THE LONG-RANGE ECONOMIC ASSUMPTIONS

FOR THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY

SOCIAL SECURITY ADMINISTRATION

August 31, 2021
Page 2

PRINCIPAL ECONOMIC ASSUMPTIONS

OVERVIEW

Sections

1 PRODUCTIVITY

2 PRICE INFLATION

3 AVERAGE REAL WAGE DIFFERENTIAL

4 UNEMPLOYMENT RATE

5 ANNUAL TRUST FUND REAL INTEREST RATE

6 RATIO OF OASDI TAXABLE PAYROLL TO COVERED EARNINGS
Overview, Page 1

OVERVIEW

Each year, the Board of Trustees of the Federal Old-Age and Survivors Insurance (OASI) and 

Disability Insurance (DI) Trust Funds provides an annual report to the Congress on the financial 

and actuarial status of the program. For this report, the Office of the Chief Actuary (OCACT), on 

behalf of the Board of Trustees, projects future cost and income based on three separate sets of 

long-range (75-year) assumptions for key economic variables. The intermediate (alternative II) 

set of assumptions represents the Trustees’ best estimate for future experience, while the low 

cost (alternative I) and high cost (alternative III) sets of assumptions represent more and less 

favorable scenarios, respectively, from the perspective of program cost and income as a percent 

of taxable payroll. The intermediate assumptions are also used as the point of comparison for 

sensitivity analysis and the central tendency for the stochastic projections presented in the 

OASDI Trustees Report. This memorandum presents the long-range economic assumptions used 

in the 2021 Annual Report of the Board of Trustees. 

The 2020 Trustees Report, which was released on April 22, 2020, did not reflect any 

potential effects of the COVID-19 pandemic and ensuing recession. The assumptions 

presented here for the 2021 Trustees Report include the Trustees’ best estimates of the 

effects of the pandemic and recession as of May 2021. At that time, there was, and still is,

no consensus on what the lasting effects of the pandemic and recession on long-term 

experience might be, if any. Given the unprecedented level of uncertainty, the Trustees 

have assumed that the pandemic and recession will have no effect on the individual longrange ultimate assumptions.

On June 8, 2020, the Business Cycle Dating Committee of the National Bureau of Economic 

Research determined that a peak in quarterly economic activity occurred in the fourth quarter of 

calendar year 2019.1 The peak marks the end of an economic cycle, which began in the fourth 

quarter of calendar year 2007. Consequently, in the analysis that follows, we have included the 

latest complete economic cycle ending in 2019.

The key economic variables include the average annual percentage changes in total-economy 

productivity, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), 

and the gross domestic product (GDP) deflator, as well as the average real wage differential, the 

unemployment rate, the annual trust fund real interest rate, and the taxable ratio. Total-economy 

productivity is the ratio of real GDP to total hours worked. The real wage differential is the rate 

of change in the average OASDI covered wage less the rate of change in the CPI-W. The OASDI 

taxable ratio is the share of OASDI covered earnings that is subject to the payroll tax. 

The following changes have been made to the long-range economic assumptions for the 2021

report: 

(1) An increase in the long-range average real wage differential for the last 65 years of the 

75-year projection period from 1.14 percent to 1.15 percent; and

 1 See https://www.nber.org/cycles/june2020.html.
Overview, Page 2

(2) A decrease in the ultimate age-sex-adjusted unemployment rate from 5.0 percent to 4.5

percent.

There are no changes in the other long-range economic assumptions. 

Table A.1, below, lists the assumed long-range future values for these key economic variables in 

the 2021 Trustees Report alternatives I, II, and III. 

Table A.1: Key Economic Assumptions and Summary Measures for the Long-Range (75-year) Projection Period

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

Long-Range Assumptions

(last 65 years except as noted ) I II III I II III I II III

Average Percentage Change In:

Productivity 

(Total-Economy) 1.93 1.63 1.33 1.93 1.63 1.33 0.00 0.00 0.00

Prices (CPI-W) 3.00 2.40 1.80 3.00 2.40 1.80 0.00 0.00 0.00

Prices (GDP Deflator) 2.75 2.05 1.35 2.75 2.05 1.35 0.00 0.00 0.00

Price Differential

(GDP Deflator less CPI-W) -0.25 -0.35 -0.45 -0.25 -0.35 -0.45 0.00 0.00 0.00

Real Wage Differential 

(Percent) 1.77 1.15 0.53 1.76 1.14 0.52 0.01 0.01 0.01

Unemployment Rate (Percent) 3.50 4.50 5.50 4.00 5.00 6.00 -0.50 -0.50 -0.50

Annual Trust Fund Real 

Interest Rate (Percent) 2.80 2.30 1.80 2.80 2.30 1.80 0.00 0.00 0.00

OASDI Taxable Ratio (in tenth 

projection year) 0.840 0.825 0.810 0.840 0.825 0.810 0.000 0.000 0.000

The remainder of this section provides brief descriptions and summary information for the key 

economic variables, as well as the assumed values for alternative II.

Productivity: The rate of growth in total-economy productivity is the fundamental component 

contributing to the real growth rate of GDP and average earnings. OCACT uses a weighted 

average of the productivity growth rates in economic sectors, where the weights are the shares of 

each sector in total GDP. The economic sectors include the nonfarm business sector, the farm 

sector, the household sector, the nonprofit institutions sector, and the general government sector. 

In the long-range period, OCACT assumes that the sector weights are approximately fixed at 

recent levels. Based on an analysis of the data and future trends, the ultimate assumed growth 

rates for the sectors are as follows: 2.00 percent for the non-farm business sector, 2.00 percent 

for the farm sector, 1.63 percent for the household sector, 0.00 percent for the nonprofit sector, 

and 0.00 percent for the government sector. The weighted average of the assumed sector

productivity growth rates is equal to the Trustees’ assumed ultimate average annual rate of

growth in total-economy productivity of 1.63 percent, which is the same ultimate rate used in the 

2020 report.
Overview, Page 3

Price Inflation: The rate of growth in the CPI-W is used to determine the cost of living 

adjustment (COLA). The average annual growth rate in the CPI-W (adjusted for past changes 

made in computation) was 3.62 percent over the last six complete economic cycles, from 1969 to 

2019, and 2.20 percent over the last three complete economic cycles from 1990 to 2019.

2

OCACT expects that monetary policy will continue to target relatively low inflation, but will be 

more willing to have periods of somewhat elevated inflation, and will not be able to prevent 

occasional bursts of inflation caused by demand and supply shocks over the long-range period.

Accordingly, the ultimate average annual percentage change in the CPI-W is assumed to be 2.4

percent, which is unchanged from the 2020 report.

