Thursday, September 3, 2015

A real puzzle about real wages

 - by New Deal democrat

This morning the National Employment Law Project (NELP) released its annual update on real wages during the recovery.  Their findings are a puzzle to say the least. 
Virtually every other measure of real wages shows a bottom in late 2012. (Real wages declined from 2009-12 as the price of gas went from $14.0 to $3.90, hence inflation outstripped miserly nominal wage growth):

In contrast, here is the NELP graph of real occupation wage changes from 2009-2014:

Note that the OES is calculated through May of each year, so the latest report misses the effect of the big decline in gas prices in the last 12 months. 
It is virtually gospel that as the labor market improves, so should wage growth. In other words, wages could be down from 2009, but up from 2012 or 2013. So I went back and compare the NELP's latest report with earlier reports.  Here is what I found:
From 2009 through 2013:

and from 2009 through 2012:

In case it isn't obvious from the graphs, according to the NELP, wage declines have increased across every single wage quintile from 2012 to 2013, and even more in from 2013 to 2014! Even with the NELP saying that hiring in high wage jobs took off in 2013 into 2014.
To double-check the NELP data, I went to the OES database, which can be found here: ( and obtained the median hourly pay for all occupations for each year 2009-14, and then divided by the change in prices as calculated by the CPI from May 2009 (the OES is calculated as of May of each year), and here is what I got (pay in column 1, CPI change from 5/09 in column 2, "real" pay in column 3, and the YoY change in "real" pay column 4):
2009 $15.95
2010 $16.27 2.1 $15.94 -0.1
2011 $16.57 5.2 $15.75 -1.3 -1.2
2012 $16.71 7.6 $15.53 -2.6 -1.3
2013 $16.87 8.8 $15.51 -2.8 -0.2
2014 $17.09 10.9 $15.41 -3.6 -0.8
The NELP shows real median wages down -4.0%, not -.3.6%, since 2009, so they appear to be using a different inflation adjustment.
But more importantly, the OES data shows not just a continuous decline from 2009, but the decline in real wages actually *accelerating* from 2013 to 2014 -- much moreso than during the much weaker labor market of 2009-10!
I'm at a loss for an explanation.  This data cannot be dismissed as at outlier because it is very thorough.  But still it is not at all in accord with what other data on real wages have been showing. 
Is it possible that there has been a dynamic process where ever more employers are learning that they can freeze employee wages and get away with it?  This is a real puzzle.