And this is Wilma, she's a white-collar worker who writes computer code.

Both make average salaries for those two groups.

From 2010 to 2012, the salary for Wilma's position would have grown more than Betty's.

But from 2020 to 2022, it was Betty that would get the bigger bump.

Wage gains for some blue-collar workers have started to outpace gains for white-collar workers over the last three years,

a reversal from a decades-long trend.

This is a pretty remarkable moment in history.

Here's why wages have been growing faster for low income workers, and why those gains have helped stave off a recession.

First, it's important to understand who exactly qualifies as blue and white collar.

Blue collar has become a more all-encompassing term for lots of different wage workers, often at the lower end of the income spectrum, but not exclusively.

And white collar tends to be more salaried professionals who are typically working in an office-like settings.

Non-management blue-collar jobs tended to include people that work in restaurants, hotels, factories, retail stores, and construction.

The pay gap between some industries that fall in these groups has steadily grown.

You can especially see that divide between Betty and Wilma.

Part of the reason that gap has grown in the past.

There has just been so much demand for skills like computer engineering, like software engineering and not as much supply.

And there has been far more supply of workers prepared to do low-wage work.

The pandemic also increased the need for white collar jobs which could easily be worked from home.

But when the economy began recovering, a different demand arose.

What hurt us the most is, you know, it's hard to find people to work.

People returned to activities far faster than companies could hire,

creating competition for many traditionally low-wage positions and many blue collar workers didn't return at all.

We had a lot of retirees during the pandemic who have not returned to the labor market and immigration was depressed as well.

So we had fewer people entering the country to fill especially lower income jobs.

Many workers were also quitting their current jobs, which could be a sign of more worker leverage.

When workers are quitting in large numbers, it's because they are easily able to exchange their jobs for better jobs.

And when workers are being laid off in large numbers, it's because employers hold the upper hand and are easily able to exchange workers for better workers.

Workers who did leave for higher paying jobs also saw higher wage gains than people who stayed.

When employers are short-staffed, the immediate problem at hand, the fastest way to solve that problem is to hire someone.

They're often prepared to throw huge amounts of money at hiring a new candidate, signing bonuses, you need a new benefit in order to come on, okay, sure.

So as demand went up and supply went down for blue-collar workers, the opposite happened for white-collar workers which kept their wage gains at a lower level than they typically would be.

To the extent we have seen shakiness in the labor market, it has been in some of these white collar professions, like the tech industry.

While some economists consider the slowdown in white-collar jobs more of a return to pre-pandemic levels,

the boost in blue-collar pay is keeping spending elevated, even during inflation.

Hourly earnings surpassed inflation for the first time in two years in July, largely driven by gains for low-wage workers.

We have actually seen some parts of the economy receive real wage increases that have expanded their purchasing power and allowed them to buy more,

to move into better homes, to invest in better schooling for their kids, and to improve their life conditions.

Some economists say that this increased spending power for lower income workers and the tight labor market have been major factors in avoiding a recession.

So typically in recessions, lower-income workers, by virtue of the jobs that they work in or the tenure that they have at those jobs,

tend to be some of the first to be let go, or to not be hired in the first place.

If those workers are making more money and they're remaining employed,

they are propelling economic growth forward and they are keeping other people in their jobs and they are preventing a recession from happening,

which creates a virtuous circle for everyone involved.

While these earning boosts have helped close the gap between blue and white-collar workers somewhat,

the amount that Betty, our food worker, and Wilma, our computer programmer, make today is still very different.

And as Federal Reserve officials continue to tackle inflation, they're taking an aim at cooling the job market.

What we're talking about is having wage increases still at a very strong level.

But at a level that's consistent with 2% inflation over time.

Wages have started to cool and the trend has reversed in recent months.

But some economists are optimistic that the gains for low income workers will continue.

I don't think we're going to see these wage gains erode because the labor market is still tight in those low wage industries.