The GDP deflator is another measure of price inflation. It is used in projecting the level of 

aggregate nominal GDP and wages and, therefore, OASDI tax revenues. The ultimate assumed 

long-range average annual growth rate in the GDP deflator is 2.05 percent, or 0.35 percentage 

point below the 2.4 percent assumed ultimate average annual growth rate in the CPI-W. The 

price differential of -0.35 percentage point is the sum of -0.3 percentage point due to

computational difference and -0.05 percentage point due to coverage difference. The GDP 

deflator and the price differential assumptions are the same as those used in the 2020 report.

Average Real Wage Differential: Annual real wage differentials vary to a small degree over the 

last 65 years of the 75-year projection period (i.e., for 2031 through 2095), averaging 1.15

percentage points, or 0.01 percentage point higher than in the 2020 report. The change is 

consistent with the Centers for Medicare and Medicaid Services’ (CMS) projection of slightly 

slower average growth in employer-sponsored group health insurance (ESI) as a share of GDP.

The Trustees assume that after the first ten years of the long-range projection period, the average 

annual rate of change in the average OASDI covered wage will be approximately the same as for 

(1) average U.S. wages and (2) average U.S. earnings (which include the self-employed). The 

average annual real growth rate in average U.S. earnings is assumed to be 1.13 percent over the 

65-year period. This reflects average annual changes of 1.63 percent for total-economy 

productivity, -0.35 percent for the price differential, -0.10 percent for the ratio of earnings to 

compensation, 0.00 percent for the ratio of compensation to GDP, and -0.05 percent for the 

average hours worked per week. 

Unemployment Rate and Labor Force: Unemployment rates and the labor force together 

determine employment, which is fundamental to projecting GDP and aggregate levels of 

earnings and compensation. The aggregate civilian unemployment rate, adjusted for the 2011 

age-sex distribution of the labor force, averaged about 5.6 percent over both the last six complete 

economic cycles from 1969 to 2019 and the last three cycles from 1990 to 2019. As noted in the 

2020 report, the Trustees believe that there has been a structural shift in the components of 

employment, such that the future age-sex-adjusted unemployment rates will average lower than 

 2 Consecutive NBER defined peak years are used to define each economic cycle, except that OCACT uses 

the 1979 through 1990 period as an economic cycle. NBER identified January 1980 as a peak month, but 1979 is 

more representative of a peak on an annual basis. NBER also identified a peak in July of 1981. This brief 18-month 

economic cycle is merged to the 1981 to 1990 cycle to form the 1979 to 1990 cycle.
Overview, Page 4

they did over the last six complete economic cycles. Therefore, the ultimate civilian age-sex 

adjusted unemployment rate is assumed to be 4.5 percent, which is 0.5 percentage point lower 

than the rate used in the 2020 report.

For the 2021 Trustees Report, OCACT also updated the labor force model, which is now 

estimated based on data including the latest complete economic cycle. The relationship between 

unemployment and labor force in the updated model is in closer alignment with the structural 

shift in the relationship between unemployment rates and labor force participation rates, 

mentioned above.

Annual Trust Fund Real Interest Rate: The real interest rate (real effective annual yield) on the 

special public debt obligations issuable to the trust funds for a given year is defined as the 

nominal effective annual yield adjusted for the increase in the CPI-W for the first year after 

issue. Real ex-post (actual) interest rates on long-term Treasury securities averaged 2.70 percent 

over the last six economic cycles (from 1969 to 2019) and 2.39 percent over the last three

complete cycles (1990-2019). However, real interest rates have been substantially lower recently, 

averaging just 0.84 percent for the last complete cycle (2007-2019). The extreme low rates 

appear to be due in part to the weak economy in most of the developed world.

The assumed ultimate real interest rate for new issues is 2.3 percent, which is the same as in the 

2020 report, and 0.4 percentage point lower than was assumed for the 2018 report. This ultimate 

assumption is consistent with a sustainable domestic fiscal policy over the long-range period and 

a gradual return to the sustainable rate of economic growth throughout the developed world.

OASDI Taxable Ratio: The OASDI taxable ratio is the share of OASDI covered earnings that is 

subject to the payroll tax. It is a fundamental component to projections of taxable payroll. This 

ratio declined substantially between 1983 and 2001, with the decline slowing substantially or 

ceasing since then. After reaching a low point of 82.6 percent for 2000, the ratio has been largely 

at or above that level, roughly stabilizing since 2012. The ratio is assumed to reach 82.5 percent 

in the tenth projection year (2030 for the 2021 report) and remain near this level thereafter, 

which is the same ratio assumed for the 2020 report. 
Productivity, Page 1

1. PRODUCTIVITY

THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

1 PRODUCTIVITY................................................................................................................... 2

1.1 SUMMARY ............................................................................................................................................................. 2

1.2 RECENT BEA AND BLS DATA REVISIONS .......................................................................................................... 2

1.3 PRODUCTIVITY GROWTH RATES FOR MAJOR SECTORS AND OVER LONG TIME PERIODS AND ECONOMIC 

CYCLES .............................................................................................................................................................................. 3

1.3.1 Sector Productivity Growth Rates.................................................................................................................... 5

1.3.1.1 Nonfarm Business (NFB)............................................................................................................................ 5

1.3.1.2 Farm........................................................................................................................................................... 6

1.3.1.3 Nonprofit Institutions (NI) .......................................................................................................................... 6

1.3.1.4 General Government (GOV) ....................................................................................................................... 7

1.3.1.5 Households................................................................................................................................................. 8

1.3.2 Total-Economy Productivity Growth Rate.......................................................................................................10

1.4 FUTURE EXPECTATIONS ..................................................................................................................................... 10

1.5 PROJECTIONS FROM OTHER SOURCES ............................................................................................................... 12

1.6 APPENDIX............................................................................................................................................................ 18

TABLE OF TABLES PAGE

TABLE 1.1: ASSUMED ULTIMATE ANNUAL RATES OF INCREASE IN TOTAL-ECONOMY PRODUCTIVITY .......................... 2

TABLE 1.2: HISTORICAL AVERAGE ANNUAL RATES OF INCREASE IN TOTAL-ECONOMY PRODUCTIVITY AND ITS 

COMPONENTS (%)......................................................................................................................................................... 3

TABLE 1.3: ULTIMATE AVERAGE ANNUAL RATES OF INCREASE IN TOTAL-ECONOMY PRODUCTIVITY AND ITS 

COMPONENTS FOR THE 2021 TRUSTEES REPORT ........................................................................................................ 4

TABLE 1.4: TOTAL-ECONOMY PRODUCTIVITY: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 2012.... 14

TABLE 1.5: NONFARM BUSINESS PRODUCTIVITY: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 2012 16
Productivity, Page 2

1 Productivity

1.1 Summary

For the 2021 Trustees Report, the assumed ultimate annual rates of increase in total-economy 

productivity are 1.93 percent, 1.63 percent, and 1.33 percent for alternatives I, II, and III, 

respectively, as shown in Table 1.1. These rates of increase are unchanged from those used in the 

2020 Trustees Report. The assumed rates of increase for total-economy productivity are 

consistent with assumed ultimate annual rates of increase in nonfarm business productivity of 

2.36 percent, 2.00 percent, and 1.63 percent for alternatives I, II, and III, respectively.

