The White House Council of Economic Advisers (CEA) on Wednesday pushed back on federal data that shows wages have been stagnant or even falling, arguing that the government figures omit important information.
“Many of the official wage statistics fail to incorporate additional employment benefits such as bonus pay, health insurance and contributions to retirement savings,” the CEA argued in a new paper.
{mosads}Instead of real wages being flat, as indicated by data from the Bureau of Labor Statistics (BLS), the paper argued that wages are rising between 1.4 percent and 1.9 percent when using a different measure of inflation and incorporating measures of benefits such as vacation days and health insurance contributions.
The paper also argued that wage data should include post-tax take-home pay instead of pre-tax dollar amounts, an approach that some economists outside the administration have said is questionable.
“It is unusual to adjust measures of wages for taxes,” said Gabriel Chodorow-Reich, an economist at Harvard University. “Among other things, wages are earned by individuals but taxes are paid by households. Moreover, a one-time tax cut provides a one-time boost to the growth rate of after-tax income. It is not appropriate to extrapolate after-tax wage growth over multiple years using a one-time tax cut.”
Democrats have hammered Republicans for the 2017 GOP tax bill, saying it led to an explosion of corporate profits and increased wealth for stockholders while doing very little to move the needle on regular workers wages.
BLS data suggests that real wage stagnation is nothing new and that wages have barely budged since former President Clinton was in office during the 1990s.
Jay Shambaugh, an economist at the Brookings Institution’s Hamilton Project and a member of the CEA under former President Obama, noted that even the proposed adjustments would not change the trend lines for wages.
“The reality is real wage growth is lower right now,” he said. “If they want to say it’s not zero, they’ve made proper adjustments to make that case. But it won’t change the story looking back.”
The White House acknowledged that even using its proposed measures, wage growth under the Trump administration has maintained the same pace.
“The wage growth data isn’t radically higher than we had in 2015,” said Kevin Hassett, the chairman of the CEA, in a call to reporters.
“That’s something we’ll have to wait and see what the data says in the second half of the year,” he added.
He said that by then he expects the tax law to start having a more visible effect on productivity and capital formation, which would in turn lead to higher wages.
But some economists agree that BLS data is not the best indicator of wage growth.
Mark Zandi, chief economist at Moody’s Analytics, told The Hill in a recent interview that BLS data on average hourly earnings was the worst measure of wage growth because it was skewed by the kinds of jobs that were being created and lost.
Zandi argued that the employment cost index was a better measure, and that it showed real wages starting to perk up at a rate of roughly 1 percent in real terms.
Updated at 1:03 p.m.