Time to stop being average?

Weekly Updates

An alarming trend has developed in the media and social media. There is a tendency to confuse wage growth with average earnings growth. Often this would not matter, but right now this is a dangerous error. They are not the same.
Wage growth signals whether working households can increase their spending. Savings, credit, and workforce participation rates are also relevant, but wage growth is the big issue. Whether a poor economist, toiling away in their dark, dank office, receives more compensation for their invaluable work makes a difference to the economic outlook.
Average earnings are not wage growth. Because average earnings are an average, they are affected by what sort of jobs exist. If no one in the economy receives a pay rise (wage growth of zero), but low-income employees lose their jobs, average earnings will rise because fewer low-paid workers drag down the average.
There is anecdotal evidence that employers of lower-skilled labor have increased automation and changed working practices to get more output from fewer workers. That means that a lower-income job may become a lower share of overall employment, at least for the near term. The implication is that confusing average earnings with wages will create an unfairly optimistic view of household income.