The Atlanta Fed has a wage tracker data series. I added CPI information to see who is and isn’t keeping up with inflation.
I downloaded data from the Atlanta Fed Wage Growth Tracker.
The Atlanta Fed’s Wage Growth Tracker is a measure of the nominal wage growth of individuals. It is constructed using microdata from the Current Population Survey (CPS), and is the median percent change in the hourly wage of individuals observed 12 months apart. Our measure is based on methodology developed by colleagues at the San Francisco Fed.
The the Atlanta Fed data I added CPI data from the BLS. We can track real (inflation-adjusted) wages by subtracting the increase in the CPI from the increase in nominal wages.
Real Wage Growth Tracker
Wage Growth Discussion
- The bottom quarter of wage earners (Blue) consistently loses to inflation. Not once in the entire series of this data dating to 1997 have wages kept up with inflation. Thank You Fed!
- The Median wage earner (Red) loses to inflation a substantial portion of the time. Since 2000,I estimate that about 40 to 45 percent of the people lose to inflation about half the time.
- Those at the 75th percentile, the top quartile (Green) consistently beat inflation by a lot. Congratulations!
- The average person (Yellow) nearly always beats inflation even though some 40 to 50 percent of the people lose to inflation at least half the time.
The data is worse than it looks for anyone renting and struggling to buy a home because home prices are not in the CPI.
Median Real Weekly Wages
Free Money
It’s important to point out that wage data does not include earned income credits, child tax credits, food stamps, Medicaid, and heavily subsidized Obamacare.
By those methods we pay people not to work, so many don’t.
Despite massive deficits, even Republicans are handing out more free money.
For discussion, please see How Much Will That GOP Deal on Child Tax Credits Really Cost?
The Fed’s Big Problem
On average, the economy looks OK. But averages are misleading. Several large groups of people are struggling. They all have one thing in common.
Wage data is another way of looking at The Fed’s Big Problem: There Are Two Economies But Only One Interest Rate
Who’s Unhappy?
- Those looking to buy a home but cannot afford the record high prices, are not faring well in this economy.
- Anyone whose wage growth is in the bottom half.
In general, renters and those under the age of 40 are most likely impacted. Click on the above link for details.
I went to bed failing to save my last changes before scheduling the post automatically. I added a discussion of free money now. I also added a Fred chart.
Free Money
It’s important to point out that wage data does not include earned income credits, child tax credits, food stamps, Medicaid, and heavily subsidized Obamacare.
By those methods we pay people not to work, so many don’t.
Despite massive deficits, even Republicans are handing out more free money.
Is Your Hourly Pay or Salary Keeping Up With Inflation?
You must be joking! Of course it isn’t. Hasn’t for over a decade.
The tax we have saved because the elected ignore the massive deficits is free money for each of us. The more money we have, the more free money we have received. Everything is beautiful.
Sincere best wishes for those feeling pinched – hoping more free money or greater social equity comes your way soon!
CNBC talking heads now talking about rate hikes based on Fed minutes. Lol. The 20 year, which I track because I own TLT, also hit 4.612 nearing all time highs. Tomorrow is 30 year TIPS auction and I’m loading up the train. Choo! Choo!
https://www.cnbc.com/2024/02/21/fed-minutes-january-2024.html
“It’s turtles all the way down and inflation all the way up!”
No. But, then we have no wage income.
Work hard, use talented people with good skills, watch o.h and delinquencies. Serve your big customers well, bc one day it will pay. Never have a concentrated account as large as 40%/50% of your annual vol. 15%/20% is good enough. U might do well when business is good. In recessions u can survive by getting few orders from your big customers, that want to keep u alive. For them it’s crumbs. Begging and stretching A/R is cheaper than collection agencies.
Tale as old as time – Archie and The Meathead discussing inflation:
Bing Videos
If your big customer paid u and go bk within 90 days u have to pay the estate. Begging, claiming that u can go bk is better and than the Archie Bunker way.
I’m not a fan of excluding data to say something is deceiving…”well, if you remove R then X looks this way ….”. No. It looks as it should. Don’t remove anything but I do concede pointing out the contrast is very useful so thanks for that Mish.
As for beating inflation, many that are beating it are older meaning they did not always beat inflation. All things being equal, at some point the ones losing now will be winning. That is how the system works.
Home buying, there is probably only one decent era where a lot of people won. Right after WWII with the Levittown style building where people were getting a lot for their money to include a washer and dryer. We probably could get back to something similar but not until we ditch the 15 min city nonsense that is nothing but quasi prisons. People need some sense of space and community. Prisons don’t.
