There are different ways to assess recent trends in real compensation (i.e., nominal compensation adjusted for inflation), including using different compensation measures, inflation measures, and reference periods. These factors can lead to conflicting conclusions about real wage developments in the United States. In October 2023, we published a detailed report analysis break down these differences.
The interactive tool below shows you the annualized percentage change in real wages between a base fourth quarter of your choice and the most recent quarter with available data. For each time period of your choice, this interactive activity will show you how real wages have changed using four different compensation measures and two different inflation measures. You can hover over the legend or the bars themselves to see the salary percentage changes. The title of each figure will indicate the period over which the change is calculated.
There are there different compensation parameters for work (in cash and, using some metricbenefits) before taxes and government transfers. This interactive desire to show evolution of remuneration using the following measures: The average hourly wage, the employment cost index (ICE), Median Usual weekly earnings and total compensation (remuneration declared in the national income and product accounts). These measures have key differences, such as the types of pay they include and take into account factors such as number of hours people are working or changes in the composition of the labor market. Some commonly used measurements can be difficult to interpret becauseFor example, they ignore lost wages for those who are not anymore functioning Or they are affected depending on whether it is high– or low-wage workers work more or less. See Table 1 for a brief overview of these differences.
This interactive activity will also help you understand how wages are changing using two different inflation measures: the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) Index. As we explain in our preliminary analysis, adjusting for inflation to calculate real wages is essential to understanding changes in purchasing power. However, deflation by CPI or PCE may lead to different conclusions. As we explain, the CPI better reflects the main direct costs of consumer spending. The PCE index, on the other hand, better reflects the total cost of consumer spending, including more spending that is not directly borne by households.
The choice of the reference period is very important, particularly given the volatility of the economy in recent years. This interactive activity will allow you to understand how compensation has evolved compared to various reference periods before and during the pandemic.
See our preliminary analysis better understand why these different factors are important to actual compensation, see how compensation has evolved across the distribution, and observe changes in these measures relative to long-term trends.
First quarter 2024 — Have salaries in recent months kept pace with inflation?
This analysis will be updated as new data is released. Its last update was on May 2, 2024.
The interactive image above shows the annualized percentage change in real wages for the fourth quarter of each year from 2019 to 2023 through the first quarter of 2024 (for example, choosing “Q4 2019” from the drop-down list will give you the annualized percentage change in real wages from the fourth quarter of 2019-Q1 2024.). This interactive will be updated quarterly as new data is released.
We find that all four measures of typical and overall wages, adjusted by the PCE, have increased since 2019. When deflation using the CPI, we see smaller increases in three of the four measures and a decline in one measure. In other words, the nominal wage achieved through these measures has been relatively successful in keeping pace generally cost of living since 2019, measured by PCE. The nominal wage has been less successful in keeping up with the rising costs of goods and services that are much more important to consumers as measured by the CPI. This trend is consistent from period to period, with CPI-deflated wages experiencing smaller increases – or rather decreases – compared to PCE-deflated wages.
Additionally, using PCE inflation, real wage gains were seen across all measures compared to the fourth quarter of 2021. Since the fourth quarter of 2022, deflation by either inflation measure shows real wage gains. Finally, since the fourth quarter of 2023, real wages have increased as measured by average hourly earnings, the Employment Cost Index (ECI), and total compensation as reported in the National Income and Product Accounts. . Real wages, measured by the median weekly wage, fell sharply, reversing an almost as sharp increase in the previous quarter.
Total compensation consistently reports the largest salary increases across quarters. As we explain, this measure takes into account the aggregate compensation of all individuals, which represents changes in employment (i.e., changes in compensation resulting from changes in the number of workers or hours worked). In contrast, average hourly earnings and median weekly earnings are sensitive to compositional changes. Therefore, over certain periods, particularly periods when lower- or higher-wage industries and occupations increase as a proportion of the overall labor market, the results are more mixed when using these measures. For example, in 2020, the salary of the average or median worker increased, in part because those who remained employed at the time were higher-paid workers. Read our preliminary analysis for more details on the differences between different measures of remuneration and inflation and their impact on the evolution of real wages.