The truth about workers' wage growth is hard to find
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Illustration: Eniola Odetunde/Axios
Do you make more money now than you did before the pandemic?
Why it matters: You might think you know the answer about your own pay, but there is little consensus on how American workers' overall real wages have fared in recent years, write the authors of an intriguing new analysis from the Hamilton Project at the Brookings Institution.
- The answer varies depending on the pay data you use and how you adjust those numbers to account for inflation.
- "There's no clear way of measuring pay for workers. And no quote-unquote 'right' way to measure inflation," says Chloe East, an economist and visiting fellow at the Hamilton Project, who coauthored the report.
The big picture: At the macro level, perceptions of wage gains contribute to the general economic vibe. The Biden administration sees it as a metric to message as positive heading toward an election year, for example.
- The answers are also important on an individual level, of course, because workers want to earn more.
Zoom out: Inflation has come down quite a bit from last year, but prices overall are still higher than they once were. That makes it hard to compare your pay now to what it was in 2019.
- Even if you're earning more, it's hard to feel that way when confronted with those higher prices — like when a box of cereal costs $8.99, as this WSJ opinion piece recently explained.
Zoom in: The authors of the Hamilton Project analysis really get in the weeds here. They look at four different measures of pay — average hourly earnings, median weekly earnings, total compensation, and the employment cost index (ECI), which measures how much employers spend on wages.
- Total compensation sums the pay of all workers, including those who are unemployed — it dropped a lot in 2020 when unemployment soared.
- Median weekly earnings and hourly earnings are not adjusted for the composition of workers; so when a lot of low-wage earners lost jobs in 2020, those numbers went up.
Aside from those 2020 disruptions, those measures have generally all gone up since 2019 — with ECI seeing the smallest gains. But that's before you start inflation adjusting. Then, it gets even more tricky.
What they found: Wages are higher now — or lower!
- If you adjust wages using the Consumer Price Index, wage gains look minimal, and in the case of ECI, they actually fell from Q4 2019 to Q2 2023. If you use the Personal Consumption Expenditures Price Index, wage gains look better.
- The PCE measure is a broader take on inflation, including prices for things that aren't directly felt by consumers — if your employer is spending more for your health insurance, you might not realize that.
- So, the CPI adjustments probably feel more on track to regular folks, East says.
Of note: The one conclusive finding from the analysis was that pay for low-wage workers has definitely increased, as we've reported. Still, East emphasizes — their wages are, by definition, low.
Our thought bubble: If the answers to the question of whether workers have workers gotten a real raise are this hard to parse, it probably means that, in general, pay raises haven't been great.
- East doesn't disagree. "Americans might be slightly above where we would expect based on long-run trends," says East. "But they're not much better off than they were before."
