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A Project of The Annenberg Public Policy Center

O’Malley’s Mangled Wage Statistic

Democratic presidential contender Martin O’Malley claims that “70 percent of us are earning the same or less than they were 12 years ago.” That’s not correct. Actually, weekly paychecks for rank-and-file workers are 6.6 percent higher than they were a dozen years ago, even after adjusting for inflation.

O’Malley was citing figures that don’t reflect a spike in real wages and earnings that has taken place over the past year or so. Real hourly wages are up 2.3 percent since the end of 2013, and they have risen faster for rank-and-file workers than for supervisors. Real weekly earnings are up even more, thanks partly to a slightly longer average work week.

O’Malley, a former governor of Maryland, made the claim in his May 30 speech formally announcing that he is running for his party’s nomination. And he repeated it the following day when he appeared on ABC’s “This Week” with George Stephanopoulos.

An Outdated Source

When we asked where O’Malley got his figure, a campaign spokeswoman told us it came from a report by the Economic Policy Institute, released June 4 last year. But the figures in that report are now badly out of date, and didn’t quite back up what O’Malley said anyway.

The EPI found that between 2000 and 2013, real hourly wages of the lowest-earning 30 percent of workers did indeed fall, and those workers in the range between 30 percent and 40 percent saw no increase at all. But EPI’s figures (see table 1 on page 11) show wages for all but the bottom 40 percent increased at least a bit. For those between the bottom 40 percent and the top 30 percent, the increase ranged from 0.1 percent to 0.2 percent annually. EPI characterized this group’s wages as “essentially stagnant,” and we would not disagree with that. But it’s not the same thing as “earning the same,” as O’Malley claimed.

In a more recent report, released Feb. 19, EPI found that real wages fell for nearly all groups between 2013 and 2014, rising only for the bottom 10 percent and those in the 40th percentile. (See Table 1.)

However, EPI’s figures are based on year-to-year comparisons, and thus fail to reflect a remarkable and broad spike in real wages and earnings recorded in more recent, month-to-month figures published by the U.S. Bureau of Labor Statistics.

EPI’s research and policy director, Josh Bivens, said this rise will be reflected in the group’s next annual report. “It’s true that real wages over the past 12 months have been pushed up a lot by falling oil prices, but, I think that’s clearly a temporary phenomenon and those gains will be clawed back when oil prices rise in the future,” Bivens told us. “But they have definitely provided a boost to purchasing power in the short-term, it’s true.”

As we’ve noted before, falling prices for gasoline and other fuels have actually pushed down the Consumer Price Index recently, which in turn has helped push up the purchasing power of the dollar.

A Spike in Real Wages and Earnings

Temporary or not, the gains have been substantial and broad. “Real” hourly wages, which the Bureau of Labor Statistics expresses in constant 1982-1984 dollars to adjust for inflation, have increased by 2.3 percent since December 2013, after a long period of stagnation or decline since the end of the Great Recession in 2009.

That figure is for all employees in the private workforce taken together. (Both the EPI and BLS wage and earnings figures cover only private sector employees, and exclude government workers.) BLS does not provide statistics broken down by wage level percentiles, as the EPI report did. But it’s clear the recent gains were not concentrated at the top.

BLS does provide a breakdown for “production and nonsupervisory” employees, who make up 82 percent of all workers, and who are paid less on average than their bosses. Those rank-and-file workers have seen their real hourly wages go up 2.7 percent since the end of 2013, an even bigger increase than the average for all workers.

It’s also worth noting that O’Malley used the word “earned,” and weekly earnings have risen even faster than hourly wages recently. That’s because workers are putting in slightly more hours than they did at the end of 2013. Since December 2013, weekly paychecks have gone up 2.9 percent for all workers, and 3.1 percent for rank-and-file workers.

We also looked at how real earnings — the measure O’Malley used — stacked up against those of “12 years ago” — the time period he specified. And it turns out that as of April, weekly paychecks for rank-and-file, nonsupervisory employees were 6.6 percent higher than they were in April 2003.

–Brooks Jackson