Thursday, February 11, 2016

The story on real wages: four measures showing actual improvement

 - by New Deal democrat

In the last several years, I have written a number of posts documenting the stagnation in average and median wages, for example here and here.  Courtesy of the crash in gas prices and the decline in underemployment below 10%, there has been a change in the last 16 months.

We have a variety of economic data series to track both average and median wages:
  • The most  commonly known measure is that of average hourly pay for nonsupervisory workers, which is part of the monthly jobs report.
  • The Bureau of Labor Statistics, which conducts the household employment survey, also reports "usual weekly earnings" for full time workers each quarter
  • The BLS also measures the Employment Cost Index quarterly.  
  • The BLS also measures "business sector real compensation per hour" quarterly. 
All of these have now been updated through the fourth Quarter of 2015.  Let's take a look at them.

The first graph tracks monthly average (mean, not median) hourly wages (blue), median wages from the employment cost index (red), real compensation per hour (brown), and median usual weekly earnings (green). All are adjusted for inflation.  Since the quarterly index of median wages only started in Q1 2001, I have normed the indexes to 100 at that time:

Here is the same information YoY:

"Real usual weekly earnings" is now equal to its highest level since the beginning of the Millennium. The other three are at Millennium highs (as far back as two of them go).  Real average hourly earnings can be calculated back 60 years.  It is at a new 35 year high -- but still lags behind its high point in the early 1970s. And there has been an acceleration in growth in the last year.

Finally, via Doug Short Sentier Research's most recent monthly measure of median real household income also was positive:

I don't want to oversell this improvement.  It is still not nearly good enough to have a viabrant middle class.  But it does represent a significant positive.