evidence: Increases in wage income offset the higher cost of living for most working households with incomes between $20,000 and $100,000, as shown in Figure 4. However, these households saw essentially no annual wage gains in real (inflation-adjusted) terms. Working households with incomes below $20,000 – who faced the highest inflation rate of any group (Figure 3) – saw their wage income rise by only about one third of the increase in their cost of living. Unless these households supplemented their earnings from employment with increases in other forms of income (such as transfers), they experienced a decline in purchasing power in 2021. Only households with incomes of $100,000 or more saw their annual wage income rise by significantly more than their consumption costs.9 Figure 4 shows that, despite faster growth in earnings per hour for lower-wage workers, annual earnings in 2021 did not keep up with the costs of inflation for low-income households and barely kept up for middle-income households. There are two main reasons for the apparent disconnect between hourly wage growth and the increase in annual wage income. First, lower-wage workers saw faster wage growth but from a much smaller base, meaning that their wages did not increase as much in dollar terms as higher-wage workers’.10 Second, lower-wage workers were less likely to be consistently employed throughout the year and more likely to work part time in 2021, so the increase in hourly wages applied to fewer hours of work. Workers in high-income households were more likely to remain employed and to work full time.