are the last stop for a package before it’s delivered, so they need to be located within a short driving distance to a large number of Amazon customers. But for others — like “cross dock” facilities that receive merchandise from suppliers, and fulfillment centers that receive goods from cross dock facilities and pack them into customer orders — there is more leeway in the location selection process and so an opportunity to better use internal labor forecasting tools.

“Our longer-term strategy … is to apply labor forecasts to future site selection,” the report read.

Overall, the leaked report offers a variety of solutions to choose from, but each with trade-offs that Amazon executives may not find palatable. Raise wages and the company may need to pull back spending elsewhere. Increase automation and risk the wrath of critics concerned about replacing people with robots at the second-largest private sector employer in the country. A focus on better retaining employees could also mean reducing performance tracking and productivity quotas that have played a role, however controversial, in the company’s historic business success to date.

Amazon has shown time and time again that it values “customer obsession” — and the promises it makes to its customers — above all else. But the customer loyalty that results from that obsession is ultimately at risk if Amazon cannot employ enough people — or robots — to pack and ship the boxes people expect to find outside their front door a day or two after clicking “Place your order.” The company’s new CEO, Andy Jassy, has proclaimed that Amazon is “not close to being done in how we improve the lives of our employees.” As the internal report shows, doing so should no longer be optional for Amazon; it’s an imperative.

Ed Comment: I assume 159% attrition means the average tenure is 7.5 months. If 20% stay a long time, supervisors for example, then the tenure of the other 80% is even shorter. I think this is typical of low wage workers more generally. Presumably people quite because they get fired, get a better job, or don't need to work, at least temporarily. "Amazon’s attrition rates were 123 percent in 2019 before jumping to 159 percent in 2020, according to internal data in the report Recode obtained, while turnover rates across the US transportation and warehouse sectors were much lower: 46 percent and 59 percent respectively in 2019 and 2020, according to Bureau of Labor Statistics estimates....Turnover in the US retail industry was slightly higher than that — 58 percent and nearly 70 percent respectively in 2019 and 2020 — but still only about half as bad as Amazon’s. In Phoenix: Attrition at Amazon’s facilities in the area grew from 128 percent in 2019 to 205 percent in 2020..."

  • Wages/Income
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Previous articleJune 27, 2022Unemployment Insurance, Starting Salaries, and JobsUI benefit cuts show employment-wage trade-off: 23-50% UI reduction drives job growth +1.5-2.4% but wages fall -1.8-7.2%. Study across 7 states reveals -1.0 labor demand elasticity.Next articleJune 28, 2022Have Wages Stagnated for Decades in the US?Since 1990, real median American wages grew by 34% since 1990, with the 10th, 20th, and 30th percentiles experiencing 50%, 48%, and 38% growth, respectively.
Showing 131 database articles primarily about Wages/Income

Not Tech, Not Wall Street

AI Summary. The authors estimate that more than half of the rise in the top 1% income share since 1985 — 5.8 of 10.5 percentage points — flowed through pass-through businesses, counting roughly 3m wealthy private business owners with average net worth near $25m running law firms, dealerships, and medical practices.

Torsten Sløk Apollo
Date Posted:
September 21, 2026
Is Database:
Database
Is Important:
Important

More than half the increase in the top 1% income share since 1985 flowed through pass-through businesses to ~ 3mm private business owners with a mean net worth of ~$25mm.

Did most of the top 1% income gain come from private businesses?

Core argument: Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.

The income that lifted America's top 1% did not come mainly from tech or Wall Street, according to Owen Zidar and Eric Zwick. More than half of the rise in the top 1% income share since 1985, 5.8 of 10.5 percentage points, flowed through pass-through businesses. Zidar and Zwick, counted roughly 3 million wealthy private business owners, with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains, the kind of businesses that make their owners wealthy and well known in their own communities without ever making them nationally famous.

Takeaways by Macro Roundup® AI

  1. Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
  2. Zidar and Zwick count roughly 3 million wealthy private business owners with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains.
  3. The income that lifted America’s top 1% did not come mainly from tech or Wall Street, according to Zidar and Zwick, but from businesses whose owners are well known locally without becoming nationally famous.

