I was looking at a debate between Mr. Davis and Mr. Perry over inflation. Mr. Davis started out the debate with this provocative article, American Families Are Right To Be Worried About Inflation, and Mr. Perry responded with his own chart showing that average hourly earnings grew faster than inflation. Since I do the grocery shopping for our family my gut feeling says we are experiencing mild inflation in excess of wage growth. So who is right? In almost all cases like this I go over to FRED and chart some data.

My first reaction to the debate was Mr. Perry’s selection of average wage earnings. The logical choice would have been real disposable income since it removes personal current taxes and inflation and is readily available at FRED. For the average person the only wage growth that matters is what they have after taxes.

If we look at a Fred graph of real disposable personal income versus the two CPI measurements, we can see that the graph confirms Mr. Davis’s statements who claims that “food inflation blows away wage growth” and “food prices have soared since 2009”. If we adjust the real disposable personal income for population growth, the difference is even more dramatic. So what is the best way to measure wage growth, average wage earnings or real disposable personal income per capita? They tell different stories.

The graph is shown below. Here is a link to the FRED graph, http://research.stlouisfed.org/fred2/graph/?g=Gix.