THREAD (1/4): Price inflation can hurt but "real wage" is not a great gauge:
1. Consumption heterogeneity: We measure “real wages” top-down, not bottom up. We do measure financial balances bottoms-up: allows us to compare effect of prices on expenditures vs income gains (see QT)

2/4
2. Volatility effects: Real wages are most locally correlated to most volatile price, usually oil. Is fracking vs OPEC really a domestic macro-labor phenomenon?
3. Employment nonlinearities: Getting hired (no income to some income) isn't counted

3/
4. Fiscal transfer benefits: Topping up incomes when employment opportunities are scarce
5. Distributional wage dynamics: Lower-wage workers might be getting ahead (or falling behind), but division of two aggregates will mask whatever's going on under the hood.

4/4

Composition bias: Wage growth can go up or down for reasons that have to do w/ whether low-wage workers are disproportionately hired/fired. Others look only select for those who are continuously employed over a 12 month period.

PS Here's one big thing the emphasis on real wages tends to miss...

PPS It's very easy to cherry-pick both the wage measure and the price deflator in order to suit your argument.

Another reason why I'd prefer working with measures built from microdata informed by both incomes and expenditures (financial balances).