Table 1.1: Assumed Ultimate Annual Rates of Increase in Total-Economy Productivity

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

I II III I II III I II III

Total-Economy Productivity 1.93 1.63 1.33 1.93 1.63 1.33 0.00 0.00 0.00

Total-economy productivity is defined as the ratio of real gross domestic product (GDP) to total 

hours worked by all workers in the U.S. economy. The Bureau of Economic Analysis (BEA) 

estimates historical values for real GDP in its National Income and Product Accounts (NIPA). 

The Bureau of Labor Statistics (BLS) provides total hours worked based mostly on data from its 

Current Employment Statistics (CES) Survey.

This section is divided into four subsections. The first reviews recent BEA and BLS revisions to 

real GDP and total hours worked. The second decomposes total-economy productivity by major 

sector and analyzes differences in sector productivity growth over time. The third discusses 

various views in the economic literature on the possible future paths of productivity growth. A 

final subsection describes alternative long-run projections from private forecasters.

1.2 Recent BEA and BLS Data Revisions

BEA made a regular annual update of the NIPA data on July 30, 2020.

3 This update affected data 

back to 2015. Compared to the values published in October 2019, the nominal GDP estimate was 

revised up by less than 0.1 percent for 2015, by about 0.2 percent for 2016 and 2018, and by 

about 0.1 percent for 2017. Real GDP was revised up by about 0.2 percent for 2015 through 

2017 and about 0.3 percent for 2018.

BLS also revised its estimates of total hours worked for year 2015 and later. Compared to last 

year’s estimates, hours worked are lower by about 0.1 percent in 2018, and little changed for 

other years. The slightly lower average growth rate in total hours worked in the revised

estimates, combined with a slightly higher average growth rate in real GDP, implies a slightly 

higher average rate of productivity growth since 2015. 

 3 See https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-andannual-update. 
Productivity, Page 3

1.3 Productivity Growth Rates for Major Sectors and Over Long Time Periods and 

Economic Cycles4

Table 1.2: Historical Average Annual Rates of Increase in Total-Economy Productivity and Its Components (%)

Total

Economy

Nonfarm

Business

Farm Households Nonprofit

Institutions

General

Government

1954-2019 (65 years) 1.83 2.04 4.30 3.73 0.52 0.25

1969-2019 (50 years) 1.59 1.87 3.98 3.25 0.28 0.14

 1969-1994 (25 years) 1.54 1.71 4.76 4.23 0.46 0.30

 1994-2019 (25 years) 1.63 2.02 3.20 2.27 0.10 -0.02

By Complete Economic Cycle

 1969-1973 2.66 2.99 4.35 7.03 1.32 0.43

 1973-1979 1.07 1.25 3.91 3.06 0.36 -0.44

 1979-1990 1.41 1.50 6.03 3.23 0.32 0.69

 1990-2001 1.85 2.27 3.98 6.32 -0.26 -0.27

 2001-2007 2.19 2.67 3.52 0.21 0.41 0.25

 2007-2019 1.11 1.38 2.28 0.91 0.29 0.16

Multiple Cycles

 Last Six - 1969-2019 (50 years) 1.59 1.87 3.98 3.25 0.28 0.14

 Last Five - 1973-2019 (46 years) 1.49 1.77 3.95 2.93 0.19 0.12

 Last Four - 1979-2019 (40 years) 1.56 1.85 3.95 2.91 0.17 0.20

 Last Three - 1990-2019 (29 years) 1.61 1.98 3.18 2.78 0.11 0.02

 Last Two - 2001-2019 (18 years) 1.47 1.81 2.69 0.68 0.33 0.19

 4 Peaks in economic cycles roughly follow the NBER cycle dating, except for short recoveries such as 

1980-1981, which are not counted as separate cycles.
Productivity, Page 4

Table 1.3: Ultimate Average Annual Rates of Increase in Total-Economy Productivity and Its Components for the 

2021 Trustees Report

Alternative Total 

Economy

Nonfarm 

Business Farm Households Nonprofit 

Institutions

General 

Government

I 1.93 2.36 2.36 1.93 0.00 0.00

II 1.63 2.00 2.00 1.63 0.00 0.00

III 1.33 1.63 1.63 1.33 0.00 0.00

Table 1.2 lists the average annual rates of increase in productivity for the total economy and its 

major sectors over several different time periods and economic cycles.

5 The major sectors 

include nonfarm business, farm, households, nonprofit institutions, and general government. 

Listed in Table 1.3 are the assumed ultimate average annual rates of increase in productivity for 

the total economy and its major sectors for alternatives I, II, and III. For these ultimate 

assumptions, the Trustees assume that the relative size of employment by sector will stabilize.

The annual growth rate in productivity generally varies from its trend growth rate over an 

economic cycle, assuming employers are slow to adjust labor to changes in output. Going into a 

recession, the growth rate in productivity may drop below trend, as employers reduce output 

faster than labor. During an economic recovery, the growth rate in productivity may rise above 

trend, as employers increase output using their existing stock of labor. The recession that began 

abruptly in 2020 is clearly an exception.

Productivity growth rates also exhibit periods of high or low growth not necessarily related to 

economic cycles. For example, the growth rate in total-economy productivity was 2.80 percent 

over the 25-year period from 1948 to 1973, 1.30 percent over the 22-year period from 1973 to 

1995, 2.49 percent over the 10-year period from 1995 to 2005, and 1.09 percent over the 14-year 

period from 2005 to 2019. Hence, it seems reasonable to analyze productivity growth rates over

longer periods, such as the latest 50-year period from 1969 to 2019 or a 65-year period from 

1954 to 2019.

6

Data on productivity for earlier historical periods, beyond the latest 65 years, are less useful for 

several reasons. First, the NIPA data are less reliable in earlier periods.7 BEA began measuring 

 5 Historical productivity growth rates in this section are based on the published real GDP data from BEA, 

without adjustments to pre-1978 data used in Sections 2 and 3. While the adjusted data are more consistent with 

current inflation measurement methods (see Section 2.6 for the description of the adjustments), they are available 

only for the aggregate GDP and not by sector. Therefore, in this section unadjusted data are used for consistency 

between the aggregate rate of change and the rates of change in each sector. With the adjustments, the annual growth 

rates for years before 1978 would be about 0.1 percentage point higher.

6 Ferguson, Roger W. and William L. Wascher. “Distinguished Lecture on Economics in Government: 

Lessons from Past Productivity Booms,” Journal of Economic Perspectives. Volume 18, Number 2 (Spring 2004), 

pp. 3-28.

