The pay gap is getting bigger

In 2024, my colleague Liv Wang and I took a deep dive into the earnings gap. We found that the pandemic had triggered strong pay gains among the lowest wage-earners, those at the bottom quartile of the distribution. For this group, for a while, the pace of pay growth was more than double that of the highest earners.   

Despite these gains, however, the gap between the highest and lowest earners remained large, with the top quartile reaping nearly 5 times the annual pay as the lowest quartile.  

Since then, wages have stabilized, but the pay gap is wider than ever. In 2025, the differential between the bottom and the top quartile of earners has grown to nearly 530 percent, a record in ADP data going back to 2019.  

In other words, the top wage earners are reaping more than 5 times the pay of the lowest earners as wage growth has slowed for low-income workers.  

In our previous analysis, we calculated an individual’s annual-equivalent pay based on average gross pay rate observed in the last 12 months. We sorted our sample of roughly 14 million workers into quartiles based on the amount of their starting pay, collecting data from March 2021 through March 2024.  

When we updated this analysis with data through August 2025 with a sample of 15 million people, we found that pay gains have slowed rapidly for the lowest-income earners. Year-over-year, pay growth for the bottom quartile of earners fell from 8.6 percent in March 2024 to 6.8 percent in August 2025, a rather dramatic 1.8 percentage-point decrease.    

And for top earners, year-over-year pay gains have remained mostly steady, edging up slightly from 3.8 percent in March 2024 to 3.9 percent in August 2025. 

This slowdown in pay growth for low-income workers has contributed to a widening pay gap.  

In August 2023, the highest-income earners made 4.9 times as much as the lowest-income earners. A year later, in August 2024, the gap had grown to 5 times what low-wage workers made. And by August 2025, the gap was nearly 5.3, or 530 percent, close to the record hit in May 2025. 

My take 

The recent hiring slowdown has affected workers differently depending on their place in the pay distribution.  

For a typical worker in the top quartile of earners, slower hiring has had a negligible effect on the pace of year-over-year pay growth. But for the typical worker in the bottom quartile, the pace of pay gains has slowed dramatically, resulting in a widening gap between the pay of the highest and lowest earners.   

In short, even though their pay continues to grow faster than that of other cohorts, the lowest-wage workers continue to lose ground. 

The week ahead 

Tuesday. It’s a light week for economic data, but there are still some metrics deserving of attention. The first is a measure of manufacturing and service producer sentiment from the S&P Global Purchasing Managers Index, or PMI.  

Wednesday. Census data on new home sales will give us a fresh look at how the housing market is holding up. Year-over-year, sales fell in July despite the strain of low inventory.  

Thursday. Initial jobless claims returned to historic lows last week after an artificial pop the week before due to faulty claims data from Texas. One upside of the current slow hiring trend is the slow pace of layoffs. 

As a measure of consumer health, durable goods data from the Census Bureau has trended in the wrong direction, down three out of four months. I’ll be looking to see if this trend continues.    

Data from the National Association of Realtors showed that existing home sales rose in July in a sign of homebuyer strength amid higher prices and interest rates.  

Friday. The Bureau of Economic Analysis will release data on personal income and outlays. Personal income grew 5 percent in July compared to a year earlier, below its historical average of 6.5 percent year-over-year growth in data going back to 1960, according to the Bureau of Economic Analysis. The good news is the pace of growth has been edging up for three consecutive months, we’ll see if the trend continues for August. 

Personal consumption expenditures, or PCE, a measure of inflation, edged up in July when stripped of volatile food and energy prices. Should PCE continue to rise, it would be a bad sign for inflation and sluggish hiring.