Four Measures Of Wages All Show Renewed Stagnation

Since 2013, I have documented the stagnation vs. growth in average and median wages, for example here and here. I last did this in 2017. So let’s take an updated look.

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 compensation per hour”quarterly.

Let’s start with nominal wages. The first graph below shows the YoY% growth in each of the four measures:

While each is noisy, the overall trends are clear:

First, in this cycle as in the last, wage growth declined coming out of recessions, then rose as the expansion continued.

Second, by most measures nominal growth has picked up somewhat in the last year.

Third, secularly there has been an undeniable slowdown in wage growth, which (while not shown) was 4-6% in the late 1990s peak and 3-4% at the 2000s peak. So far in this expansion it is no better than 2.5%-3%. I believe this is in part due to how weak the employment situation was for so long into this expansion, but also secularly due to shifts in bargaining power, as employers learn over time that employees can be retained with lower and lower annual increases in compensation.

Now let’s turn to the real, inflation-adjusted measures. Our first graph starts out normed to 100 for each measure in the fourth quarter of 2007.

After a spike during the Great Recession due entirely to the collapse of gas prices at that time, real wage growth declined through 2013 time frame, then rose significantly from late 2014 through early 2016 mainly due to the decline in gas prices. Since that time, 3 of the 4 measures (all except the ECI) have turned flat if not worse. Further, note the divergence between the mean measure of the average hourly earnings (blue) and median measures in usual weekly earnings (red) and the employment cost index (green), strongly suggesting that gains have been skewed towards the upper end of the income distribution.