Wisconsin: Real Wages Are the Same as They Were in January 2011

In my interview with NPR’s Jim Zarolli, the question came up about wage developments. Embarrassingly, I had no opinion, having not looked at the data (I know that doesn’t stop some people from opining; in any case, that question and lots of other stuff didn’t make it into the piece that aired). Well, I looked up the data, and surprisingly the level of real hourly earnings in May 2015 is the same as it was in January 2011(!).

Figure 1 shows the time series for average hourly earnings for all private workers, deflated by the headline CPI. If you think about it, it’s pretty amazing that the real wage is the same even given the dramatic drop in energy prices in recent months.

Figure 1: Average hourly earnings in 2014$, deflated by CPI all (blue, left axis), and log aggregate weekly hours, generated by multiplying average weekly hours by number of employees (red, right axis). All data pertain to all workers, private sector. Average hourly earnings and average weekly hours seasonally adjusted using ARIMA X-12 (multiplicative), executed in EViews. Gray shaded area denotes NBER defined recession dates. Green shaded area denotes Governor Walker administration. Source: BLS and author’s calculations.

In contrast to Wisconsin’s real hourly earnings increase of only 0.06% since January 2011, US real hourly earnings have risen 1.8%.

The other series displayed in Figure 1 is a measure of aggregate weekly hours. It’s hard to say given the volatility, but it certainly seems that aggregate hours are declining over the last three months. This is troubling given that data from the household survey validates the conclusion from the establishment survey that employment is declining in Wisconsin.

As an intellectual exercise, it is interesting to ask if Wisconsin can go into a downturn while the US does not. Year-on-year civilian employment growth in Wisconsin did go negative in 1985 and 1998 even while US growth did not (there’s also a short dip in 2004). Hence, it is conceivable that Wisconsin’s path could deviate from the US overall.