Remember that ad from the 1980s where that woman keeps asking “Where’s the beef?” I’m feeling a little like her these days, asking “Where’s the wage growth?” It’s true that the labor market continues to chug along. The unemployment rate has been at or below 4.0 percent for the last 16 months, yet, I still find myself looking for the beef—in this case, stronger wage growth.

Earlier this week in EPI’s Macroeconomic Newsletter, Josh Bivens posited two different ways to measure wage growth using the establishment survey (CES) data that’s released every jobs day. The first measure, as EPI typically uses in our nominal wage tracker, tracks growth each month relative to the same month the prior year. For the second, he looks at quarter to quarter changes (at an annualized rate for comparison). While year over year, it’s pretty clear that wage growth has flat-lined in recent months and has yet to reach the Federal Reserve’s target zone (given inflation targets and productivity potential), the second measure shows clearly that there’s actually been a deceleration in wage growth this year. The Employment Cost Index, released yesterday, also shows a marked deceleration in private sector wage growth.

While those data provide plenty of evidence of a slowdown in the rate of wage growth and sufficient justification for the Fed’s decision yesterday to cut interest rates, I decided to take a look at another survey to continue to investigate trends in wage growth over the last year as well as the last several. Using the Current Population Survey (CPS), we can see what’s happening across the wage distribution as well as growth by various demographic characteristics. To be clear, the CES is one of the most reliable measures of wage (and employment) growth because of its large sample size and benchmarking, but it only provides information on average wages for very large groups of workers. The CPS gives us texture at the cost of increased volatility.

Here, I examine annual averages for the year ending in June of each year, combining the first half data in the stated year with the second half data in the prior year. All wages are in 2019 dollars (meaning the average of July 2018 through June 2019). Using this metric, real average hourly wages in the CPS grew 2.4 percent between 2018 and 2019. Table 1 below shows real wages by wage percentile for the pooled 12-months ending in June 2000, 2007, 2017, 2018, and 2019, with annualized changes between each set of years shown at the bottom of the table. Compared to recent years, there appears to be somewhat more broadly based growth in wages across the distribution. The median finally is showing some signs of life, increasing 2.7 percent since last year, after a decline in between 2017 and 2018. The top—here limited to only the 95th percentile of the wage distribution—grew at 2.8 percent over the last year. (Other surveys are better at measuring the concentration of wage gains at the very top.)

This type of broad-based growth, with particular strength at the bottom of the wage distribution, is to be expected as unemployment stays quite low by historical standards. When the unemployment rate falls, even as more potential workers are drawn into the labor market, available workers of all types become scarcer and employers have to increase wages to attract and retain the workers they want.

Lower unemployment has, in the past, benefited low-wage workers more than middle-wage workers and middle-wage more than higher-wage workers.

The notable weakness in the last year was for the lowest wage workers; the 10th percentile wage fell in real terms between 2018 and 2019 after rising an average of nearly 3 percent in the previous four years. (There was a rise in the 10th percentile nominal wage, but inflation took away all of those gains.) Given that the economy continued to exhibit low unemployment and wage growth had been relatively strong at the bottom prior to this year, this result may be surprising. I’ve discussed before that there are two factors driving wage gains at the bottom in the years before 2019: a tightening labor market AND state-level minimum wage increases over the last several years.

A cursory examination of the latest minimum wage increases suggest that some of the latest increases are not only on top of a few years of increases in those same states, but also are now reaching a bit higher into the wage distribution and hence potentially bypassing workers at the (national) 10th percentile. For example, the latest minimum wage changes in California, Massachusetts, and Washington increased the minimum from $11 to $12 an hour. And, the minimum wages in Colorado, Oregon, New York, Maine, and Arizona are at or above $11 an hour. Even $11 an hour is higher than the 10th percentile of the national wage distribution (at $10.02). So, the latest state-level minimum wage action may actually not be very well captured by the 10th percentile. Further, the drop in the 10th percentile over the last year was on the heels of a relatively strong increase between 2017 and 2018. Taken together, wages grew 1 percent on average for the lowest wage workers over the last two years. The 20th percentile has done better over the last two years, and in fact exhibited the strongest growth (+2.6 percent annualized) over the last two years compared to any other decile, including the 95th percentile.

In general, the trends in wages for most workers over the last year, while welcome, still have left many of these workers just beginning to make up for lost ground. Figure A below shows cumulative real wage changes by decile since 2000 and 2007. Rising wage inequality continues to be a defining feature of the American economy. Because of the recent uptick in wages for the 20th and 30th percentiles over the last year on top of steady increases in prior years at the 10th percentile, wage growth is in the rough shape of a checkmark with stronger growth at the bottom attributed to several consecutive years of state-level minimum wage increases and a growing economy, while the fastest growth at and near the top is a continuation of the trends in growing inequality since the 1970s. In the last three to four decades of growing inequality, high-wage workers have had more leverage to bid up their wages faster than others. That trend has continued through the 2000s.

The longer term trend of rising inequality is troubling as is the recent slowdown in wage growth. Hopefully, the data that gets released on Friday will reverse this recent hiccup in wage growth and will show continued strength as the economy trudges on toward full employment.