Related Articles:

  • What’s Missing in the Fed’s Data about Ultrarich Portfolios — The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
  • They’re Rich but Not Famous—and They’re Suddenly Everywhere — An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
  • Capitalists in the Twenty-First Century — Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
  • Wages/Income
  • Workforce
    • Inequality

Family Income Continues to Grow in 2025 Data

AI Summary. Census data show the number of U.S. families with inflation-adjusted incomes above $150,000 grew from under 3m in 1967 to over 31m in 2025, while families earning under $75,000 fell by almost 3m in absolute terms. The share of families with multiple earners has not increased much over that period.

Jeremy Horpedahl Economist Writing Every Day
Date Posted:
September 17, 2026
Is Database:
Database
Is Important:
Important

In 1967, just 5.5% of American families had an inflation adjusted income of $150,000 or more. In 2025, 35.7% did. During that timeframe, the share of families with a real income less than $75,000 declined from 63.4% to 32.8%.

Are more American families reaching higher inflation-adjusted income levels?

Core argument: The number of U.S. families with incomes above $150,000 in 2025 inflation-adjusted dollars rose from fewer than 3 million in 1967 to over 31 million in 2025, according to Census data.

In 1967 there were fewer than 3 million families with incomes over $150,000 (in 2025 inflation-adjusted dollars). By 2025, that had grown to over 31 million families. If we look at the highest income threshold in this Census data — over $200,000 — the number of families has grown from just 1 million in 1967 to over 20 million in 2025. And there are fewer lower-income families too: the number of families under $75,000 shrunk, not just as a proportion of the total but even in absolute terms by almost 3 million families from 1967 to 2025. Of course, some of these families do have more earners than in 1967, though we shouldn’t overstate that too much. Using other data from Census, we can see that the share of families with multiple earners hasn’t increased much since 1967, and especially hasn’t since the mid-1990s.

Takeaways by Macro Roundup® AI

  1. The number of U.S. families with incomes above $150,000 in 2025 inflation-adjusted dollars rose from fewer than 3 million in 1967 to over 31 million in 2025, according to Census data.
  2. Families earning over $200,000, the highest income threshold in the Census data, grew from about 1 million in 1967 to over 20 million in 2025.
  3. Families with incomes under $75,000 declined by almost 3 million in absolute terms from 1967 to 2025, while Census data show the share of families with multiple earners has not increased much since 1967, and especially not since the mid-1990s.

Related Articles:

  • Income in the United States: 2025 — Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.
  • The Middle Class Is Shrinking Because of a Booming Upper-Middle Class — Analyses showing a shrinking middle class typically use relative income thresholds that rise with median income, so they can register decline even when living standards rise across the distribution. Using an absolute definition, the authors find the core middle class shrank because the upper-middle class grew from 10% of families to 31%, doubling its income share.
  • Who Sees Themselves as Working Class? — Survey data indicate 60% of U.S. adults say the term "working class" describes them well, including half of those with a bachelor's degree and half of upper-income Americans. Identification is highest among blue-collar workers at 77%, versus 61% in other occupations, and ranges from 52% of Asian adults to 62% of White adults.
  • Wages/Income
  • Workforce
    • Inequality

Income in the United States: 2025

AI Summary. Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.

Melissa Kollar and Zach Scherer U.S. Census Bureau
Date Posted:
September 16, 2026
Is Database:
Database
Is Important:
Important

Real US median household income increased 2.6% year over year in 2025 to a record high of $87,460.

Has median U.S. household income reached its highest level on record?

Core argument: Median U.S. household income reached $87,460 in 2025, up 2.6% from $85,210 in 2024 and the highest on record in data dating back to 1967.

In 2025, median household income was $87,460, an increase of 2.6% from the 2024 estimate of $85,210. Household income in 2025 was the highest on record dating back to 1967. For all demographic characteristics of the householder the median household income estimates in 2025 were either higher than the 2024 estimates or were not statistically different from 2024. Median household income increased by 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households. Median income did not change significantly for Asian or Hispanic households.

