Are Wages Really That Depressed?

Wall Street Journal: “A new piece of research from Stephen Rose, an affiliated scholar with the Urban Institute and a professor at George Washington University, has the modest premise that rumors of the demise of American well-being have been greatly exaggerated.”

“Since 1979, real earnings are up only 17%, after adjusting for inflation using the consumer-price index. For a period of nearly three and a half decades, it’s a disappointing run, although broken down by gender, the picture is more mixed.”

“When the cost of employee benefits is included in Mr. Rose’s chart … suddenly workers are doing quite a bit better. Real median compensation, adjusted for the consumer-price index, is up 25% from 1979.”

“But Mr. Rose argues that one more change is important: using the right inflation index. The personal consumption expenditures price index has generally shown inflation to be lower than the CPI. And many economists believe the PCE is the more accurate index, since it better accounts for the ways that consumers’ consumption behavior changes over time. The Federal Reserve, for example, prefers the PCE price index.”

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