National Average Wage Index - NAWI

Categories: Metrics, Econ

NAWI, the National Average Wage Index, measures U.S. wages annually. The Social Security Administration does this wage-measuring every year using federal income tax data and contributions to deferred compensation plans (which is still income...just income that’s deferred until later). NAWI uses the previous year’s average wage and the current year’s average wage to find the percent change between the two.

NAWI is mainly used by the Social Security Admin to see how current wage trends match up with retirement and insurance benefits offered in the U.S.. If NAWI makes it look like there’s wage inflation or deflation, it influences what the Fed (Federal Reserve) decides to do with interest rates.

For example, if there’s wage inflation, raising interest rates would help dampen inflation. And if inflation’s moving at more of a tortoise’s than a hare’s pace, lowering rates can be afforded, which encourages investment and economic growth.

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