Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / The Real Inflation Hedge You Already Own
Transcript
- Lucas: So the May jobs report came out last week, and it was hot. Nonfarm payrolls added 272,000 jobs versus the 185,000 that was expected. And that pushed the unemployment rate down to 3.8 percent. Luna: Right, and the immediate market reaction was basically the Fed is not cutting rates anytime soon. The S&P dropped about 2 percent that day. Lucas: Exactly. Chair Warsh basically said as much in his press conference after the report. And when investors hear 'higher for longer' on rates, they panic. But I think there's a different story in that data, one that's actually pretty encouraging for the average person worried about inflation. Luna: What's that? Lucas: Wage growth. Average hourly earnings rose 4.1 percent year-over-year in May. That's above the current headline CPI of 2.8 percent. So if you're someone who's employed and your wages are keeping up or even outpacing inflation, you're not actually losing purchasing power in the way the headlines suggest. Luna: But isn't that an average? If you're in a low-wage service job, your raises might be smaller, or you might not get one at all. Lucas: That's a really fair point. The aggregate number masks a lot of variance. But here's the thing — even in lower-wage sectors, we've seen a tightening labor market push up starting wages. Fast food, retail, hospitality — those have had some of the fastest wage gains over the past two years, precisely because employers can't find people. Luna: Okay, so some people are doing okay. But what about the rest of us? How do we actually protect ourselves if our raises aren't keeping up? Lucas: This is where I want to challenge the conventional wisdom. Everyone talks about inflation hedges like gold, real estate, TIPS, Bitcoin. But the most powerful inflation hedge most people already own is their own human capital — their ability to earn income and increase it over time. Luna: You're saying the best investment is yourself? Lucas: I know it sounds like a cliché, but the data backs it up. A college graduate with a degree in a high-demand field like computer science or healthcare sees starting salaries that are 50 to 80 percent higher than someone with just a high school diploma. And those differentials grow over a career. But more importantly, people who continuously upskill — certifications, online courses, networking, switching jobs strategically — they tend to see wage growth that beats inflation by a wide margin. Luna: So what does that look like in practice? Give me a concrete example. Lucas: Sure. Let's say you're a marketing coordinator making $55,000 a year. You take a six-month part-time course on data analytics or digital marketing — cost maybe $2,000 to $5,000. You then move into a marketing analyst role that pays $70,000. That's a 27 percent bump. CPI is running at 3 percent. You've just blown past inflation. And you've also made yourself more resilient to automation or outsourcing. Luna: But not everyone can afford the time or money for that. And some people have family obligations or jobs that don't offer flexibility. Lucas: No question. And that's a structural issue that policy needs to address. But even small steps can help. Even just asking for a raise — there's data showing that people who negotiate their starting salary earn $5,000 to $15,000 more over their first few years. The simple act of asking is a form of investing in your human capital. Luna: That's a good point. And it ties back to the jobs report — when the labor market is tight, you have more leverage. So maybe the message is: take advantage of the current environment while it lasts. Lucas: Exactly. And on that note, I want to mention something quickly. If you're finding these conversations helpful — maybe they've given you a new way to think about your career or your money — we keep this show ad-free and listener-supported. You can help us keep it going by visiting buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. No pressure, just a way to support if you're able. Luna: Yeah, and it really does help us keep the lights on and continue bringing you fresh angles on inflation and personal finance. Lucas: Anyway, back to human capital. One of the most overlooked aspects is geographic mobility. If you're in a city where wages are stagnant but housing costs are high, moving to a metro area with a stronger job market can be a huge inflation hedge. Places like Austin, Nashville, or even some midwestern cities have seen strong wage growth and lower cost of living than coastal hubs. Luna: But moving isn't easy either. You have to factor in the cost of relocation, the social disruption, and the risk that the new job doesn't work out. Lucas: True. But the data shows that people who move for a job, on average, see a wage increase of 10 to 20 percent. And in the current environment, with remote work still prevalent, you might not even have to relocate. You could take a remote job based in a high-wage city while living somewhere cheaper. Luna: Right, that's been a huge shift. Companies are still hiring remote workers, though the trend has slowed a bit from its peak in 2021. Lucas: So the takeaway is: instead of just worrying about inflation eroding your savings, think about what you can do to grow your own earning power. The best way to beat inflation is to earn more than inflation. Luna: And that's something you have more control over than the stock market or the Fed. Lucas: Exactly. Now, let's talk about another angle. One of the reasons I think people overlook human capital as an inflation hedge is because it doesn't show up on a balance sheet. You can't see it in your brokerage account. But if you think about it, your future earnings stream is probably the largest asset you have, especially early in your career. Luna: So how do you value that? I mean, you can't exactly look up the price of your own labor on Yahoo Finance. Lucas: No, but you can get a rough idea. Look at your current salary, your industry's median pay, and the trajectory for your role. If you're below the median for your experience level, you have room to grow. And if your industry salary is trending up, that's a tailwind. Luna: So it's like an asset you need to actively manage — rebalance, invest in, and sometimes even sell. Lucas: Exactly. And one of the best investments you can make in your human capital is building a network. There's a famous study that found that 85 percent of jobs are filled through networking. Not through online applications. So going to industry events, connecting on LinkedIn, having informational interviews — that's a direct investment in your future earning power. Luna: It's almost like a side project — something you do in addition to your regular job. Lucas: And that brings up another point. Starting a side hustle, even a small one, can be an inflation hedge. Not necessarily because the side income itself is huge, but because it diversifies your income stream. If your main job's raises don't keep up, you have another income source. And it can also be a testing ground for new skills. Luna: I've seen people turn a side hustle into a full-time business, especially in fields like consulting, freelance writing, or online tutoring. Lucas: Right. And the beauty is that the skills you learn in a side hustle — negotiation, marketing, time management — they also make you more valuable in your main job. It's a virtuous cycle. Luna: So let's bring it back to the broader picture. If everyone focused on their human capital, would that actually help with inflation at the macro level? Lucas: Interesting question. I think so, in two ways. First, if more people upskill, you get higher productivity growth, which is deflationary — it allows the economy to produce more with the same resources. Second, if wages rise broadly, that can actually fuel demand-pull inflation in the short term, but over the long run, higher productivity offsets that. Luna: So it's not a silver bullet, but it's a powerful individual strategy. Lucas: Exactly. And that's really the message of this episode. Don't just look at inflation as something that happens to you. Look at what you can do to make yourself more valuable in the labor market. Because that's the one asset you can truly control. Luna: And with the jobs report showing a strong labor market, now is a good time to act. Lucas: Right. So maybe spend 30 minutes this week updating your LinkedIn profile, or signing up for a free online course, or reaching out to someone in your network for coffee. That's a better inflation hedge than buying gold. Luna: I think that's a great note to end on. Thanks, Lucas. Lucas: Thanks, Luna. Talk to everyone next time.