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Wage growth describes how worker pay changes over time. The number can be measured in several ways, and the interpretation changes depending on whether the data are hourly or weekly, nominal or inflation-adjusted, and based on payroll records or employer compensation costs.
Nominal wage growth
Nominal wages are measured in current dollars. If hourly pay rises from $25 to $26, nominal pay increased 4%. That tells you the paycheck is larger, but not whether it buys more.
Real wage growth
Real wages adjust nominal earnings for inflation. When wage growth exceeds inflation, purchasing power generally improves. When inflation rises faster than wages, real purchasing power generally falls.
Average hourly earnings
The Current Employment Statistics survey produces average hourly earnings for employees on private nonfarm payrolls. It is timely and widely used, but changes in the mix of industries and workers can affect the average.
Weekly earnings add hours worked
A worker can receive the same hourly wage but earn more or less in a week depending on hours. BLS therefore publishes both hourly and weekly earnings measures. Changes in the average workweek can cause weekly earnings to move differently from hourly earnings.
The Employment Cost Index
The Employment Cost Index, or ECI, measures changes in employer labor costs, including wages, salaries, and benefits. Because it controls for changes in the occupational and industry mix, it can provide a different view of compensation pressure than average hourly earnings.
Median wages vs. average wages
An average can be pulled upward by high earners. Median wage measures can answer a different question: what does the worker in the middle earn? No single wage series is always best; use the measure that matches the question.
Why wage growth matters
- Households: pay growth affects purchasing power and saving capacity.
- Businesses: labor costs affect margins, pricing, and hiring decisions.
- Inflation analysis: persistent compensation growth can matter for service-sector costs, although wages are not the only driver of inflation.
- Monetary policy: policymakers watch compensation along with productivity and inflation.
How to read wage headlines
- Check whether the number is hourly, weekly, annual, median, or average.
- Identify the worker group covered.
- Check whether the number is nominal or inflation-adjusted.
- Compare with inflation over the same period.
- Look at several months and revisions.
Continue learning
Read Real Wages vs. Nominal Wages, Understanding the U.S. Job Market, and visit the Jobs & Wages hub.
Sources & methodology
EconomicHQ standard
Sources, dates, and methodology matter.
EconomicHQ prioritizes primary sources for consequential financial and economic claims and identifies reporting periods for changing information. This article is educational and does not provide individualized financial, investment, tax, legal, or credit advice.