Reconciling the Divergence in Aggregate U.S. Wage Series

Abstract: Average hourly wages from the Labor Productivity and Costs (LPC) program, the Current Population Survey (CPS) and the Current Employment Statistics (CES) survey have diverged, both in trend and volatility. Supplements and irregular earnings of high-income workers, included in the LPC but not in the two other datasets, have grown more rapidly and have become more volatile, accounting for most of the divergence between LPC and CPS earnings. The more restrictive worker coverage in the CES explains a large part of the divergence between CPS and CES earnings. The results have important implications for the choice of wage series in macroeconomic analysis.