Obviously if these wage trends continue, wages in China and India will eventually catch up with those in the U.S. But how do we know how fast wages are growing?
Here in the U.S. the Bureau of Labor Statistics produces a measure called the Employment Cost Index (ECI) on a quarterly basis. The ECI not only measures changes in wages, but also provides data on benefits and on total compensation (wages and benefits combined).
Wages change for many reasons. An employer's wages need to remain competitive with other employers' wages to retain and attract the workers needed to keep its operation viable. Workers may achieve higher levels of compensation by investing in training for additional skills and knowledge. Changes in the cost of living, which are reflected in the Consumer Price Index, are often included in compensation. Scarcity or abundance of labor or skills will cause compensation to change. Labor scarcity is often seen in economic boom times, and labor abundance in slack periods. The Great Recession saw substantially lower wage increases (down from 3-3.5% range to lows of around the 1.5% level in 2009 and 2010) with the increased supply of labor (Graph 1). These are just a few of the many factors that influence compensation changes.
Starting in 1975, the ECI has provided a measure of how private-sector wages are changing over time. The incentive to begin measuring compensation changes was the rapid acceleration of both wages and prices at that time. Over the years, various changes and additions have been made to the ECI. Benefits and total compensation were added in 1981. State and local government workers have also been added to the index.
The ECI is released quarterly at the end of January, April, July, and October. All of the ECI data are available at www.bls.gov/ncs/ect, including press releases and data query tools.