Greg Mankiw writes:
If I had my way, appeals to the BLS average hourly earnings series would be banished from commentary about wages and the fortunes of the workers -- unless the the commentator explains why that measure is a truer measure of labor compensation than those that include in-kind payments to employees (that is, benefits).
Good point. I am always surprised when I see economists compare wages and productivity using wage measures that exclude fringe benefits. Theory says that productivity should determine total compensation, not cash earnings.
As a presumed target, I have to ask "why?" I thought that everybody knew that wages and salaries were only one component--albeit the largest component--of total compensation. But I also thought that everybody knew that (except at the very top end) differences between growth rates of wages and salaries and growth rates of real compensation were relatively small.
We have pretty good data on short-run and medium-run movements in average hourly wages and median usual weekly earnings. We have pretty bad data on benefits. We know that average total compensation growss about 0.4% per year faster than average wages and salaries, and that the gap is smaller--0.2%?--at the median.
Yes, it would be very nice, it would be better to have median weekly real compensation. But we don't. So why not use what we have got?