How recent worker raises are a "money illusion" : Planet Money : The Indicator from Planet Money Although workers across the country have seen an increase in wages, the cost of things like gas and food have also been increasing. This leaves workers wondering whether these raises are real or just an illusion.

The Money Illusion: Have Americans really gotten a raise?

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

Kristal Moore lives in Hendersonville, N.C. She's 52 years old, and she works a lot. She has a lot of jobs.

JULIA RITCHEY, BYLINE: Yeah. Kristal is a gig worker. And over the last couple of years, she's driven for a rideshare companies, also delivering meals and groceries for Instacart and Uber Eats.

VANEK SMITH: And, producer Julia Ritchey, hello.

RITCHEY: Hi (laughter).

VANEK SMITH: You sat down with Kristal Moore in Hendersonville.

RITCHEY: Yeah. We locals call it Hendo (ph), just FYI.

VANEK SMITH: Hendo - OK, OK. It's shorter. I like that. It's fast.

RITCHEY: Yes, yes. That's just the parlance around here. So I talked with Kristal on the porch outside of her apartment. She has these, like, sparkling brown eyes and this really infectious smile. And, you know, she's like one of those people, Stacey, who calls everybody honey, including this, like, delivery guy who was looking a little bit lost outside.

KRISTAL MOORE: What's the matter, honey?

UNIDENTIFIED PERSON #1: Deliver a package...

MOORE: For Rebecca (ph)?

UNIDENTIFIED PERSON #1: Yes.

UNIDENTIFIED PERSON #2: Yeah.

UNIDENTIFIED PERSON #1: And she's having a wedding dress delivered, and we just...

MOORE: We're busy around here today (laughter).

RITCHEY: Kristal loves chatting with people. She loves feeling helpful, and that's kind of part of why food delivery and rideshare really suited her during the pandemic.

VANEK SMITH: Yeah. I mean, for the past couple of years, where a lot of us were inside almost all the time, Kristal was outside almost all the time, driving all over Hendo in her 2010 black Honda Civic.

MOORE: Which is very good on gas.

VANEK SMITH: And as the economy has been heating up, Kristal says her services are more and more in demand, and her pay has gone up as a result of that.

MOORE: When I started, the income was very profitable. People are, for the most part, very generous.

RITCHEY: So lately, Kristal has been getting slightly higher fees for each delivery, and she says people have been really great about tipping more. So she's been bringing in more money.

VANEK SMITH: At least she thought she was. This is where things get kind of weird. So Kristal is getting more and more money for each delivery. But then it was just kind of vanishing, like it wasn't real.

MOORE: The profit is lower right now.

VANEK SMITH: The profit is lower. In other words, the extra money Kristal was taking home was somehow not showing up in her savings account.

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VANEK SMITH: This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

RITCHEY: And I'm Julia Ritchey. Today on the show, the money illusion.

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VANEK SMITH: The money illusion - so wages are rising all over the country right now. But prices are rising, too. In fact, there are more than 6% over last year according to numbers out this morning. And this brings up this question, have Americans gotten a real raise this year, or is it just an illusion?

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RITCHEY: Kristal Moore was very excited when she started working from her car in the early days of the pandemic, delivering food and driving people around. It was the perfect fit for her, to be honest. Her work was in great demand, and she liked feeling like she was helping people. She says, actually, a lot of the grocery deliveries that she made were for older people.

MOORE: You know, I love doing that because they can't - they're either worried to go out with the COVID, or they're just not able to drive anymore for themselves.

VANEK SMITH: And the money was good. Including tips, Kristal would take home around $20 for each delivery.

MOORE: And, of course, that sounds good until you factor in the gas. Prices have gone up on just about everything - food, gas, of course.

RITCHEY: And those rising prices started taking bigger and bigger bites out of Kristal's earnings and outpacing the rise in tips and pay she was getting. And she realized she had less money.

MOORE: I am still able to make it, so to speak, and pay my bills. But it's a little more of a struggle right now.

RITCHEY: Kristal is experiencing something that millions of workers are going through all over the country. Pay is going up. People are getting raises, getting new jobs with higher pay. But that higher pay is not translating into actual wealth. It's the money illusion.

