The illusion of wage growth

Official wage statistics are being distorted by the unbalanced lay-offs of low-wage workers. Research by Professor of Economics Bart Hobijn provides a useful method to adjust for this, looking only at the growth in median wages for workers continuously employed.

Official wage statistics are being distorted by the unbalanced lay-offs of low-wage workers. Research by Professor of Economics Bart Hobijn and President and CEO of the Federal Reserve Bank of San Francisco Mary C. Daly provides a useful method to adjust for this, looking only at the growth in median wages for workers continuously employed.

In this story published Aug. 31, 2020, in the Federal Reserve Bank of San Francisco Economic Letter:

Despite a sharp spike in unemployment since March 2020, aggregate wage growth has accelerated. This acceleration has been almost entirely attributable to job losses among low-wage workers. Wage growth for those who remain employed has been flat. This pattern is not unique to COVID-19 but is more profound now than in previous recessions. This means that, in the wake of the virus, evaluations of the labor market must rely on a dashboard of indicators, rather than any single measure, to paint a complete picture of the losses and the recovery.