Takeaways by Macro Roundup® AI

  1. Median U.S. household income reached $87,460 in 2025, up 2.6% from $85,210 in 2024 and the highest on record in data dating back to 1967.
  2. Median household income rose 4.8% for Black households, 3% for White households, and 2.9% for non-Hispanic White households in 2025, while Asian and Hispanic households saw no statistically significant change.
  3. Across all demographic characteristics of the householder, 2025 median household income estimates were either higher than or not statistically different from 2024 estimates.

Related Articles:

  • Income in the United States: 2024 — U.S. median household income was $83,730, not statistically different from the prior year's $82,690, according to Census Bureau estimates. Across most demographic subgroups, median household income was higher or not statistically different from the prior year, with the exception of Black households, which saw a decline.
  • US Focus: The Effect Of Soaring Profits — US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
  • The College Wage Premium in the Generative AI Era — The U.S. college wage premium fell from 0.626 to 0.575 after four decades of expansion, implying the first sustained negative growth in relative demand for college-educated labor. The authors estimate that weaker wage growth in occupations highly exposed to artificial intelligence accounts for roughly 28% of that decline, though the patterns are not causal.
  • Wages/Income
  • Workforce
    • Inequality

Sticky Wage Norms and the Real Wage Cost of Unexpected Inflation

AI Summary. Firms set nominal wage increases by round-number rules—about 42% of increases below 6% fell within 0.01 percentage points of a whole or half number—and these rules rose only from about 2.7% to 3.5% as inflation peaked near 7%, contributing to falling real wages for job stayers.

Erik Hurst, Christina Patterson, Nela Richardson, and Ye Liv Wang University of Chicago
Date Posted:
September 10, 2026
Is Database:
Database

ADP microdata from 2016–25 suggest firms set wages according to “wage norms” ~ invariant to inflation. The 2020–21 inflation surge mechanically reduced real wages. By the end of 2025, 34% of incumbent workers’ real wages were lower than in 2020.

Do round-number wage rules cause real wages to fall during inflation?

Core argument: Roughly 42% of all nominal wage increases below 6% fell within 0.01 percentage points of a whole or half number.

Roughly 42% of all nominal wage increases below 6% were within 0.01 percentage points of a whole or half number [Figure 6]. Figure 9 plots the employment-weighted average modal wage change across firms (solid line) alongside inflation rate (dashed line) from 2016 through 2025. In the pre-pandemic period, firm-level wage rules were relatively stable at a median of 2.7%, modestly above the rate of inflation. Beginning in 2021, inflation rose sharply, peaking at approximately seven percent in 2022. The average modal wage change also rose, reaching a peak of 3.5% in 2022 and 2023. By 2025, the median firm had a wage rule granting increases of three percent, roughly in line with inflation. The stickiness of firms’ wage rules in the face of inflationary pressure contributed to the systematic fall in real wages for job stayers. Evidence from Belgium [which has strong wage indexation], suggests that declining real wages, rather than inflation itself, helps explain the persistence of depressed consumer sentiment during the 2021–2024 period.

Takeaways by Macro Roundup® AI

  1. Roughly 42% of all nominal wage increases below 6% fell within 0.01 percentage points of a whole or half number.
  2. Firm-level wage rules held near a median of 2.7% before the pandemic, and the employment-weighted average modal wage change peaked at 3.5% in 2022 and 2023 while inflation peaked near 7% in 2022; by 2025 the median firm granted 3%.
  3. The stickiness of firms' wage rules amid inflationary pressure contributed to a systematic fall in real wages for job stayers, and evidence from Belgium, which has strong wage indexation, suggests falling real wages rather than inflation helps explain depressed consumer sentiment in 2021–2024.

Related Articles:

  • Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections — An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.
  • Real Wages Start To Shrink In Developed Countries — US annual inflation of 3.8% outpaced average hourly earnings growth of 3.6%, leaving prices rising faster than pay for the first time in two years, while Eurozone workers face a fresh energy-driven setback. JPMorgan attributes the real wage decline to Middle East conflict and expects growth to resume if energy prices retreat.
  • The Post‑COVID Decline in the Labor Share — The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
  • Wages/Income
  • GDP
    • Inflation
  • Politics
  • Workforce

How Many Big Macs Does Your Salary Buy?