7 NIPA data for the most recent years are also less reliable, since they are subject to revisions.
Productivity, Page 5

income in the mid-1930s, and output in the early to mid-1940s.8 It then “backcasted” both 

measures to 1929. According to BEA analysts, the agency did not introduce the more modern 

methods of sampling, collecting, and processing of data until 1948, and did not simultaneously 

collect and balance income and output data until the early 1950s. Consequently, it seems 

reasonable to limit the use of historical data to the last 65 years. Compound annual rates of 

growth for total-economy labor productivity for approximately the past five decades are shown 

in Table 1.4.

A second important consideration in the use of historical data on productivity is that a significant 

portion of the total historical average annual rate of increase in total-economy productivity 

occurred because of reallocation of employment from relatively low- to high-productivity jobs. 

For example, over the 50-year period from 1969 to 2019, the ratio of agricultural to 

total-economy hours worked declined from about 0.043 to 0.016, and the ratio of agricultural to 

total nominal GDP declined from about 0.022 to 0.006. Furthermore, although farm productivity 

grew faster than total economy productivity over the last 50 years, the average level of 

productivity for agricultural workers in 2019 was about 68 percent of the average level of 

productivity for all workers. 

This reallocation complicates the consideration of historical experience. The assumed ultimate 

value for the annual rate of increase in total-economy productivity should be consistent with the 

average value over a long-range historical period with adjustment for differences between 

conditions of the past and conditions expected for the future. The average long-range historical 

value is inflated due to sectoral shifts in employment that are not expected to continue into the 

future.9 This problem can be resolved by removing the effects of sectoral shifts in employment 

from the historical record or, more simply, by setting the ultimate value for the annual rate of 

increase in total-economy productivity to a weighted average of the expected ultimate values for 

the annual rate of increase in productivity for each sector.

1.3.1 Sector Productivity Growth Rates

1.3.1.1 Nonfarm Business (NFB)

The average annual growth rate in NFB productivity was 1.38 percent over the last complete

economic cycle (i.e., a 12-year period from 2007 to 2019), 1.81 percent over the last two 

economic cycles (18-year period from 2001 to 2019), and 1.98 percent over the last three 

economic cycles (29-year period from 1990 to 2019).

Looking at longer periods, the average annual growth rate in NFB productivity was 1.85 percent 

over the last four economic cycles (40-year period from 1979 to 2019), 1.77 percent over the last 

five economic cycles (46-year period from 1973 to 2019), and 1.87 percent over the last six 

 8 BEA, “GDP: One of the Great Inventions of the 20th Century,” Survey of Current Business, January 

2000, p. 7.

9 For example, the 0.027 decline (i.e., from 0.043 to 0.016) in the ratio of agriculture to total-economy 

hours worked over the last fifty years cannot be repeated in the future since the level of the ratio in 2019 is only 

0.016 and it cannot become negative.
Productivity, Page 6

economic cycles (50-year period from 1969 to 2019). These productivity growth rates include 

the effects of a relatively low growth rate period from 1973 to 1995. The 1973-1995 slowdown 

has been attributed to a shift in employment from relatively high-productivity manufacturing 

jobs to low-productivity service jobs, and to the influx of new unskilled baby-boomers into the 

workforce. Historical compound annual rates of growth in labor productivity for the nonfarm 

business sector are shown in Table 1.5.

The 1.87 percent average annual growth rate for NFB productivity over the last six economic 

cycles (1969 to 2019) is a reasonable starting point for estimating the ultimate growth rate. 

Although productivity growth in the last cycle was slower, the average over the longest available 

period of good data points to a somewhat higher long-range rate of growth. (The growth rate in 

NFB productivity over the last 65 years was 2.04 percent and would be somewhat higher if pre1978 inflation adjustments were consistent with today’s methodology.) Therefore, the Trustees

assume an ultimate rate of increase in NFB productivity of 2.00 percent. 

1.3.1.2 Farm 

The average annual growth rate in farm productivity was about 3.98 percent from 1969 to 2019. 

A significant portion of the relatively high growth rate in farm productivity was due to a shift in 

farm operation and ownership from smaller farms run by the self-employed to larger, more 

efficient and capital-intensive farms run by corporations. For example, based on BLS’ Current 

Population Survey (CPS) data, the ratio of self-employed to all paid workers in the agricultural 

sector fell from about 0.62 in 1969 to 0.31 in 2019. For the long-range future, this shift is 

expected to slow and the difference in the productivity growth rates between the farm and 

nonfarm sectors is expected to decline to zero. Thus, the assumed ultimate rate of increase in 

farm productivity is 2.00 percent, equal to the assumed ultimate average annual growth rate in 

NFB productivity.

1.3.1.3 Nonprofit Institutions (NI) 

The average annual rate of change in NI productivity was 0.46 percent over the 25-year period 

from 1969 to 1994, 0.10 percent over the 25-year period from 1994 to 2019, and 0.28 percent 

over the combined 50-year period from 1969 to 2019. The pattern of growth rates in NI 

productivity, with periods of positive and negative values, is largely due to shifts in employment 

within the NI sector.

In the NIPA, NI labor compensation accounts for about 83 percent of NI nominal GDP. NI 

compensation is summed from five subsectors including education, health, social, religious, and 

business services. For each subsector, the level of real output is defined as the product of the 

level of average compensation per hour in a base year (currently 2012) and the level of hours 

worked. This means that the level of productivity in each subsector is a constant (i.e., the average 

compensation per hour in a base year), and that the growth rate in productivity in each subsector 

is zero. However, this also means that the level of productivity for the total NI sector is a 

weighted average of the levels of productivity in the subsectors, and that the growth rate in total 

NI productivity may be positive (or negative), due to shifts in employment from subsectors with 

relatively low (high) average compensation to sectors with relatively high (low) compensation.
Productivity, Page 7

In fact, BEA data indicate that the average annual compensation in health services has been

higher than the average annual compensation in other service subsectors since the mid-1970s, 

and that the growth in employment in health services over the 25-year period from 1969 to 1994

was higher than the growth in employment in other service subsectors. The NIPA include data on 

compensation and full-time equivalent employment in health care, educational services, and 

social assistance.10 These three subsectors are mostly composed of NI workers.11 The data show 

that the level of average annual compensation for full-time equivalent employment in 2019 was 

$78,300, $62,400, and $36,200 in health care, educational services, and social assistance, 

respectively. The data also show that the ratio of full-time equivalent employment in the health 

subsector to the total for all three subsectors rose from about 0.48 in 1969 to 0.61 in 1986, 

declined to 0.57 in 2000, and remained relatively stable thereafter.12

Thus, the data indicate that the relative increase in employment in health services significantly 

contributed to the average annual rate of increase in NI productivity of 0.46 percent over the 

25-year period from 1969 to 1994. The data also indicate that the subsequent relative stability in 

the growth rates in employment across NI subsectors significantly contributed to the decline in 

the NI productivity growth rate to 0.10 percent over the 25-year period from 1994 to 2019. In the 

future, it seems reasonable to assume that the more recent historical trend in employment will 

continue, and that the ultimate growth rates in employment in the NI subsectors will be roughly 

equal.13 Thus, the assumed ultimate growth rate in NI productivity is zero.

