Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How a Worker's Raise Is Finally Beating the Price of Education
Transcript
- Lucas: So the latest numbers are pretty clear: average hourly earnings for private workers hit $37.60 as of June. That's up from $37.51 in May, and it's about 3.5 percent higher than a year ago. Luna: And at the same time, CPI actually dipped a bit — down to 332.6 in June from 333.98. So real wages are finally moving in the right direction. Lucas: Exactly. For the first time in a while, the average raise is outpacing the cost of living across several categories. We've talked about groceries, rent, insurance — but I wanted to look at one that's been a real burden for a long time: education. Luna: Oh, that's a big one. Student loan debt is still over $1.7 trillion nationally. But you're saying wage growth is finally making a dent? Lucas: It's starting to, especially in certain segments. According to the latest data from the National Student Clearinghouse, community college enrollment is up nearly 8 percent year over year. And a big reason is cost. The average annual in-state tuition at a community college is about $3,800 — that's actually down about 2 percent from two years ago. Luna: Wait, tuition is falling? I thought higher education costs only went up. Lucas: That's the conventional wisdom, but we're seeing a shift. Several states have increased funding for community colleges, and online programs from places like Southern New Hampshire University and Western Governors University have kept prices flat. Meanwhile, the average hourly wage has risen from about $34.80 two years ago to $37.60 now. That's roughly an 8 percent increase over two years. Luna: So the gap is narrowing. If you're working full-time at that average wage, you're earning about $78,000 a year. A $3,800 tuition bill is less than 5 percent of your pre-tax income. Lucas: Right. Compare that to ten years ago, when the average wage was around $26 an hour and community college tuition was about $3,400. That was nearly 6.3 percent of annual income. So the affordability ratio has improved by about a full percentage point. Luna: That's not nothing. But what about four-year universities? Those are still expensive. Lucas: They are. The average in-state tuition at a public four-year university is still around $10,700, and it's been creeping up about 1.5 percent annually. So wage growth is barely keeping pace there. But the real story is in shorter-term credentials. Luna: Like certificates and associate degrees? Because those are the ones that map directly to job openings in fields like nursing, IT, and skilled trades. Lucas: Exactly. The cost of a one-year certificate in something like medical coding or cybersecurity is often under $5,000. And the Bureau of Labor Statistics says median weekly earnings for someone with an associate degree are about $963. That's up from $887 five years ago — a 8.6 percent increase, which is actually faster than wage growth for all workers. Luna: So the return on investment for those credentials is getting better. You're spending less and earning more. Lucas: Precisely. And there's another factor: employer tuition assistance programs. A lot of companies now offer to cover the cost of certain certifications or even full degrees. Starbucks, Walmart, Amazon — they all have programs. If your employer pays for a $5,000 certificate, and you get a $10,000 raise from the new skills, that's a huge net gain. Luna: But not everyone has that option. What about the worker who's been laid off or is in a declining industry? Lucas: That's fair. And that's where community colleges and state-funded retraining programs step in. For example, Michigan's Reconnect program offers tuition-free associate degrees to adults without a college degree. And we've seen similar programs in Tennessee, Kentucky, and California. The take-up rate is increasing as wages rise and people feel more confident about investing in themselves. Luna: So the combination of higher wages, stable or falling tuition at certain schools, and employer or state support is making education more accessible. That's a positive shift. Lucas: It is. And it's one of those rare moments where the data actually supports optimism. If you're a worker considering going back to school, the math is more favorable than it's been in years. Luna: You know, it's conversations like this that make me appreciate the value of being informed. Lucas, I think a lot of our listeners get real, usable insight from this show — I know I do. Lucas: Thanks, Luna. And you know, if walking through the economy with us has made something click, or if you find yourself checking your own wage against CPI, consider supporting the show. Listener support is what keeps us ad-free and focused on the data that matters. If you're able, you can head to buy me a coffee dot com slash fexingo. Luna: Yeah, even a small contribution helps us keep digging into these angles. And we really appreciate it. Lucas: Alright, back to education. One more data point I want to highlight: the Employment Cost Index for wages hit 177.5 in the first quarter of this year, up from 176.23 at the end of last year. That's a 0.7 percent increase in just three months. Luna: So compensation costs are rising, which means employers are feeling the pressure to pay more. That could lead to more automation or outsourcing, but for now, it's good for workers. Lucas: Right. And when you combine that with the slight decline in CPI, the picture is clear: real purchasing power is improving. The question is whether this is a trend or a blip. Luna: What do the futures markets say? The 10-year breakeven inflation rate is at 2.24 percent, which suggests the market expects inflation to stay moderate. Lucas: And that's key for education costs, because if inflation stays low, schools won't have to hike tuition as much to cover their own rising expenses. So the conditions are aligning for a sustained improvement in education affordability. Luna: I hope so. It's been a long time coming. Lucas: Agreed. And we'll keep tracking it. Next time, I want to look at how these wage gains are affecting savings rates and retirement contributions — another area where the math is finally shifting. Luna: Looking forward to it. For now, Lucas, this was a great deep dive. Lucas: Thanks, Luna. And thanks to everyone listening. Stay curious.