TABLE 7-1 Average Annual Real “Wage” Increases, 1980-2000 (percent)

 

Means

 

Period

ECI Hourly Compensation

ECI Hourly Wage

Social Security Annual Wagea

Median CPS Wage

1960-1980

n.a.

n.a.

1.0

1.5

1960-1973

n.a.

n.a.

2.0

2.5

1973-1980

n.a.

n.a.

-0.7

-0.3

1980-2000

0.9

0.6

1.2

0.3

NOTE: Nominal indexes deflated by the CPI-U (research series).

aData through 1999.

SOURCE: ECI data from BLS web site. Social security annual wages from U.S. Social Security Administration (2000). For CPS hourly wage, see text footnote 8.

wage inequality in the United States increased substantially. As a consequence, median hourly wages rose much more slowly than their mean.

A second question concerns the scope of a wage index: Should it measure changes in the overall compensation of workers, including not only wages but fringe benefits, or should it cover wages only? Over most of the past 50 years, fringe benefits—chiefly, employer-paid pensions and health insurance costs— rose more rapidly than wages, so that the growth in real compensation per hour exceeded the growth in wages by about 0.25 percent a year. Since 1980, the BLS has published a quarterly Employment Cost Index (ECI) for total hourly compensation (including fringe benefits) and one for wages alone.7 Between 1994 and 1999 the excess growth of fringe benefits relative to wages was reversed as growth in the cost of medical care and the generosity of employer health care plans were reduced. But in 2000 fringe benefits once again began to grow more rapidly. The future relationship between the two components of employee compensation is likely to depend importantly on what happens to health care costs.

Table 7-1 shows for various periods the average annual growth in the real wage (or compensation) for each of the four concepts described above: the two published ECIs for hourly compensation and for wages (which are not available for the early years); the average annual social security wage; and the median

7  

Here the term “wages” includes wages and salaries. The ECI defines wages as straight-time wages per hour worked. Paid leave and premium pay are included in fringe benefits. The ECI collects data from employers on a probability sample of compensation components for specific occupations. The data are combined into an overall index with fixed employment weights by occupation and industry.



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