1.3.1.4 General Government (GOV) 

The average annual rate of increase in GOV productivity was 0.30 percent over the 25-year 

period from 1969 to 1994 and -0.02 percent over the 25-year period from 1994 to 2019. These 

relatively small growth rates in GOV productivity are due to shifts in employment within the 

GOV sector.

GOV labor compensation accounts for about 79 percent of GOV nominal GDP.14 GOV 

compensation is the total of compensation from three primary subsectors: federal civilian, federal 

military, and state and local government. As with the NI sector, the level of productivity in each 

GOV subsector is a constant (i.e., the average compensation per hour in a base year), and the 

growth rate in productivity in each subsector is zero. However, this also means that the level of 

 10 BEA, NIPA, Tables 6.2B through 6.2D and Tables 6.5B through 6.5D.

11 BEA, “Income and Outlays of Households and of Nonprofit Institutions Serving Households,” Survey of 

Current Business, April 2003, p. 14, http://www.bea.gov/scb/pdf/2003/04april/0403household.pdf.

12 NIPA categories of services changed in 1998, so present ratios are not directly comparable with the old 

ratios. The ratio declined from 0.61 in 1982-1987 to 0.57 in 2000 (the data for 1998-2000 are available both under 

the old and the new categorization), and remained roughly constant between 0.71 and 0.72 under the new 

categorization from 2000 to 2011. However, it has since declined to 0.68 for 2019.

13Given that the overall assumptions reflect a continued growth in the health sector as a percent of GDP, 

this faster growth is assumed to occur in the for-profit sector of the economy.

14 BEA, NIPA, Table 3.10.5.
Productivity, Page 8

productivity for the total GOV sector is a weighted average of the levels of productivity in the 

subsectors, and that the growth rate in total GOV productivity may be positive (negative), due to 

shifts in employment from subsectors with relatively low (high) average compensation to 

subsectors with relatively high (low) compensation.15

The relatively small, positive growth rate in GOV productivity over some historical periods is 

due to reallocation of employment among subsectors. In the future, the growth rate in GOV 

productivity could be negative, reflecting a reversal of historical trends. For the future, however, 

it seems reasonable to assume that the ultimate growth rates in employment in the GOV 

subsectors will be about equal and that the assumed ultimate growth rate in GOV productivity 

will be zero.16

1.3.1.5 Households 

In the NIPA, nominal GDP in the household sector is the sum of the nominal compensation of 

private household workers and the nominal imputed output of owner-occupied housing (IOH). In 

2019, the nominal compensation of private household workers made up only about 1.5 percent of 

the total nominal GDP in the household sector. Though this component is relatively small, it is 

useful to analyze each component of GDP in the household sector.

Compensation of Household Workers - As with NI and GOV compensation sectors, BEA sets 

the real growth rate in GDP in this sector equal to the growth rate in hours worked. Hence, the 

growth rate in productivity is, by definition, zero.

Imputed Output of Owner-Occupied Housing (IOH) - Renters of apartments and homes pay rent 

and receive streams of housing services. BEA includes these business transactions in the NIPA. 

Although the owners of homes pay no rent and have no business transactions, they receive 

similar streams of housing services. Hence, for consistency, BEA estimates the real and nominal 

values of housing services received by those who own their own homes (i.e., real and nominal 

IOH) and includes these amounts in the NIPA.

BEA’s inclusion of IOH in GDP creates a problem. Since IOH has no associated measure of 

labor hours worked, it is not clear how it should be included when estimating historical and 

projecting future growth rates in sector and total-economy productivity. There are two possible

approaches to handle IOH in projections of total-economy productivity for the long range.

First, total real GDP could be projected as the sum of projections for real IOH and real GDP less 

IOH. Real GDP less IOH would be the product of the total-economy-less-IOH productivity and 

 15 BEA, “Government Transactions, Methodology Papers: U.S. National Income and Product Accounts,” 

September 2005, http://www.bea.gov/national/pdf/mp5.pdf.

16 Beginning with the 2017 report, OCACT estimates that the number of active military will remain 

constant rather than grow in proportion to civilian employment. This implies a gradual shift in the weights of 

civilian government and the military, and a resulting small decrease in average productivity of the government 

sector, but the effect is small.
Productivity, Page 9

total hours worked. The ultimate average annual growth rate in total-economy-less-IOH 

productivity could be set to the weighted average of the assumed ultimate average annual growth 

rates in sector productivity.17 Real IOH could be projected as a fixed ratio to total real GDP less 

IOH. 18 Total real GDP could then be constructed as the sum of real IOH and real GDP less IOH. 

As a second and equivalent approach, household productivity could be defined as the ratio of the

sum of real IOH and real output of private household workers to the total hours worked of 

private household workers (as in Table 1.2). Using this definition, the average annual rate of 

increase in productivity for private household workers over the 50-year period from 1969 to 

2019 was about 3.25 percent. In the future, however, the average annual growth rate in 

productivity for private household workers is expected to be much lower. In fact, it is expected to 

equal the average annual growth rate of total-economy-less-IOH productivity, as described in the 

first approach.19 The ultimate average annual growth rate in total-economy productivity could be 

set to the weighted average of the assumed ultimate average annual growth rates in sector 

productivity.20 Finally, total real GDP would be the product of total-economy productivity and 

hours worked.

 17 Sector weights would be defined as the ratio of sector to total nominal GDP less IOH.

18 Over the 35-year period from 1984 through 2019, the ratio of real IOH to real GDP less IOH has been 

fairly constant and averaged 0.075.

19 If,

Pph = Real IOH / Hph

Pxph = Real GDP less IOH / Hxph

Then,

 . . .

Pph = Real IOH – Hph

 . . .

Pxph = Real GDP less IOH – Hxph

Assuming,

 . .

Real IOH = Real GDP less IOH

 . .

Hph = Hxph

Then,

 . .

Pph = Pxph

Where,

 Pph = Productivity, private household

 Pxph = Productivity, total economy less private household

 Hph = Hours worked, private household

 Hxph = Hours worked, total economy less private household

 .

