By Doug Short, Advisor Perspectives:
Earlier this week I updated my commentary on Five Decades of Middle Class Wages, an analysis of Real Average Hourly Earnings of Production and Nonsupervisory Employees. During the 21st century and especially since the end of the Great Recession, wages have clearly been stagnant.
But, as Mark Twain famously remarked, ‘there are three kinds of lies: lies, damned lies, and statistics.’
I was, therefore, not surprised when a reader sent me a link to a blog article entitled ‘Real Wage Stagnation Is a Bit of a Myth.’ Seriously! The article featured a chart that included the very same earnings data series that I had used, but it came to quite the opposite conclusion:
‘Contrary to popular belief, wages have been rising a bit faster than prices. In other words, real wages haven’t stagnated as widely believed, but have been moving higher, albeit at a slow pace.’ All it takes is a simple statistical manipulation to paint a smiley face on the real wage data. And what is that? Choose a tame deflator for your inflation adjustment.
Below are two charts of the Average Hourly Earnings of Production and Nonsupervisory Employees stretching back to 1964, the year the Bureau of Labor Statistics (BLS) initiated the series. The top chart is my analysis. The one below it is the optimistic variant that claims stagnation is a ‘myth’ (click them for larger versions).
This post was published at Wolf Street on August 24, 2014