I think there was a time in the 70s when that happened again right before interest rates were raised high.
I quit working for blood sucking corporations in mid 90’s
went contracting til 2002(9/11 killed wages to $30 an hour) and made living wages
after 2002 been self employed – take 3-4 months in summer off
have so much work at $35-$100 an hour – work at least 3-5 hours per day now
and since I do most jobs as bid – I get nice bonuses when project is done
You sound like an internet advertisement with a stripper as the model!
Crime is up because income inequality is up. People used to build porches in the front, then decks in the back, and now walls in the front.
Crime is up because it pays and there is less penalty when getting caught.
“Crime is up because income inequality is up.”
“Crime is up because it pays and there is less penalty when getting caught.”
It’s hard to penalize someone who is already a starving, indentured plantation slave.
Compared to living in a cardboard box, a prison cell is not much of a deterrent. Especially in winter. Ditto sitting on a bed in a warm cell, vs being whipped around all day in order to afford a cardboard box big enough to fit in.
Starving for drugs to get high?
Word hard, get paid. 5%, 8%, 5% raises last three years, cash bonus has been over 10%, >20%, over 13% during the same time. Doubled vacation time (PTO) in last two years, employer upper their 401K match of what I contribute raising their cap 3%. That blows inflation to smithereens. Go get you some. Go me.
I am expecting a small $10k raise for 2024, company doing ok not great. 30% bonus on track, stock grants, and other goodies. Not sure what people are complaining about. Can it be better? Sure but it’s not terrible.
Only real complaint I have is health insurance deductibles all went up.
The good old days. i used to get those when i worked for a U.S. company. . But i have had only two 3% raises over the past 6 years. i work for a software company. Unfortunately, I work in the U.S. but the company HQ is based in Europe and European companies don’t pay as well as the U.S. I work probably 50 hours a week.
No bonuses and no stock options. Those are mostly US incentives.
Good for you, but you missed the entire point of the article…… Only 25% of earners consistently beat inflation. 75% take it in the shorts. This high inflationary period is driving wealth inequality to the moon. Keeping printing money Joe!
In the last 25 years nominal wages were rising. Nominal wages of the green line is rising the most. The number of full time employees is falling. The cost of layoffs is in the billions. Unemployment is low, but in real terms the blue line deflated from 2020. The red line deflated since 2009. Lower highs, lower lows. Why ?
I have a different view on this topic.
What people earn in wages, salary, commission etc is ultimately determined by the free market. If they have the knowledge, skills, and experience that is in demand, they can command higher income.
If their “job” can be done by machines, or done by someone else of similar skill who is willing to work for much less then they are, then they will end up sinking to the lowest income group.
It is up to the individual to acquire the education, skills and experience needed. No one is going to make your life better for you. It is up to you.
Of course, the free market is never perfect. There are many factors that can muddle it up in the short run, like unions, minimum wage laws, etc. But in the long run, if you want to earn a lot of money, get the skills you need.
It doesn’t matter who you vote for. No politician is going to make your life better for you. Forget all the political nonsense.
What I see far too much of here is people who want to blame everyone else for their personal situation, rather than taking responsibility for their own life. Americans used to be more self reliant. Now, too many have turned into cry babies who are looking for someone to blame for their own inadequacies.
I have worked all my life, saved, invested and become very wealthy. I had the good fortune to be born in a country that provided me that opportunity. The US is still the best place for those who want to get ahead. All the whiners and cult morons should move somewhere else where they think it will be better.
Amen Papa. Skills & profits will set you free.
I agree with that. Life has been pretty good to me. Not without difficulties but good.
I have many employees that struggle and that when I suggest things to help them get ahead, they just can’t do these things. Simple things like get to work on time. Don’t find excuses to not show up. Work just a little more (1 hr a day OT) and save that. They just don’t have the personal discipline to be able to do these things.
There are still a lot of opportunities if someone can take personal responsibility. Most would rather complain and blame everyone but themselves.
So yes, my income has kept up with inflation (and more).
Most people do not have clearly defined life goals, and if they do its often a goal that isn’t thier own (i.e. doing what everybody else is doing or what’s popular). In my view, this is why people flounder and seem to never get out of the funk they are in. They are a ship without a rudder or a sail.
Set life goals and do things that move you towards those goals. But understand that life is about tradeoffs. You can be wealthy, but the tradeoff is hard work and often long hours. Conversely, you can have lots of free time, but don’t expect to have alot of wealth. I think most people, including myself, would be satisfied with a balance between wealth and free time.