 Y = Rate of change in Y

20 In this second approach, sector weights would be defined as the ratio of sector to total nominal GDP.
Productivity, Page 10

1.3.2 Total-Economy Productivity Growth Rate

The assumed ultimate growth rate in total-economy productivity is equal to a weighted average 

of the growth rates in sector productivity and employment (see Section 1.5 Appendix). This 

relationship is simplified by assuming that the ultimate future growth rate in employment in each 

of the sectors of the economy will be about equal, and that the ultimate growth rates in 

productivity for the nonprofit institution and general government sectors will be zero. Given 

these assumptions, the ultimate growth rate in total-economy productivity is equal to the 

weighted average of the ultimate growth rates in productivity in the farm, nonfarm business, and 

household sectors of the economy.

Sector weights are defined as the ratio of sector to total nominal GDP. This “nominal output” 

weight for the farm sector declined from about 0.022 in 1969 to 0.006 in 2019, and it averaged 

about 0.008 over the last complete business cycle from 2007 to 2019. The nominal output weight 

for the nonfarm business sector was much more stable. It averaged 0.750 over the 25-year period 

from 1970 through 1994, 0.750 over the 25-year period from 1995 through 2019, and 0.746 over 

the last complete business cycle. For the future, the ultimate values for the nominal output 

weights are assumed to remain at 0.75 for the nonfarm business sector and 0.01 for the farm 

sector.

The nominal weight for the household sector rose from about 0.053 in 1977-1979 to the 

historically high value of 0.076 in 2009, largely because the GDP deflator for IOH grew faster 

than the GDP deflator for all other goods over the period. More recently, the weight has fallen to 

0.070 in 2012 and has remained at or close to that value since. In the future, OCACT expects the 

GDP deflator for IOH will grow at about the same rate as the GDP deflator for all other goods 

and that therefore the nominal weight for the household sector should stabilize at 0.07, close to

its recent historical average.

Sector weights can also be defined as the ratio of sector to total nominal GDP excluding IOH. In 

this case, the ultimate values for the nominal output weights will be 0.0108 (i.e., 0.01 / (1.0 –

0.07)) for the farm sector, and 0.8065 (i.e., 0.75 / (1.0 – 0.07)) for the nonfarm sector.

This analysis indicates that the long-range future growth rate in productivity for the total 

economy excluding IOH will be about 1.63 percent (i.e., 2.00 * (0.8065 + 0.0108)). It also 

indicates that the long-range future growth rate in productivity for the total economy including 

IOH will be about 1.63 percent (i.e., 2.00 * (0.75 + 0.01) + 1.63 * 0.07). Thus, for the 2021

Trustees Report, the assumed annual rates of increase in total-economy productivity are 1.93 

percent, 1.63 percent, and 1.33 percent for alternatives I, II, and III, respectively. These rates of 

increase are unchanged from those used in the 2020 Trustees Report.

1.4 Future Expectations

Growth in total economy labor productivity has been unusually slow during the last complete 

economic cycle. From 2007 to 2019, total economy productivity grew 1.11 percent per year on 

average, while nonfarm business productivity grew 1.38 percent per year on average. This is 

significantly slower than the historical average growth rate over the 65-year period (1954-2019) 
Productivity, Page 11

of 1.83 percent for total economy productivity and 2.04 percent for the nonfarm business 

productivity. 

The reasons for the recent productivity slowdown are being debated by the economic profession. 

One view, proposed by Borio et al. (2015) holds that recessions precipitated by credit booms 

followed by financial crises have persistent negative effects on productivity growth stemming 

from misallocation of labor to sectors with lower productivity growth.21 The recession of 2007-

2009 was one such recession, and thus low productivity growth over roughly a decade in its 

aftermath was to be expected, but is not necessarily predictive of much longer periods such as 75 

years into the future. Considerations of more traditional factors also lead to a debate as to 

whether the productivity slowdown of recent years is a temporary phenomenon that will be 

reversed, or a more fundamental change that is likely to persist.

The position that future productivity growth is likely to be slower than the historical average 

observed prior to 2007 rests primarily on the argument that the pace of technological innovation 

has slowed. Its main proponent, Robert J. Gordon, argues that the unusually rapid pace of 

technological innovation observed in 1920-1970 period resulted from the invention of several 

general-purpose technologies, such as electricity and the internal combustion engine, that 

dramatically boosted productivity. He argues that similarly powerful general-purpose 

technologies have not been invented since the 1970s and are not likely to be invented in the near 

future. This explains the productivity slowdown in recent decades, and suggests slower 

productivity growth in the future. 22

Additionally, Robert J. Gordon, Dale W. Jorgenson, and others argue that some of the past 

productivity growth was driven by improvements in labor quality owning to the rising 

educational attainment of the labor force. However, as Jorgenson notes, “average levels of 

educational attainment remain high for people entering the labor force, but will no longer 

increase.” As a result, rising average educational attainment will gradually disappear as a source 

of productivity growth.23

The opposing view holds that productivity growth will rebound in the future owing to new 

technologies evolving at a pace at least as fast as in the past. Proponents of this view, primarily 

Erik Brynjolfsson and his co-authors, point to artificial intelligence and machine learning as the 

new general-purpose technology that will result in a return to faster productivity growth in the 

 21 See Borio, Claudio, Enisse Kharroubi, Christian Upper, and Fabrizio Zampolli, 2015. “Labour 

reallocation and productivity dynamics: financial causes, real consequences”, Bank for International Settlements 

Working Paper No. 534, https://www.bis.org/publ/work534.pdf.

22 See Gordon, Robert J. 2016. The Rise and Fall of American Growth: The U.S. Standard of Living Since 

the Civil War. Princeton: Princeton University Press, and Gordon, Robert J. 2012 “Is U.S. Economic Growth Over? 

Faltering Innovation Confronts the Six Headwinds”, NBER working paper 18315, 

http://www.nber.org/papers/w18315.pdf.

23 Jorgenson, Dale W., Mun S. Ho, and Jon D. Samuels. “Educational Attainment and the Revival of U.S. 

Economic Growth.” In Education, Skills, and Technical Change: Implications for Future U.S. GDP Growth. 

Chicago: University of Chicago Press, 2017.
Productivity, Page 12

future. They argue that slow productivity growth in the recent past is not a predictor of future 

productivity growth. In fact, as new technology is being developed, new investments required to 

fully realize the transformative potential of the new technology are being made, and 

complementary innovations are being undertaken, one should expect productivity growth to be 

slow—until the effects of the new technology begin to spread across the economy.24

The future rate of technological innovations and their effects on productivity are extremely 

difficult to foresee. OCACT believes that it is reasonable to base the productivity assumption on 

the analysis of long historical trends, with adjustments for foreseeable differences between future 

and past conditions, such as a slower rate of change in educational attainment. 

