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Statistics can be debatable.
According to some scientists, all the ants in the world weigh as much as all the people. But we have to agree on the number of ants and their average weight. While the accepted number of ants used to be 10 quadrillion (10,000 trillion), now some say it’s 20 quadrillion. And, they might have excluded the arboreal ants that would have tipped the scales upward. As a result, depending on your numbers, you could conclude that ants’ weight equals humans or people weigh more.
Measuring Mount Everest, looking at the bottom and the top, we can have a similar debate. To begin, you need to know where sea level starts. When Nepal used the Bay of Bengal, it wound up with the summit at 29,028 feet while China chose the Yellow Sea and got 29,017. Then, for the position of the peak you have to decide whether to include the snow cover.
So yes, whatever the topic, unknowingly and intentionally, we select the data that shape our opinions.
So too for measuring our pay.
Measuring Our Pay
If we wonder whether our wages have stagnated, it makes sense to compare a wage or salary between two dates.
Yes?
Not necessarily. In a list of our criteria, we can select before or after tax income, and add or delete government transfers and benefits.
In a Hamilton Project Report, statisticians created a menu for us. We could pull our numbers from average hourly earnings or the ECI (Employment Cost Index). Other possibilities include median weekly earnings and total compensation. Then, further complicating our computation, if we care about real purchasing power, our inflation lens matters. Is it the Consumer Price Index or Personal Consumption Expenditures? (To calculate Social Security COLAS (cost of living adjustments based on inflation), statisticians use the CPI. Meanwhile the Federal Reserve prefers the PCE.)
Below, you can see that the Employment Cost Index and the CPI diminished wage increases while total compensation data and the PCE told a different story:
Looking more closely, you can see some of the differences:
Our Bottom Line: Pay Measures
Returning to our title, what is our pay recipe?
It all depends on our data menu.
My sources and more: Thanks to the Hamilton Project for my jobs data and to the always interesting BBC’s More or Less for ants info. Then, for more, do take a look at this past econlife and these books from Morten Jerven and Charles Wheelan.