VANEK SMITH: The money illusion - so this is a term coined by economist Irving Fisher in the 1920s, and it has to do with the difference between so-called nominal wages and real wages.

MICHELLE HOLDER: Nominal wages, which are, you know, wages that the everyday Joe and Joanna gets for their work.

RITCHEY: Michelle Holder is an economist and the CEO of the Washington Center for Equitable Growth. So nominal is the actual dollar amount, the numbers you see on your paycheck. As people, we tend to respond mostly to this, to the number on our paychecks. And in nominal terms, Kristal was getting more money from her deliveries. But she wasn't feeling a lot richer.

VANEK SMITH: And the reason for that was because even though Kristal's nominal pay was rising, her real pay was not.

HOLDER: If we look at what economists call real wages, which are adjusted to reflect the true buying power of that money in...

RITCHEY: Buying power - essentially, adjusted for inflation. Michelle points out that for workers in hospitality, wages are up more than 10% over last year. Some workplaces are reporting wages up by more than 15 or 20% or bonuses of thousands of dollars.

VANEK SMITH: Yeah, and even though inflation is high - I mean, like we said, prices are up more than 6% over last year according to numbers out this morning - that is still not as high as the more than 10% raise hospitality workers are seeing. So it would seem that a lot of workers in the U.S. are coming out ahead.

RITCHEY: But that depends on a lot of factors, like where you live, what you do and what your personal expenses are.

VANEK SMITH: Yeah. I mean, take Krystal Moore. She has to buy gas for her work. And gas prices are up a lot more than 6%.

MOORE: There are all the envelopes (laughter).

RITCHEY: All right. You do have a big stack of envelopes.

MOORE: Oh, yeah. I keep track of everything.

RITCHEY: That's great.

MOORE: So even last month, it was just a lot cheaper, I remember.

RITCHEY: Kristal always gets her gas at the same place. She has, you know, like, one of those little loyalty cards.

MOORE: So at Apple Valley Quality Plus in Hendersonville on Chimney Rock Road - date was September 23 of this year - it was 22.47 to fill up my tank.

RITCHEY: 22.47 in September - and less than a month later...

MOORE: October 19 of this year, and it was 31.29 to fill up my tank.

RITCHEY: That's...

MOORE: Quite an increase.

RITCHEY: Does that hit you kind of like, ugh?

MOORE: Oh, yes.

VANEK SMITH: For Kristal, gas prices have risen by about a third in less than a month.

RITCHEY: Kristal estimates she earns somewhere around $30,000 a year, Stacey, but that money is buying less and less gas and less food and less clothing than it used to because prices are up so much.

MOORE: Yeah, it's actually - it's horrible. And that's why I haven't been - I actually haven't been driving as much because I almost feel like it's cheaper for me to stay at home.

RITCHEY: You have - you're, like, balancing this equation in your head where it's like, I can make this much money if I go do this delivery. But then I'm putting this many miles on my car, which is wear and tear. Plus I'm going to eat up this much fuel.

MOORE: Exactly.

VANEK SMITH: And it's like this for a lot of workers across the country. That's according to economist Michelle Holder. She says the data shows that U.S. workers have gotten raise pretty much across the board. But in real terms, a lot of people have actually seen a decrease in pay. Or at best, they've gotten a very tiny raise.

HOLDER: And so while I suspect and while the evidence suggests that workers overall in the U.S. economy have enjoyed some increase in real wages, that increase is really modest, probably less than 1%. Workers are not experiencing some humongous jump in their real wages by any stretch of the imagination.

VANEK SMITH: Yeah. I mean, right now there are a lot of forces that are disrupting our economy, and a lot of them are hopefully temporary. And so when the dust settles on all of this, we will know if our raises are real or if they're an illusion.

RITCHEY: For her part, Kristal is pretty done with all the volatility and the money illusions of gig work. She's applying to some other jobs that have a little more stability and hopefully require a lot less gas.

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RITCHEY: This episode of THE INDICATOR was produced by Viet Le, with help from Neil Tevault. It was fact-checked by Taylor Washington. Our editor is Kate Concannon, and THE INDICATOR is a production of NPR.

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