Wage Stagnation and Rising Living Costs: Identifying Undervalued Income-Generating Assets to Hedge Against Inflation and Labor Cost Pressures

The U.S. labor market in 2025 is defined by a stark disconnect between productivity and worker compensation. According to a Forbes report, 73% of workers now struggle to afford anything beyond basic living expenses, with 76% of C-suite and HR leaders and 92% of employees reporting financial stress. This crisis is compounded by a long-standing productivity-pay gap: since 1979, productivity has grown 2.7 times faster than wages, a disparity highlighted in a UMA Technology analysis. As inflation and labor cost pressures persist, investors must seek assets that not only generate income but also hedge against these macroeconomic headwinds.

The Case for Real Assets: Real Estate, Infrastructure, and Natural Capital

Private real assets-such as real estate, infrastructure, and natural capital-have historically served as robust inflation hedges. Real estate, for instance, allows for rent adjustments and cost-pass-through agreements, enabling landlords to maintain cash flow as prices rise, as the Forbes report notes. In Q3 2025, industrial and data center REITs demonstrated resilience, with funds from operations (FFO) growing 21.3% and 8.0% year-over-year, respectively; the Forbes report highlights that this outperformance was driven by AI-driven demand for computing power and the essential role of logistics in e-commerce. Similarly, infrastructure assets, particularly regulated utilities and renewable energy projects, offer contractual protections against inflation. The MSCI Global Private Infrastructure Index reported an 11.5% rolling one-year total return in Q3 2025, outperforming both listed infrastructure and fixed income, a trend also referenced in the Forbes coverage.

Natural capital investments, including timberland and agriculture, are also gaining traction. These assets provide long-term income streams and diversification, as their value is tied to tangible resources that retain worth during inflationary periods, a point underscored by the Forbes analysis. However, their effectiveness depends on factors like tenant creditworthiness and economic volatility, underscoring the need for careful due diligence.

Undervalued Opportunities: Small Businesses and Commodity Investments

Beyond traditional real assets, small businesses-particularly those owned by U.S. Latino entrepreneurs-present compelling opportunities. These enterprises, concentrated in sectors like healthcare, construction, and professional services, are growing at a 34% annual rate and contributing $800 billion to the U.S. economy, according to a McKinsey study. Despite challenges like labor shortages and global tariffs, their adaptability and essential services position them as resilient against inflation and labor cost pressures. For example, healthcare REITs saw 18.0% FFO growth in Q3 2025, driven by demographic tailwinds, a performance point noted in the earlier Forbes coverage.

Commodities, including gold and energy resources, also serve as inflation hedges. While gold lacks yield, its historical role in preserving purchasing power remains relevant. Energy resources, particularly in the context of AI-driven power demand, are seeing renewed interest as data centers consume 20% of U.S. electricity by 2030, according to a Goldman Sachs note.

Strategic Considerations for Investors

A diversified portfolio is critical for managing inflation risk. Treasury Inflation-Protected Securities (TIPS) offer guaranteed real returns but come with lower yields compared to nominal bonds, as the UMA Technology analysis explains. Real estate and infrastructure investments, while offering inflation-linked returns, require significant upfront capital and are sensitive to economic downturns. Cryptocurrencies like Bitcoin, though increasingly viewed as speculative hedges, remain volatile and subject to regulatory uncertainty, a limitation also discussed in the UMA Technology analysis.

For investors prioritizing stability, private infrastructure and high-quality real estate in Tier I/II markets offer predictable cash flows. Meanwhile, small businesses in high-demand sectors provide both income and growth potential. As the U.S. grapples with wage stagnation and rising costs, these undervalued assets present a pathway to preserving wealth and generating returns in an uncertain economic landscape.