Stop claiming that wages are starting to rise
Matthew Martin
6/02/2015 08:44:00 AM
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"total compensation per hour is rising more rapidly" —Martin Feldstein
"inflation-adjusted annual earnings growth, which you can see has accelerated a lot since last winter" —Matthew YglesiasUm, no:

The truth is that wages don't do very much, in general. You can see from the graph above that actual nominal wage growth is basically flat. Commentators like to look at annual percent changes where it's easier to see changes, but the presentation of those graphs tend to dramatically overstate the volatility in wage growth. Here's what happened to wages during the Great Recession, in context:

My point here is that nominal wage growth is extraordinarily sticky. This fact is underappreciated in both academic circles and the commentariat. In academia, macroeconomists need to recognize that we're working with a New Keynesian world with sticky wage growth not Calvo pricing. In the commentariat, columnists need to understand that wage trends just don't change fast enough to do real-time commentary, and that in general volatility in real wages has a lot more to do with inflation than wages.