The developments since the last economic cycle ended in 2019, with the massive changes in the 

economy precipitated by the COVID-19 pandemic, have caused many to speculate on the 

possibility that the pandemic will have lasting or permanent effects on the structure of the 

economy. There might be a permanent shift in the level of future productivity as in many past 

recessions. But would a potential change in structure also affect the growth rate, even after the 

pandemic is behind us? At this time, there is no consensus about what the lasting effects on longterm productivity growth might be, if any. There is no consensus on the magnitude of such 

effects or even on their direction. Given the unprecedented level of uncertainty, OCACT believes 

that at this time there is no firm basis for reflecting such effects in the ultimate assumption for 

productivity growth. Basing the ultimate assumption for productivity growth on the analysis of 

long historical trends remains the best strategy. 

1.5 Projections from Other Sources

At the time assumptions were developed, the following projections from other sources were 

available.

IHS Markit provided projections through 2050 in its August 2020 long-run trend forecast (see

The 30-Year Focus, Third Quarter, August 2020). For the 20-year period from 2030 to 2050,

IHS Markit projected that the average annual rate of increase in productivity would be about 1.58

percent for the nonfarm business sector. Moody’s Analytics’ September 2020 forecast extended

to 2050. For the 20-year period from 2030 to 2050, Moody’s Analytics projected the average 

annual growth rate in productivity would be about 1.75 percent for the nonfarm business sector. 

The Office of Management and Budget (OMB) Fiscal Year 2021 Budget included projections 

through 2030. The OMB annual growth rate for the total-economy productivity was 2.30 percent 

for 2030. The Congressional Budget Office (CBO) September 2020 report, The 2020 Long-Term

Budget Outlook, included projections through 2050. CBO’s average annual growth rate for 

total-economy productivity was 1.2 percent over the entire 30-year period and 1.2 percent over 

the last 10 years, 2041 through 2050. 

 24 Brynjolfsson, Erik, Daniel Rock, and Chad Syverson, 2017. “Artificial Intelligence and the Modern 

Productivity Paradox: A Clash of Expectations and Statistics” NBER working paper No. 24001,

http://www.nber.org/papers/w24001.
Productivity, Page 13

The Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods 

recommended an assumed ultimate annual rate of increase in total-economy productivity of 1.55

percent, compared to the 2019 Trustees Report alternative II assumption of 1.63 percent. The 

prior technical panel, which met in 2015, recommended no changes to the ultimate annual rate of 

increase in total-economy productivity of 1.68 percent that had been assumed in the 2015 

Trustees Report, alternative II.
Productivity, Page 14

Table 1.4: Total-Economy Productivity: Compound Annual Rates of Growth (%) Base Year = 2012

From

To Variable 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

1961 39.12

1962 40.50 3.52

1963 41.93 3.53 3.54

1964 43.21 3.37 3.29 3.05

1965 44.49 3.27 3.18 3.01 2.97

1966 45.81 3.21 3.13 3.00 2.97 2.98

1967 46.55 2.94 2.83 2.65 2.52 2.29 1.61

1968 47.98 2.96 2.87 2.73 2.65 2.55 2.33 3.06

1969 48.31 2.67 2.55 2.39 2.26 2.08 1.78 1.87 0.68

1970 49.27 2.60 2.48 2.33 2.21 2.06 1.83 1.91 1.33 1.99

1971 51.12 2.71 2.62 2.51 2.43 2.34 2.22 2.37 2.14 2.87 3.77

1972 52.41 2.69 2.61 2.51 2.44 2.37 2.27 2.40 2.23 2.75 3.14 2.51

1973 53.65 2.67 2.59 2.50 2.44 2.37 2.28 2.39 2.26 2.66 2.88 2.45 2.38

1974 53.17 2.39 2.30 2.18 2.10 2.00 1.88 1.92 1.73 1.94 1.93 1.32 0.73 -0.90

1975 54.63 2.41 2.33 2.23 2.16 2.07 1.98 2.02 1.87 2.07 2.09 1.67 1.40 0.91 2.75

1976 55.93 2.41 2.33 2.24 2.17 2.10 2.02 2.06 1.94 2.12 2.14 1.82 1.64 1.40 2.57 2.38

1977 56.54 2.33 2.25 2.16 2.09 2.02 1.93 1.96 1.84 1.99 1.99 1.69 1.53 1.32 2.07 1.73 1.09

1978 57.06 2.24 2.17 2.07 2.01 1.93 1.85 1.87 1.75 1.87 1.85 1.58 1.43 1.24 1.78 1.46 1.00 0.91

1979 57.21 2.13 2.05 1.96 1.89 1.81 1.72 1.73 1.61 1.71 1.67 1.42 1.26 1.07 1.47 1.16 0.75 0.59 0.26

1980 57.28 2.03 1.95 1.85 1.78 1.70 1.61 1.61 1.49 1.56 1.52 1.27 1.12 0.94 1.25 0.95 0.60 0.43 0.20 0.14

1981 58.44 2.03 1.95 1.86 1.79 1.72 1.64 1.64 1.53 1.60 1.56 1.35 1.22 1.07 1.36 1.13 0.88 0.83 0.80 1.08 2.03

1982 58.46 1.93 1.85 1.76 1.69 1.62 1.53 1.53 1.42 1.48 1.44 1.23 1.10 0.96 1.19 0.97 0.74 0.67 0.61 0.72 1.02

1983 60.04 1.97 1.89 1.81 1.75 1.68 1.60 1.60 1.51 1.57 1.53 1.35 1.24 1.13 1.36 1.19 1.02 1.01 1.03 1.22 1.58

1984 61.33 1.97 1.90 1.83 1.77 1.70 1.63 1.64 1.55 1.60 1.58 1.41 1.32 1.22 1.44 1.29 1.16 1.17 1.21 1.40 1.72

1985 62.42 1.97 1.90 1.83 1.77 1.71 1.64 1.64 1.56 1.62 1.59 1.44 1.35 1.27 1.47 1.34 1.23 1.24 1.29 1.47 1.73

1986 63.88 1.98 1.92 1.85 1.79 1.74 1.68 1.68 1.60 1.66 1.64 1.50 1.42 1.35 1.54 1.43 1.34 1.37 1.42 1.59 1.83

1987 64.17 1.92 1.86 1.79 1.73 1.68 1.62 1.62 1.54 1.59 1.57 1.43 1.36 1.29 1.46 1.35 1.26 1.27 1.31 1.45 1.64

1988 65.08 1.90 1.84 1.77 1.72 1.67 1.61 1.61 1.54 1.58 1.56 1.43 1.36 1.30 1.45 1.36 1.27 1.29 1.32 1.44 1.61

1989 65.72 1.87 1.81 1.74 1.69 1.64 1.58 1.58 1.51 1.55 1.53 1.41 1.34 1.28 1.42 1.33 1.25 1.26 1.29 1.40 1.54

