The wage growth gap has reversed

Summary

• After-tax wage growth cooled across all income cohorts in August 2026.
• The wage growth gap between income groups reversed, with lower-income households recording 4.7% year-over-year growth compared to 3.5% for higher-income households.
• Lower tax withholding following the One Big Beautiful Bill Act may explain part of the shift in wage growth.
• A stronger labor market for lower-paid workers appears to be playing an important role in the growth reversal.
• The data is based on a three-month moving average of year-over-year percentage changes from Bank of America aggregated consumer deposit account data.
• Household income terciles are defined by quantitative estimates of income, with the lowest tercile representing lower income, the middle tercile representing middle income, and the highest tercile representing higher income.
• Income thresholds between terciles move over time to reflect factors such as general wage inflation, changes in social security payments, and individual household income changes.
• Payroll payments data include channels such as ACH, bill pay, checks, and wires.
• The job-to-job change rate is defined as the proportion of customers with an identified change in their employer relative to the total number of customers with employment income.
• Bonus growth estimates are derived from customers receiving inbound ACH payroll transactions that are over 50% higher than the median regular payroll payments received by the customer.