CBO estimates that, from the fourth quarter of 2019 to the fourth quarter of 2021, following increases in both wages and prices, the average purchasing power of wages increased in both rural and urban areas, but less in rural areas.
CBO assessed how increases in the prices of goods and services have differed recently between rural and urban areas and how those increases compared with changes in wages. CBO’s findings are as follows:
Annualized price growth in rural areas averaged 4.8 percent from the fourth quarter of 2019, before the onset of the coronavirus pandemic, to the fourth quarter of 2021. By comparison, annualized wage growth averaged 6.3 percent in rural areas during that period, CBO estimates.
In urban areas, annualized price growth averaged 3.7 percent over those two years, and annualized wage growth averaged 5.7 percent.
Thus, CBO estimates that the average purchasing power of wages increased in both rural and urban areas. That growth in purchasing power—the difference between wage growth and price growth—was slower in rural areas.
Those findings about purchasing power hold when investigated in several different ways. In contrast, CBO’s estimates of the specific rates of price and wage growth are more uncertain, especially for rural areas, and are sensitive to the method used to estimate them.