Better to Light One Candle than Curse the Darkness*: Real Wage Edition

We live in an age where tons of data are easily available. It is highly unlikely that the US government is suppressing data, e.g., median hourly wage data, in an effort to provide an overly optimistic picture of the US economy. That’s an unlikely conspiracy.

Here’re two graphs of the the average real wage (AHETPI from FRED), and median real wage for all workers (from Cleveland Fed Wage Tracker), first year-on-year change, and second cumulative growth from 2018M12.

Figure 1: Year-on-year growth in real average hourly earnings (blue), in real median hourly earnings for full all workers (tan), for full time workers (green). NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED (AHETPI, CPIAUCSL), and median wages from Atlanta Fed, NBER, and author’s calculations.


Figure 2: Cumulative growth in real average hourly earnings (blue), in real median hourly earnings for full all workers (tan), since 2018M12. NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED (AHETPI, CPIAUCSL), and median wages from Atlanta Fed, NBER, and author’s calculations.

Casual inspection of Figures 1 and 2 will show that in recent months, the real median wage has been rising faster than the real average wage.

See previous attempt to explain to some particularly obtuse readers what data are available, here.

*  Attributed variously to Adlai Stevenson or Eleanor Roosevelt, or a variation on a Chinese proverb. On the latter, I confess to never hearing my parents ever say it.

32 thoughts on “Better to Light One Candle than Curse the Darkness*: Real Wage Edition

  1. pgl

    August 10, 2023 at 5:01 pm
    “Why Averages are Often Wrong…”it is often best to use the median to represent central tendency measurements instead of the average or mean because it’s less impacted by outliers.”

    I was wondering what motivated this post until I read the above. Something tells me Jonny boy will not understand:

    ‘Casual inspection of Figures 1 and 2 will show that in recent months, the real median wage has been rising faster than the real average wage. See previous attempt to explain to some particularly obtuse readers what data are available’

  2. David S

    More people are complaining about work because more people have jobs. And more people are complaining about wages because they’re working pretty hard, and everyone they know is also employed, so they can talk about how much work they have, and what they’re being paid, and complain about that. We’re also getting more grumpy with people who make more money but don’t do enough work to justify how much money they’re making.

    A real recession would cure all this complaining about wages and workload.

  3. New Deal democrat

    As it happens, a very nice graph comparing YoY CPI with median wage growth of all 4 income quartile was put up yesterday by Invictus from Barry Ritholtz’s sit:

    Hint: median wages have been rising this past year in all 4 quartiles.

    Real aggregate payrolls have been rising relentlessly as well. With the exception of the pandemic lockdowns, in the past 60 years no recession has started without real aggregate wages turning down, with a variance of between 4 to 10 months before onset.

    If disinflation has now ended, as I and many others suspect, that situation could change within the next few months.

  4. JohnH

    A wise man once wrote: “My use of the household survey is based upon the need (1) to report a median (as opposed to arithmetic average) figure, and (2) to disaggregate to a demographic category, namely workers with high school-no college education (red line in graph). I hope you understand why a median might be a particularly interesting statistic relative to arithmetic average given the skew in the distribution.”

    And: “Just saying median is a better representation of the ordinary person’s experience than the average because of skewed distribution with many some at very high end. Hence, the arithmetic mean is not the most informative measure of central tendency.”

    Nonetheless, some people are fond of citing average hourly wages and largely overlooking the median earnings numbers published quarterly. And so, the average hourly wage figures, which produce a more positive picture of wage growth, could be of particular interest to people of a certain political persuasion precisely because the average skews higher.

    No conspiracy here, just politics.

    1. Menzie Chinn Post author

      JohnH: Well, then as one of those (allegedly) trying to foist an overly optimistic and skewed view of the US economy’s performance, shouldn’t I be stressing median now? In fact, you should see me regularly switching between mean and median. But I don’t. How does this fit into your all-encompassing theory of everything?

      1. JohnH

        I am heartened that real wages are drawing attention.

        I am disheartened by the fact that, despite having experienced tight labor markets for some time now, median real wages have barely budged since before the pandemic, except for some of the lowest income cohorts, a development which is good.

        In these conditions, if real wages won’t rise significantly across the board, when will they? If the next recession is just around the corner, will real median wages be capped at these meager gains? Now that real wages are drawing attention shouldn’t the focus of attention shift to why average workers are not prospering? Certainly, if economists supporting Biden don’t start raising the issue and proposing solutions, these is always an alternative party which will certainly raise the issue, albeit with a heavy dose of insincerity.

