CHART OF THE DAY: Wages Are Increasing Faster Than We Think


Surveys continue to indicate that employers are having a tough time finding workers with the right skills.

As such, employers are also saying that they’re having to raise pay in order to attract workers from the relatively shallow pool of skilled laborers.

But economists are left asking: why aren’t reported wages actually rising?

For the most part, experts look to the Bureau of Labor Statistics’ average hourly earnings data for guidance. And on the surface, the numbers look sluggish.

But Barclays’ Dean Maki says that the BLS’s stats are a poor representation of what’s really going on. He argues that by separating the wages of supervisory workers from nonsupervisory workers, you get a more useful picture of what’s really going on in pay.

Here’s a bit of what he wrote last week (emphasis added):

"A few years ago, the BLS created a new average hourly earnings series for all employees, not just production and nonsupervisory workers, and this has become the headline wage series. This “all employees” series increased just 1.9% y/y in April and has shown little acceleration in recent years. Because the BLS publishes the weight of the production and nonsupervisory workers (about 83%), we can back out the implied wage growth of the “supervisory workers” included in the “all employees” series. Figure 3 plots the growth rates of the implied supervisory worker series alongside the production and nonsupervisory worker series. The data suggest that supervisors are receiving puny wage increases relative to their employees; the supervisory series was up 1.3% y/y in April, compared to 2.3% for production and nonsupervisory workers. Furthermore, the data suggest this was the case for most of the past year and throughout 2007-11. Thus, these data would seem to suggest that concerns about rising inequality are misplaced, as workers have supposedly been experiencing faster wage growth than their bosses for most of the past seven years."

Maki notes that supervisory workers also receive alternative forms of compensation like bonuses and equity, which aren’t captured in the BLS’s measure.

As such, it’s best to focus on the production and nonsupervisory worker data, which suggest wages are rising faster than we think.

Emphasis added. It’s worthy to note that this article focuses on the wages of skilled labor, not unskilled labor.


Do they include the “wages” of those who have lost their jobs and been unable to find another?

It seems that this author just takes a small segment of the workforce whose wages are rising slightly higher than average and then tacks a misleading headline on (since presumably the rise in their wages has been included in the average).

A messy article.


It is indeed a messy article and biased as well. Wages have been stagnant for nearly 30 years now, and any increases for those in the “middle class” or lower have not kept up with the cost of living.

I think any calculation of the “average wage” in this country should not include the earnings of those making a Million or more. Then lets see what most of us are really earning for the work we do! The top earners (those in the top 2% or even just the top 1%) skew the results too much.


Wages have not been stagnant for 30 years. Please point out the biases in the article. The article focuses on the wages of skilled labor in non-supervisory positions. I don’t see anywhere that millionaires are included in the study.


It is my impression that a lot more study needs to be done before we can conclude whether wages have risen significantly or not. Among other things:

  1. Most wage statistics do not include employer-paid medical, dental or other similar benefits. If those benefits were included in “wages”, they would be shown as increasing significantly over the last few decades. Wage statistics do not include such benefits as on-site nurses or physicians who treat whatever the employee has. That is a growing, but invisible benefit. They do not include such things as group benefit discounts at clinics or pharmacies.
  2. No wage statistics include employer or pre-wage employee contributions to ESOPS or 401K plans. That’s a significant, and probably growing thing, as “defined benefit” programs are phased out. Nor do they include “income” that’s internal to those plans, even though it’s very significant.
  3. Wage statistics include the wages of retirees who work part time or at low-wage jobs for "extra money’, but do not, of course, include social security benefits.

I have no idea how one could statistically measure “non-wage” benefits and incorporate them into “wage statistics”, but they are significant.


well, if the pool of skilled people is so shallow, that simply means unskilled people are the majority, exactly the group that policy changes are made for.


Oh, this is great information! Thanks so much, RR!


They are stagnant if you allow for inflation. Obviously someone with job X makes more in inflated dollars in 2014 than someone in the same position did in 1974.


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