Above all, never live someone else’s life. If you are happy with your life goals, regardless of how lofty or humble they may be, jettison anyone from your life who craps on your goals or tries to sabotage your efforts to reach those goals.
Agree.
Yep.
That’s all fine until you consider the impact of the Federal Reserve’s actions.
The Fed is just another lame excuse for those who are looking for someone to blame for their own inadequacies.
Everyone in the US has a chance to make a good life for themselves. And many manage to create that good life, in spite of all the impediments that others like to blame.
Stop whining.
Dang…mike drop….. well done sir.
“I have worked all my life, saved, invested and become very wealthy.”
Problem is, that doesn’t generalize.
Even for Larry, Sergei and Michael Jordan; at least 80% of their current wealth is due to The Fed and Government wealth transfers their way. For 95% of the very wealthy, the share is 95+%.
And, by simple arithmetic necessity: Every penny transferred TO any of them, has to be transferred FROM someone else.
Not saying that you personally haven’t done more of the things which would have made you wealthier than most even absent a Fed. Larry and Sergei and Michael certainly did. And, for most more realistically: Working hard, being frugal and being on the lookout for opportunity and being willing to sacrifice for a long time to pursue it, has been a time tested recipe for getting ahead in near any society; even for people who weren’t born one-in-a-billion geniuses and freaks..
But the exploding _scale_ of the wealth divide; is not due to the difference in effort put in between people, suddenly exploding. Coincidentally, just as The Fed went off Gold……
And it’s the scale of the difference; specifically because such a large share of the wealth of those on top have NOT been earned by any productive work, but rather just transferred their way FROM those at the bottom; that’s causing most of the screaming. Chances are, 95% of people don’t have the ambition nor drive to do what you have done. Most people simply aren’t willing to put in much effort; once they can afford food, shelter, a family and beer on Friday night. Which wouldn’t require much in the way of effort at all, in a somewhat free-market society at current levels of technology.
Those, like you, who are willing to go the extra mile; would always make more than most. But it’s not the $10million your effort and industriousness has earned, which is causing problems for more average motivated people: But rather the additional $90 million The Fed has; statistically and just blindly assuming $100M is your nominal wealth; on top of what you earned by your own effort; transferred to you by way of asset pumping. Those additional tens of millions have been; again by arithmetic necessity; transferred directly from those at the bottom. In such vast amounts overthe past 50 years that those guys can no longer afford even the cheapest of basics; much less beer on Friday. That’s what’s hurting them. Not that Larry and Sergei gets paid more than they do, as a result of the two of them completely revolutionizing how everyone on the planet obtains nearly all information they are interested in.
These figures show that we definitely need gun control.
Stay triggered
I am planning some quality time at the range for that very purpose.
In summary, the Gini Ratio has been going up a hair in the US.
I wonder whether 80/20, 90/10, 60/40 … whatever … is a better way of representing the underlying truth using only one number. In place of a graph.
The “Gini number” going up; AND total wealth down; the latter a direct consequence of the process by which the former has been pushed up; is simply a bad combination all around.
Mike, only situations that have protected me from the ravages are 1) 3% mortgage holding PITI at $1600/mo 2) Spouse went on Medicare – 8000/year on private medical no longer spent. But salary hasn’t increased much at all for 3-4 years. Thinking there’s ultimately wage compression. Burger Flipper may get $20, but if you’re making $45/hr it doesn’t mean you’re always boosted to $55. Unless you’re a government employee??
IMO government employee wages aren’t increasing that substantially (although total compensation in the form of less ornerous health insurance cost increases compared to the general public is usually a benefit) and the wages for elected officials tends to increase at a greater rate.
Correct observation on wage compression. Metaphorically, imagine it as a high-rise building where every floor represents a nominal hourly wage. Raising the bottom (minimum) wage up to 20 results in fewer floors and a greater portion of workers at or just above the bottom floor, increasing the pool of people who are scraping by.
I suspect the reason a lot of government wages haven’t increased that much is because a lot of government workers are in unions on long term contracts. But wait until those are up and need to be renegotiated and see what they ask for and then look out at how much taxes rise to pay for that.
Their total pay is generally also much more skewed towards “benefits.” Such as full pension after a couple of years of 25hr a week with 3 months vacation; and a guarantee of the same health plan Biden has, for the rest of their life and for all their family.
I am not sure why government employees get to retire before 62 for partial benefits and 67 for full benefits like everyone else. They need to change that
I’ve been noticing wage compression also and talking about it with others.
Of course the whole discussion assumes the CPI actually reflects the true cost of living increases. I think the government intentionally understates inflation.