      2. JohnH

        In fact, you did stress the ‘good news’ that median wages have recently been growing faster than average wages. But you did not mention the ‘bad news’ that median wages have barely risen since 2018, virtually all of it “recently.”

        And, yes, average wages, which have risen by about 4% since 2018 (more than double median wages), seems to be the go-to statistic here, even though it’s an average, and even though “median is a better representation of the ordinary person’s experience than the average because of skewed distribution.”

        BLS acknowledges the problem, noting that the “There are several characteristics of the series presented in this release that limit their suitability for some types of economic analyses… (3) The series are the average earnings of all employees or all production and nonsupervisory jobs, not the earnings average of “typical” jobs or jobs held by “typical” workers.”

        If you really want to understand what’s going on in the economy and in the electorate, why wouldn’t you want to get data that tells you how the “typical” worker, i.e. the mean/median worker is faring? Why use an average wage that gilds the lily over the past few years?

        1. Menzie Chinn Post author

          JohnH: Median real wages have been growing faster than average wages for months. However, I think this is the first time I mentioned that median wages were rising faster than average, and only in response to your comment.

    2. baffling

      actually John, you just try to muddy the water so you can interject your own opinion as important without relying on sound data analysis to support it. you play “politics” more than anybody here, but then try to accuse others of the same thing.

      1. pgl

        ‘Ed Hanson: My criticism pertained to the household survey estimates at the state level, where the sample sizes are relatively small.’ – our host.

        Note how Jonny once again takes a quote out of context. BTW Jonny boy – do try reading this post as the data is contradicting your latest dishonest trash.

  5. Macroduck

    What are the odds that Johnny will acknowledge his error? What are the odds that he’ll stop making false claims about these data series?

    I suspect more than one candle will be needed to illuminate Johnny’s darkness.

    1. pgl

      “Videos that compare climate activists to Nazis, portray solar and wind energy as environmentally ruinous and claim that current global heating is part of natural long-term cycles will be made available to young schoolchildren in Florida, after the state approved their use in its public school curriculum. Slickly-made animations by the Prager University Foundation, a conservative group that produces materials on science, history, gender and other topics widely criticized as distorting the truth, will be allowed to be shown to children in kindergarten to fifth grade after being adopted by Florida’s department of education.”

      I was wondering why we had not heard from CoRev of late. It seems he has been busy helping DeSantis with the Florida miseducation system!

  6. JohnH

    Casual inspection of Figure 2 will show that since before the NBER recession, the real median wage has been rising slower than the real average wage. In fact, according to the preferred statistical measure (median), it has hardly risen at all…a politically inconvenient fact.

      1. pgl

        Try the preferred time frame – very short when it came to UK real wages under Cameron so as to totally miss a huge decline followed by that short partial offset.

        But on this one – take the longer time period.

        Yes Jonny boy is a two faced liar.

    1. pgl

      Yea – take a long view now. But you refused to take the longer view with respect to UK wages under Cameron. No Jonny boy – you are the lying troll who moves the goal posts routinely.

    2. pgl

      Now apply his NEW Jonny boy standard to that UK real wage issue he has been lying about since Trump first decided to run for President. Take a look at the 4th graph from Dr. Chinn’s post (which Jonny boy keeps ducking).

      Real UK wage index in 2008 = 108. Same index eight years late = 102. Yea it fell a LOT and then partially crept back up. But Jonny boy keeps saying real UK wage rose.

      Yep – this is how this troll lies. And then he has the gall to accuse others of lying.

    3. Ithaqua

      Ah, a “heads I win, tails you lose” argument… had it been rising faster, you could have written exactly the same sentence, just switching the words “average” and “median” for each other. Without a rationale that explains why this, and not the reverse, is politically inconvenient, all you have is a pair of sentences.

  7. Ivan

    Having been part of the “big government” for decades I always laugh when I hear these paranoid conspiracies of how government is engaged in elaborate schemes to fool the governed.

    First of all there are always a huge spread of political opinions in any unit with a dozen or more people in it. If someone engaged in substantial lies for the benefit of one or the other end of the political spectrum, there would be a leak of that information – or even a formal whistleblower. All public employees are also part of the governed and the same apply for any other attempt to cover up nefarious activities targeting the governed. Anything known by more than one person is not going to be a secret for long – the more consequential the shorter it stays a secret.

