Wages Have Grown More than Many of Us Thought
By David Henderson
Standard wage data show that between the spring of 2017 and the spring of 2018, real wages in the U.S. increased only 0.1%. But there are three major problems with these data. First, they don’t account for fringe benefits, which are an increasing proportion of employee pay. Second, standard wage data use an index that overstates the inflation rate. Third, each year the composition of the workforce changes, as older, higher-paid workers retire and young, lower-paid workers enter the workforce.
A study released this month by the White House Council of Economic Advisers addresses these three biases and concludes that real wages grew by 1% in 2017-18, not the measly 0.1% reported in the wage data.
These are the opening two paragraphs of my op/ed in the Wall Street Journal that appeared last night electronically and today in print. The op/ed is titled “Wages Are Growing Faster Than You Think.”
As per my agreement with the Journal, I will post the whole thing when 30 days are up.
Normally when I write a piece for the Wall Street Journal or, indeed, any publication, it’s because I have an idea about something that hasn’t been said and needs to be said. This was not such a case. Instead, an old friend, John Metcalf, whom I met at the first Austrian Economics conference in South Royalton, Vermont, but who went on from economics to law, emailed me. He suggested that the composition effect was potentially large and I should write a WSJ piece about it. I agreed and started to research the issue. Then I found that the Council of Economic Advisers had done my analytic work for me. I wrote it up.