Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating the Cost of Dining Out
Transcript
- Lucas: So Luna, I've got a number that might surprise you. Average hourly earnings for private-sector workers hit $37.50 as of May 2026, up from $37.41 the month before. Not a huge jump, but the trend is consistent — wages have risen about 4.3 percent over the past year, while overall CPI is running just above 3 percent. Luna: Right, so the gap is narrowing. We've talked on this show about wages finally beating housing costs in smaller markets, beating car insurance, beating gasoline prices. But there's one big spending category where the story has been stubbornly tilted against workers: dining out. Lucas: Exactly. For years, menu prices at restaurants have been climbing faster than wages. But the latest data suggests that may finally be turning. The CPI for food away from home rose just 2.8 percent year-over-year in May — that's below the wage growth figure. And if you look at core CPI ex food and energy, that's at 336.1, up only about 0.9 percent from the prior month. So the restaurant price component is actually moderating. Luna: Moderating, but still high. I mean, any time you go out, you feel it. Even a basic fast-food combo can run you over $12 now. So how much of that wage gain is actually translating into more purchasing power at the counter? Lucas: Well, let's do some quick math. If you earn $37.50 an hour, that's about $1,500 for a 40-hour week. A typical sit-down dinner for two with a couple of drinks and tip — let's say $80. That's about 5.3 percent of your weekly pre-tax pay. Back in 2020, the same meal would have been maybe $60, with median weekly earnings around $1,100 — so about 5.5 percent of your weekly pay. The difference is small, but it's moving in the right direction. Luna: So the share of income going to a restaurant meal is actually slightly lower than it was five years ago. That's a meaningful shift. Lucas: It is, and it's happening because restaurants are in a bind. They have to raise wages to attract workers — especially in tight labor markets like Nevada, where the unemployment rate is among the lowest in the country. A headline this week said 'Struggling to find a job? Try looking in Nevada.' That state is adding jobs faster than almost anywhere else, and restaurant workers there are seeing starting wages of $18, $20 an hour for entry-level positions. That forces the whole industry to adjust. Luna: But then those higher labor costs get passed onto us through menu prices. So the question is: are wages actually outpacing those menu increases? Lucas: Nationally, yes — barely. But regionally, it's a different story. In Nevada, because wages are rising faster than in the rest of the country, the ratio is more favorable for workers. In some other parts, like the Northeast where menu prices are already higher, the gap is tighter. But the key point is that the trend has reversed. For the first time since the pandemic, restaurant price inflation is running below wage growth. Luna: And that's before we even talk about tipflation. The average tip at full-service restaurants is now over 20 percent, and many places have default tip suggestions of 22, 25, even 30 percent. That eats into whatever wage gains you've made. Lucas: That's a great point. Tipflation is essentially a hidden price increase. If you're tipping 25 percent instead of 15, that $80 meal becomes $100. Your hourly wage may have gone up 4.3 percent, but your effective cost of dining out has gone up by a much larger percentage if you're following those suggested tips. So the real purchasing power gain is less than the raw numbers suggest. Luna: And it's not just tips. Restaurants have gotten clever with pricing — dynamic surcharges on weekends, service fees that go to the house, menu items that are shrinkflated, like smaller portions for the same price. So the headline menu price may be rising more slowly, but the actual cost per ounce or per serving might still be climbing. Lucas: Yeah, shrinkflation in restaurants is real. I've seen it with burritos that are noticeably smaller, pasta dishes that have a little less protein. That's harder to track in the CPI because the bureau tries to adjust for quality, but it's not perfect. So the official inflation figure for food away from home might understate the true cost increase. Luna: Which brings us back to the core question: is the average worker better off today when they go out to eat compared to, say, two years ago? Lucas: On balance, I'd say yes — but just barely. And it depends heavily on where you live and what kind of restaurant you go to. If you're in a metro area with a hot labor market, you're probably seeing your pay outpace menu price hikes. If you're in a more sluggish area, or if you're a heavy tipper, you might still be losing ground. Luna: It's also worth noting that the employment cost index for wages — that's a broader measure including benefits — rose to 177.5 in the first quarter of 2026, up from 176.23. So total compensation is rising, too. That includes things like health insurance, retirement contributions, maybe even paid time off. Those don't show up in your paycheck, but they reduce your overall cost of living. Lucas: Right, and that's a factor that often gets overlooked in the wage versus price debate. If your employer starts covering more of your health insurance premium, that's effectively a raise, even if your hourly wage stays flat. And that can free up more money for discretionary spending like dining out. Luna: So the takeaway here isn't that dining out is suddenly cheap — it's still expensive and getting more so in absolute terms — but that the gap between your earning power and the cost of a meal is finally closing, after years of widening. Lucas: Exactly. And that's a story we haven't been able to tell for most of the 2020s. It's a sign that the labor market is still tight enough to force employers to compete for workers, and that competition is starting to show up in real improvements for consumers. Luna: You know, as we talk through this, it makes me think about how much work goes into producing a show like this — digging into the data, connecting the dots, keeping it ad-free so we can be totally independent. If walking through the economy with us has made something click, it's actually really helpful if listeners support the show. You can buy us a coffee at buy me a coffee dot com slash fexingo. Lucas: Yeah, listener support is what keeps this going. No ads, no sponsors. Just a straight conversation about the numbers. So if you find value in it, that's the place to chip in. And it really does make a difference. Luna: Alright, back to the economics. So we've established that wages are finally inching ahead of restaurant inflation. But what about the longer-term outlook? Is this sustainable, or could it reverse? Lucas: That's the million-dollar question. A lot depends on the broader economy. If the labor market softens — and we've seen some headlines about factory job cuts nearing financial crisis levels, according to S&P — then wage growth could slow. And if restaurants continue to raise prices, the gap could widen again. Luna: And there are geopolitical risks, too. We've got the Strait of Hormuz situation — Iran warning ships about transit. That could spike oil prices, which would increase transportation costs for food supplies, and that would eventually hit menu prices. Lucas: Right. So the current positive trend is real, but fragile. It's not a victory lap — it's more like a cautiously optimistic data point. Workers are getting a bit more purchasing power at restaurants, but they need to remain vigilant about tipping norms and menu tactics. The important thing is that the structural dynamic has shifted: labor is scarce enough to give workers leverage. Luna: And in a way, the restaurant industry is a test case for the broader economy. If wages can stay ahead of prices in a labor-intensive, low-margin sector, that's a good sign for workers in other industries. Lucas: Exactly. So here's what I'd say to someone listening: next time you go out to eat, take a look at your receipt. Compare the total, including tip, to what you earned that hour. If that ratio is smaller than it was a year ago, you're part of a quiet but meaningful shift. And if it's not, well, maybe it's time to look for a job in Nevada. Luna: Or maybe just tip a little less — but not too much less. Lucas: Right, we're not trying to start a protest. But awareness is the first step. And that's really what this show is about: knowing where your money goes and how it stacks up against the cost of living. Luna: Alright, that's all for this episode of Wages and Prices. Stay smart, stay curious, and we'll see you next time.