    The things that happens and should be of concern to us all, are happening right out in the open for all to see – but nobody pays attention to. Ways to measure and define a parameter can be changed and that parameter begins to look better or worse. Even when at first someone protests, it quickly is forgotten and the majority just see the changes. Some parameters get a lot harder to access even if the information technically are still available. Some parameters are ignored by certain news outlets leaving large groups of people ignorant by design. Or those outlets are focussing on certain parameters when one party is in the white house and completely ignoring them when the other party is in power.

    The latest one that I heard was the idea that Biden is helping Ukraine in order to get them to cover up for his sons “crimes”. Patently absurd, but apparently part of the reason that a lot of GOP voters have swallowed Putins narratives (hook, line and sinker) and turned against helping Ukraine.

  8. pgl

    Research Firm Says Proud Boys Legal Team Stiffed Them $30,000

    After members of the Proud Boys played a lead role in the Jan. 6 Capitol attack, their defense attorneys unsuccessfully tried to move their cases out of D.C., arguing that the Proud Boys could not receive a fair trial in the left-leaning city. To aid their argument, an attorney for one of the Proud Boys commissioned a study on potential D.C. jurors’ attitudes toward the far-right group. The report cost $30,000. But despite the document appearing in the Proud Boys’ court cases, its author says she still hasn’t been paid. She’s suing a group of attorneys for alleged copyright violations, claiming they all used her work without paying. Many of those lawyers, in turn, say they never agreed to pay for the report, and that a lone colleague is responsible for the latest legal hangover from the Jan. 6 attack.

    The Proud Boys must have learned this trick of not paying for services from Trump.

  9. pgl

    Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading maker of advanced computer chips, announced earlier this summer that it intends to fly in 500 or more Taiwanese workers, in addition to overseas workers already employed on the site, to complete construction of the fab. Nikkei has reported that the company is “in talks” with U.S. government officials to secure the temporary visas, which are said to be E-2 investor treaty permits. Union leaders have whiplash. In December, President Biden visited the plant to announce that the fabs would be “built with union labor.” He did not say “exclusively.” But it has come as a shock that the vast majority of work on the roughly 20,000-job site is non-union. TSMC is seeking some $15 billion in government subsidies for the fab. In May, I went to Phoenix to interview workers at the site. Some shared anecdotes of how untrained workers with non-union contractors had made costly mistakes. Others described grisly injuries. For over a year, the company has denied labor leaders a project labor agreement, a prehire deal that ensures union jobs and incentivizes training. Instead, TSMC has brought in hundreds of non-union contractors like ABM Industries, a company that staffs Amazon warehouses and is notorious for wage violations. Now, TSMC workers, the Arizona Pipe Trades 469 union has started a petition to block the visas. TSMC executives emphatically oppose labor unions, and run a business with razor-thin operating costs and extraordinary profits. The Department of Commerce’s CHIPS Program Office, which manages subsidies from Biden’s semiconductor subsidy bill, is currently deep in talks with prospective grantees. It makes good business sense that TSMC, which has not yet secured those subsidies, would emphasize its staffing woes and complain that it is expensive to operate in the U.S.

    TSMC’s union busting is getting some support from Noah Smith:

    Responding to the petition to block Taiwanese workers, Samuel Hammond, a fellow at the Niskanen Center think tank, tweeted, “This is the opposite of how industrial policy actually works. When Korea and Taiwan were developing, they aggressively courted workers from other countries to transfer their tacit knowledge.” “America simply doesn’t have a lot of people who know how to install this equipment,” economics blogger Noah Smith wrote on Thursday. “American pipefitters simply do not know the technical details of installing ultraviolet lithography machinery. They need someone to teach them before they can do it, and the people who can teach them live in Taiwan.”

    Read the entire discussion as there is more than what Noah lets on.

  10. ltr

    January 15, 2018

    Real Average Hourly Earnings, * 2000-2023

    * Production and nonsupervisory workers accounting for approximately four-fifths of the total employment on private nonfarm payrolls

    (Indexed to 2000)

    [ An interesting reflection on the stickiness of hourly wages, is that average wage increases in recent recessions persist in recovery. ]

    1. pgl

      Median usual weekly real earnings

      Yea – Jonny boy does not do hourly real earnings which gives a different picture if the average work week has declined. Another point Dr. Chinn has reminded our most incompetent troll. But does Jonny boy noticed? Of course not.

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