AI Summary. The average American worker earns enough to buy 10,215 Big Macs a year, the most of any country, followed by Switzerland and Australia. On an hourly basis, Switzerland leads at seven Big Macs per hour, ahead of America's six and Australia's five, reflecting longer American working hours.

Economist Staff The Economist
Date Posted:
September 2, 2026
Is Database:
Database
Is Important:
Important

The Economist’s venerable Big Mac Index is indicative of significantly higher after-tax, PPP-adjusted wages for American workers than for their French and German counterparts.

Which country's workers can buy the most Big Macs?

Core argument: The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.

On an annual basis, America continues to top our McWages rankings. The average American worker earns enough to buy 10,215 Big Macs a year; Switzerland and Australia are in second and third place, respectively. But American working hours are supersized, too. On an hourly basis, Switzerland comes out on top: the average worker there earns the equivalent of seven Big Macs an hour, compared with America’s six. Australia ranks third, at five burgers for every hour worked.

Takeaways by Macro Roundup® AI

  1. The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.
  2. On an hourly basis Switzerland leads, with the average worker earning the equivalent of seven Big Macs an hour, compared with six in the United States and five in Australia.
  3. American working hours are longer, which shifts the United States from first place on annual McWages to second on an hourly basis.

Related Articles:

  • The Big Mac Index At 40 — The Big Mac index, which compares burger prices across countries converted into dollars, shows currency misalignments in either direction at their widest since the mid-1990s, with American inflation, an undervalued Chinese yuan, and a falling yen cited as contributors. Big Mac prices also reflect domestic supply and demand for nontradeable goods.
  • Why Do Americans No Longer Work So Much More Than Non-Americans? — About half of the 1990s gap between American and European hours worked had reversed by the end of the 2010s. The authors estimate US hours per person declined after the 2000s because of rising benefits for the non-employed—especially health benefits like Medicaid—while non-US hours rose with higher wages and lower work costs.
  • Ed Conard Debates Furman On “The Expected Value of Risk Taking” — A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
  • Wages/Income
  • Workforce

US Focus: The Effect Of Soaring Profits

AI Summary. US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.

Abiel Reinhart J.P. Morgan
Date Posted:
September 1, 2026
Is Database:
Database

US corporate profit margins rose ~250bp y/y in Q2 and are approaching an all-time high. Reinhart notes that tech and communications services drove ~58% of recent S&P 500 profit growth, even as the sectors have been “steadily losing employment since late 2022.”

Are wider margins driving surging corporate profits as labor's share falls?

Core argument: Higher margins were the key driver of profit growth, as 23% y/y domestic profit growth far exceeded the 8% rise in corporate value added.

Nominal pre-tax corporate profits in the national income and product accounts (NIPA) were very robust in both 2Q (41% [annual rate]) and over the last year (23%). Excluding post-recession spikes, we haven’t seen a year this strong since the mid-2000s. Higher margins [were] the key driver [of profit growth], as 23% y/y domestic profit growth was far in excess of the 8% increase in corporate value added. Profit margins (pre-tax profits divided by value added) increased close to 250bp over the last year, and are approaching all-time highs, whereas the labor share is hitting new lows.

Takeaways by Macro Roundup® AI

  1. Higher margins were the key driver of profit growth, as 23% y/y domestic profit growth far exceeded the 8% rise in corporate value added.
  2. Profit margins, measured as pre-tax profits divided by value added, increased close to 250bp over the last year and are approaching all-time highs, while the labor share is hitting new lows.

Related Articles:

  • US Corporate Profits Surge To Record As Worker Payouts Wilt — US pre-tax corporate profits reached an annualised $4.8tn, or 18% of national income, the highest share since the aftermath of World War II, according to Bureau of Economic Analysis data. Employees' share from wages and benefits fell to 60%, the lowest since the 1950s, with the decline gaining pace in recent years.
  • Are US Corporate Profit Margins Too High? — US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
  • The Record Divide Between Corporate Profits and Worker Pay — Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.
  • Wages/Income
  • GDP
    • Financial Markets
  • Politics
  • Productivity
    • Innovation/Research
  • Workforce
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