How pay raises turned into pay cuts, except for Americans in 9 states
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Medora Lee, USA TODAYFebruary 1, 2026 at 4:06 AM
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Most Americans have felt the weight of inflation on their budgets over the last few years, but there are still a handful of places where Americans’ lives have improved financially, according to a study by MyPerfectResume.
The online resume building site analyzed wage data in all 50 states against inflation to find where paychecks gained or lost value from 2020 to 2024. Bureau of Labor Statistics data show the average American worker’s pay rose 18% to $75,600 from about $64,000 during those years, but inflation soared about 21%. Despite every state in the country showing wage increases in dollars, the average Americans lost approximately 2.6% in income after adjusting pay increases for inflation.
“In other words, the nation got a raise on paper, but a pay cut in reality,” wrote Jasmine Escalera, a certified career coach, in the report
But where you live made a difference, the study showed. Americans in 41 states lost purchasing power, but Americans living in nine states managed to eke out a better standard of living, the study said. Among states that saw declines, some slid more rapidly than others, it showed.
“The findings highlight a crucial truth: A high-paying job doesn’t automatically mean a higher standard of living,” Escalera said. Most of “the American workforce entered the mid-2020s with more pay on paper, but less real financial freedom.”
Where did Americans’ finances improve?
Workers in these states came out ahead in purchasing power once wage growth and local price inflation were considered, the study showed:
Idaho: +3.1%
Florida: +2.6%
Washington: +2.3%
Montana: +2.3%
Wyoming: +1.8%
South Carolina: +1.5%
North Carolina: +0.9%
Tennessee: +0.9%
Maine: +0.5%
In Utah, people maintained their standard of living from 2020.
An affordability plan presented by House Democrats of Kansas is seen during a press conference during the first day of the legislative session on Jan. 12, 2026.Where did Americans lose the most ground financially?
Workers in every other state saw a drop in their purchasing power, but Americans in these five states faced the sharpest gap between rising wages and increasing costs.
New Jersey: –7.0%
Rhode Island: –6.9%
Maryland: –5.4%
Massachusetts: –5.3%
New York: –5.3%
Though pay increases didn't keep pace with inflation and high living costs, some workers still chose job security over career moves, Escalera said. “Even in high-wage states such as California and Massachusetts, rising costs eroded most gains, suggesting that higher wages do not necessarily translate into better living standards”
What took the largest share of Americans’ paychecks?
Rising costs for the following quickly absorbed higher wages:
Housing
Groceries
Energy
Insurance
Everyday essentials
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Pay increases outpaced inflation for workers in only these 9 states
Source: “AOL Money”
