Retirees Outpace Workers in Annual Income Growth

Independent economist Aaron Terrazas notes that while retiree income tracks the cost of living, active employees are compensated based on the cost of labor. For much of the recent past, low inflation and labor shortages favored workers, but that dynamic is changing. The Social Security adjustment relies on third-quarter inflation data, which currently trends higher than the typical raises granted to those who stay with their current employers.

This trend risks deepening economic inequality, as older consumers currently drive a significant share of spending. However, this may eventually contract as the baby boomer generation enters their 80s and reduces consumption. For those still in the workforce, switching jobs remains the most effective way to secure a pay increase, though finding new opportunities has become increasingly difficult. With job openings remaining anemic and white-collar sectors facing volatility, many employees are now relying on "loud working"—publicizing their own accomplishments—to justify raises or secure their positions in an environment where employers feel little pressure to offer competitive retention packages.