American Economic Review: Vol. 101 No. 3 (May 2011)


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Real Wage Index Numbers

Article Citation

Pencavel, John. 2011. "Real Wage Index Numbers." American Economic Review, 101(3): 565-70.

DOI: 10.1257/aer.101.3.565


Real wage index numbers have been used to measure movements in the standard of living of the typical worker. This paper describes some of these indicators for the United States and England. A new real wage index is proposed that resembles the sliding scale used to adjust wages in certain industries years ago. This new index is applied to US manufacturing industry and it implies a fall in real wages by about 40 percent since 1960. Workers' distributional position in US manufacturing has deteriorated considerably.

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Pencavel, John (Stanford U)

JEL Classifications

C43: Index Numbers and Aggregation; leading indicators
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J31: Wage Level and Structure; Wage Differentials
L60: Industry Studies: Manufacturing: General

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