The Atlanta Fed Gets It

I am sure we sound like a broken record when it comes to AVERAGE wage growth. We’ve pointed out that as Baby Boomers retire at high salaries, and young people enter the labor market at low salaries, of course the average will be lower.  We’ve worried that salary budgets of 3.0% meant to cover all range of employees – whether they are in “hot” geographical areas or possess scarce skills – leads to companies making poor merit increase decisions.

The Atlanta Fed has figured out a methodology of looking at wage growth that measures the growth of wages for those that stay in jobs, therefore measuring income growth for non-job changers.  The Wage Growth Tracker is the time series of the median wage growth of matched individuals. This is not the same as growth in the median wage.

But Look at Charts 2 and 3. You may have learned in stats class that the median is important because it strips out the noise at the top and the bottom.  But this time look at the noise! Follow the 25th and 75th percentiles in Chart 2 to see the tops and the bottoms.  See that some workers are receiving 14% or 15% increases and ask yourself: do I have any employees that fit that profile? If I do – how can I address that? Then look at the 25th percentile and ask about what is happening with the negative increases?  What competitive factors are driving that?

Lastly, drop to the bottom chart.  That’s the percentage of workers receiving 0% increase. Another big why? Are companies diverting that small pool to the 14%? Is there a failure to invest in skills?

We do not have all the answers, but we hope we have framed the questions that folks should be asking. Read More Here

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