Why Real Wage Gains Were Not So Real: Evidence from Household-Level Food-at-Home inflation

During the pandemic-era inflation (2021-2024), widely cited measures of real wage growth suggested that the purchasing power of U.S. workers—especially low-wage workers—rose. Yet economic sentiment remained persistently negative, prompting arguments that public pessimism reflected psychology rather than material conditions. This paper provides evidence that standard CPI-deflated wage measures misrepresented changes in material well-being for many households during this period. Using NielsenIQ Consumer Panel Data (2005–2023), I construct household-specific food-at-home inflation rates and corresponding real purchasing-power measures. I find substantial dispersion in household-level food-at-home inflation, which widened sharply during the 2021-2023 inflation surge. Consequently, despite conventional measures indicating rising real food-at-home purchasing power for low-wage workers, I find that roughly 60% of households in the bottom income decile experienced declines in real food-at-home purchasing power between 2019 and 2023. I likewise document similar divergences between conventional measures and the experiences of households across the broader income distribution. These results demonstrate how aggregate CPI-deflated wage measures can misrepresent changes in material well-being, highlighting a broader measurement issue and offering a material explanation for the apparent disconnect between macroeconomic indicators and public sentiment.