Are Low Wage Wages Keeping Up with Inflation

If accommodation and food service wages evolve in October in the same way they have covaried with overall leisure and hospitality service wages, then the answer is yes, for a variety of price indexes.

Figure 1: Average hourly earnings of production and nonsupervisory workers in accommodation and food services, in $/hour, deflated by CPI (black), chained CPI, seasonally adjusted (teal), and CPI-wage earners and clerical (red), into 2020$. NBER defined recession dates peak-to-grough shaded gray. Chained CPI seasonally adjusted by X-12/X-11 ARIMA. October observation on wages extrapolated from leisure and hospitality services average wage over 2021, using log first differences specification. Source: BLS, NBER, and author’s calculations.

So, even though actual CPI exceeded nowcasted CPI (as described in this post), real wages still rose for these workers.

(Aside: Is there a standard error for the estimate of average wages? The technical notes regarding average hourly earnings series indicates: “Average hourly earnings estimates are derived by dividing the estimated industry payroll by the corresponding paid hours.” In other words, the average hourly wage is not calculated by surveying a number of employees to obtain their earnings per hour, and then averaging over all the observed earnings per hour. Hence, there is not a standard error in the sense one might expect. )