White House releases new measure for wage growth, breaking with work Department: NPR

ARI SHAPIRO, HOST:

The latest jobs report came out today. And while the unemployment rate has not changed from the current 3.9%, the number of people actually affected is wage growth. Today 's report shows that wages rose in August, up 2.9% from last August. Many economists worry that wages will not rise as fast as they should be. And in response to this, the White House released this week a different calculation for wage growth, which gives a higher figure than the official figure of the Department of Labor.

To talk more about it, we are joined by Elise Gould, an economist at the Institute of Economic Policy, who focuses on wages. Thank you for being here in the studio.

ELISE GOULD: Thank you for inviting me.

SHAPIRO: So, without going too far into the jargon, explain the difference between the new way the White House wants to calculate wages and the way most economists, including the Department of Labor, have evaluated that.

GOULD: Of course. And to begin with, I would say that there are many different ways to consider wages. There are many different surveys on wages. The 2.9%, as you said, comes from the Department of Labor report today. And this concerns all workers in the private sector. Year after year, what happened to wage growth? And it is also the growth of nominal wages, so not real. We think of real wage growth or adjusted for inflation, we are talking about rising wages of people with purchasing power.

SHAPIRO: But what is the White House doing differently here? What change is the White House making to get a better number?

GOULD: So, they are trying to change the metric. And they do some key things. One of the things is that they are considering compensation – so non-salary benefits, things like health insurance. They watch paid holidays. They are trying to say, OK, wages are one thing, but there are other benefits that workers can get, and we should perhaps take that into account.

SHAPIRO: So, if someone receives the same paycheck but receives an extra week of vacation each year, that would be a higher figure in this White House calculation than the ordinary calculation of the Bureau of Labor Statistics.

GOULD: Exactly, but know that it would also have been a higher figure last year or the year before. One of the things that the White House does is publish a new issue for this year without really going back in time to see, OK, now we have to somehow change the benchmark.

SHAPIRO: So it's a real comparison of apples to oranges then.

GOULD: It's true. It's a bit like moving the chains and goal posts in the same direction at the same time. And that does not give you a better idea of ​​the current situation.

SHAPIRO: What is the appropriate level of wage growth if there is such a thing?

GOULD: Well, when you think of a growing economy, the Fed has a target inflation rate of 2%. We also want to see what happens with workers who become more productive over time. And this has to do with technology and investments in education and a lot of different things. And it's a trend. The potential is about 1.5. We put these two elements together, then we should consider something like 3.5% or more.

SHAPIRO: So the figure of 2.9% we saw today is much worse.

GOULD: Yes, although 2.9% is honestly better than we've seen.

SHAPIRO: Of course.

GOULD: So there is a certain optimism with this number. I hope it goes up even faster. But the problem is that workers just do not have the kind of leverage they have in the past to go to their employer and ask for pay raises. We have seen a decline, a long-term decline in collective bargaining, an erosion of the minimum wage. We have also seen employers take practices that prevent these workers from having better outside options – for example, things like having to sign non-compact or unprotected clauses. And so, workers can no longer easily get out and try to get other outside options to increase their wages.

SHAPIRO: This figure, a wage growth of 2.9% compared to last year, brings together many people and different types of workers. When you choose it, who are the winners and the losers? Who is better? Who is worse?

GOULD: In general, we always see people at the top doing better than people in the middle. It's increasing inequality. Those at the top have the biggest gains. What you also see in recent years is the lowest gains. So these workers, these low-wage workers at the 10th, 20th percentile – we're actually seeing significant increases in their wages. And I think that part of that is attributable to the growth of the economy, and part of it is attributed to the fact that we have seen a number of minimum wage increases at the level of State who have increased the wages of these workers.

Those who are lost are those in the middle. We are talking about an hourly wage of about 20 dollars. Annual, you know, between $ 40,000, $ 50,000 and $ 60,000. You talk about teachers, manufacturing workers. They see very little growth in wages.

SHAPIRO: Elise Gould is at the Institute of Economic Policy. Thanks for join us.

GOULD: Thank you.

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