Mean And Median Average Hourly Earnings Growth Compared

Anonymous tells a story about an old engineer regaling people with aphorism like “you may know the significant digits but do you know the significance of the number”, in talking about what the average joe is experiencing. Here are some easily calculated numbers showing the distinction between mean and median average hourly earnings (note that median usual weekly earnings are the product of median earnings and median hours worked).

Figure 1: Year-on-year growth of average hourly earnings from CES adjusted by Chained CPI (bold black), median average hourly earnings calculated from CPS data (tan), median of lowest quartile calculated from CPS data (blue). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, Atlanta Fed, NBER and author’s calculations.

Note that the median and median of lowest quartile wage growth have been rising faster than the average wage over the past few months.

Since Atlanta Fed’s wage tracker only reports growth rates, I can only show cumulative growth relative to a given date, for medians.

Figure 2: Cumulative growth of average hourly earnings from CES adjusted by Chained CPI (bold black), median average hourly earnings calculated from CPS data (tan), median of lowest quartile calculated from CPS data (blue), relative to 2019M07. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, Atlanta Fed, NBER and author’s calculations.

The cumulative median wage growth has lagged the average. However, as I have noted previously, the lower income groups — such as those in leisure and accommodation services — have shown bigger gains. This is shown in the blue squares in Figure 2.

Previous posts on median wages, see hereherehere.

In sum: engineers are not the only ones who think about the significance of the numbers.


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