Why perceived inflation is always much higher than actual inflation has been a long-standing research topic in the EU (the EU collects high-quality survey data on perceived inflation). During 2004-15, perceived inflation in the EU was 9.5 percent per year, while actual inflation was 1.8 percent. The EU research has shown that it’s not one bias but a whole collection of biases that fools people into believing that inflation is at much higher levels than it actually is.
That might be gaslighting.
In the US, according to the Michigan survey, perceived inflation depends on whether the respondent is a Republican or a Democrat AND on which party has the White House. No wonder life expectancy in the US is declining.
Then again, if the “data” is partly synthetic, perhaps any meaning derived from the data should be considered synthetic as well.
“The need to strengthen protections on the CPS PUF resulted from a 2020 reidentification study that found significant vulnerabilities in select geographies. Rather than increase the population count threshold for publication of the data from 100,000 to 250,000 as initially proposed, the 2023 CPS PUF will retain the 100,000 population count threshold and partially synthesize data for riskier geographies. The new synthetic values allow preservation of the level of detail and many of the underlying relationships while providing the level of protection required.”
https://www.census.gov/programs-surveys/cps/technical-documentation/user-notes/2023-cps-puf-changes.html
Bottom quartile are those most heavily affected by “fight for 15” efforts and the like. Raising those wages nominally isn’t as significant as what a C-suite person would get, but percentage-wise shouldn’t they be besting ‘official’ inflation rates on a regular basis over the past 5-10 years?
But who’s in what group? Is the green line CEOs and other executives? The yellow line working professionals and red/blue blue collar workers and down from there? Or is it older (experienced) workers vs younger (inexperienced) workers?
How is this different than the Pareto Distribution where 80% of the wealth is controlled by 20% of the population since the beginning of time?
https://en.wikipedia.org/wiki/Pareto_distribution
Seems like the solution to people’s woes is to move from blue/red to green, ironically that’s the same solution to many political conundrums, leave red/blue behind and embrace the (green) profits.
https://www.census.gov/programs-surveys/cps.html
There is some documentation, but the little that I’ve seen has led me to discount the significance of this dataset (admittedly there is some personal bias against these types of datasets in general). I did find it curious that there is the assumption of a 40-hour work week and they don’t use the average weekly hours.
“The Census Bureau will be rounding and dynamically topcoding hourly and weekly wages. Since July, the Census Bureau modified its initial proposal for rounding wages to minimize impacts expressed by data users conducting wage analyses. Specifically, the upper boundary of our minimum rounding was raised to $29.99 for hourly wages. We also have updated our weekly rounding to better align with the hourly wage rounding rules, assuming a traditional 40-hour work week. The introduction of a new “dynamic” top-coding approach for wage and earnings data that will be applied to a weighted average of the top 3% of values on a monthly basis will be implemented as presented in July.”
https://www.census.gov/programs-surveys/cps/technical-documentation/user-notes/2023-cps-puf-changes.html
75th percentile isn’t very high. Definitely not high enough to only be CEO’s (that would probably be 99% percentile).
75th is almost certainly working professionals (doctors, nurses, lawyers, dentists, accountants, engineers etc) and above.
Massive illegal immigration will fix this
Now you are very much thinking clearly hahaha
When real wages are rising part time employees work less hours. The total is negative. The online boom might be over. Online co cancelled privileges and increased restrictions. Yesterday AMZN became a member of the Dow. In the last few years the world was divided by two : The US vs China. Consumers will have to adjust.
The biggest issue that I am having with CPI/Inflation stats, from our Government, is that I think that they are ALL lies. ALL of them.
Thus, polite analysis from Mish here are over-shadowed by my lack of trust of the very numbers being used for these Analyses.
Yes, my first thought as well. Official statistics are crap and experienced price inflation is much higher than CPI.
Most people only care about relative inflation. As in how it relates to things they do/buy rather than the over all inflation rate.
So if you are buying a lot of things that have experiences high inflation it seems really bad and if you aren’t, it seems a lot tamer than it is.
Given most of our family budget goes towards ‘staples’ such as food, utilities, municipal taxes, and transportation, and that we are on fixed pensions linked to ‘official’ CPI, our personal experience is that we are falling further and further behind each month/year.
Why are you voluntarily reading things that you think you know are fake and lies? Are you intentionally trying to confuse yourself?
You can only opine so much from the current CPI numbers. There’s a false sense that all is well in the market when we all know damn well it isn’t. Your income has been obliterated when looking at the things that actually matter which are living expenses. Those other things in the CPI are manageable since they’re items you can live without or stretch out the useful purpose longer like a car or tv.