Data Suggest Wage Gains Could Be Only Statistical

In the last post I noted that average hourly earnings surprisingly increased at an accelerating rate, even as employment fell significantly. As a lower demand for workers will usually result in a lower price (lower wage), that should mean that wage increases should be decelerating instead of accelerating. As I noted, there are two possible explanations for this (or three if you count the combination of the two as a distinct explanation). It could be a statistical illusion, as disproportionate job losses for low paid workers will increase the average wage without anyone actually getting a wage/salary hike. Or it could result from a reduction in effective supply, in the sense that workers demand higher pay. Such demands will result in some not getting any job, but that those that do get a job will be better paid.

Yesterday, I found no signs of the "statistical illusion"-explanation after having studied data sector-wise. However, after having today studied other tables, I did find one that gave some support for it. Namely, the one that sub-divided employment and unemployment according to educational status. While there are many individual exceptions to this rule, it is generally the case that people with a high level of education earn more than people with a low level of education. And so, educational level could be used as a proxy for earnings.

As it happens, employment for high school drop-outs fell dramatically in November, while employment for those with only a high school diploma also fell significantly. Meanwhile employment for those with "some college" (less than a bachelor's degree) rose slightly and employment for those with a bachelor's degree or more was unchanged.

While not completely conclusive, it does give support for the "statistical illusion" hypothesis.