Inflation is a rise in price levels relative to currency. I.e., $1 today should be able to buy $1 / inflation factor in the past. However, people buy more today with wages x inflation factor than the previously bought with supposedly a higher level of wages. That shouldn't happen.

No matter how you cut it, that's a problem with the numbers.

Regarding point 2), we also work considerably less than we did in the past. Hours worked per capita have not gone up significantly.