1990 66.73 1.86 1.80 1.74 1.69 1.63 1.58 1.58 1.51 1.55 1.53 1.41 1.35 1.29 1.43 1.34 1.27 1.28 1.31 1.41 1.54

1991 67.52 1.84 1.78 1.72 1.67 1.62 1.56 1.56 1.50 1.53 1.51 1.40 1.34 1.29 1.42 1.33 1.26 1.28 1.30 1.39 1.51

1992 69.95 1.89 1.84 1.78 1.74 1.69 1.64 1.64 1.58 1.62 1.61 1.50 1.45 1.41 1.54 1.46 1.41 1.43 1.47 1.56 1.68

1993 70.27 1.85 1.79 1.74 1.69 1.65 1.60 1.60 1.54 1.57 1.56 1.46 1.41 1.36 1.48 1.41 1.35 1.37 1.40 1.48 1.58

1994 70.77 1.81 1.76 1.70 1.66 1.61 1.57 1.56 1.51 1.54 1.52 1.42 1.37 1.33 1.44 1.37 1.32 1.33 1.36 1.43 1.52

1995 71.22 1.78 1.73 1.67 1.63 1.58 1.53 1.53 1.47 1.50 1.48 1.39 1.34 1.30 1.40 1.33 1.28 1.29 1.31 1.38 1.46

1996 72.60 1.78 1.73 1.68 1.63 1.59 1.55 1.54 1.49 1.52 1.50 1.41 1.37 1.32 1.43 1.36 1.31 1.32 1.35 1.41 1.49

1997 73.94 1.78 1.74 1.68 1.64 1.60 1.56 1.55 1.50 1.53 1.52 1.43 1.39 1.35 1.44 1.39 1.34 1.35 1.37 1.44 1.51

1998 75.66 1.80 1.75 1.70 1.66 1.62 1.58 1.58 1.53 1.56 1.54 1.46 1.42 1.38 1.48 1.43 1.38 1.40 1.42 1.48 1.56

1999 77.91 1.83 1.78 1.74 1.70 1.66 1.62 1.62 1.58 1.61 1.59 1.52 1.48 1.45 1.54 1.49 1.45 1.47 1.49 1.56 1.63

2000 79.89 1.85 1.80 1.76 1.72 1.69 1.65 1.65 1.61 1.64 1.62 1.55 1.52 1.49 1.58 1.53 1.50 1.51 1.54 1.60 1.68

2001 81.65 1.86 1.81 1.77 1.73 1.70 1.66 1.67 1.62 1.65 1.64 1.57 1.54 1.51 1.60 1.56 1.52 1.54 1.57 1.63 1.70

2002 84.15 1.89 1.85 1.80 1.77 1.74 1.70 1.71 1.67 1.70 1.69 1.62 1.59 1.56 1.65 1.61 1.58 1.60 1.63 1.69 1.76

2003 87.00 1.92 1.88 1.84 1.81 1.78 1.75 1.75 1.72 1.75 1.74 1.68 1.65 1.62 1.71 1.68 1.65 1.67 1.70 1.76 1.83

2004 89.31 1.94 1.90 1.86 1.83 1.80 1.77 1.78 1.74 1.77 1.77 1.71 1.68 1.66 1.74 1.71 1.69 1.71 1.74 1.80 1.87

2005 91.11 1.94 1.90 1.87 1.84 1.81 1.78 1.78 1.75 1.78 1.77 1.71 1.69 1.67 1.75 1.72 1.70 1.72 1.75 1.81 1.87

2006 91.99 1.92 1.88 1.84 1.82 1.79 1.76 1.76 1.73 1.76 1.75 1.69 1.67 1.65 1.73 1.69 1.67 1.69 1.72 1.77 1.84

2007 92.96 1.90 1.86 1.83 1.80 1.77 1.74 1.74 1.71 1.74 1.73 1.67 1.65 1.63 1.71 1.67 1.65 1.67 1.70 1.75 1.81

2008 94.00 1.88 1.85 1.81 1.78 1.75 1.73 1.73 1.70 1.72 1.71 1.66 1.64 1.62 1.69 1.66 1.64 1.65 1.68 1.73 1.78

2009 96.95 1.91 1.87 1.84 1.81 1.79 1.76 1.76 1.73 1.76 1.75 1.70 1.68 1.66 1.73 1.70 1.68 1.70 1.73 1.77 1.83

2010 99.48 1.92 1.89 1.86 1.83 1.80 1.78 1.78 1.75 1.78 1.77 1.72 1.70 1.68 1.76 1.73 1.71 1.73 1.75 1.80 1.86

2011 99.54 1.89 1.85 1.82 1.79 1.77 1.74 1.74 1.71 1.74 1.73 1.68 1.66 1.64 1.71 1.68 1.66 1.68 1.70 1.75 1.80

2012 100.00 1.86 1.82 1.79 1.76 1.74 1.71 1.71 1.68 1.71 1.70 1.65 1.63 1.61 1.68 1.65 1.63 1.64 1.66 1.71 1.76

2013 100.60 1.83 1.80 1.77 1.74 1.71 1.69 1.69 1.66 1.68 1.67 1.62 1.60 1.58 1.65 1.62 1.60 1.61 1.63 1.67 1.72

2014 101.23 1.81 1.78 1.74 1.72 1.69 1.67 1.67 1.64 1.66 1.65 1.60 1.58 1.56 1.62 1.59 1.57 1.59 1.61 1.64 1.69

2015 102.20 1.79 1.76 1.73 1.70 1.68 1.65 1.65 1.62 1.64 1.63 1.59 1.57 1.55 1.61 1.58 1.56 1.57 1.59 1.63 1.67

2016 102.62 1.77 1.74 1.70 1.68 1.65 1.63 1.63 1.60 1.62 1.61 1.56 1.54 1.52 1.58 1.55 1.53 1.54 1.56 1.59 1.63

2017 103.64 1.76 1.72 1.69 1.66 1.64 1.61 1.61 1.58 1.60 1.59 1.55 1.53 1.51 1.56 1.54 1.52 1.53 1.54 1.58 1.62

2018 104.73 1.74 1.71 1.68 1.65 1.63 1.60 1.60 1.57 1.59 1.58 1.54 1.52 1.50 1.55 1.52 1.50 1.51 1.53 1.56 1.60

2019 106.09 1.73 1.70 1.67 1.65 1.62 1.60 1.60 1.57 1.59 1.58 1.53 1.51 1.49 1.55 1.52 1.50 1.51 1.52 1.56 1.59
Productivity, Page 15

Table 1.4 (continued): Total-Economy Productivity: Compound Annual Rates of Growth (%) Base Year = 2012

From

To Variable 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1980 57.28

1981 58.44 2.03

1982 58.46 1.02 0.02

1983 60.04 1.58 1.36 2.71

1984 61.33 1.72 1.62 2.43 2.15

1985 62.42 1.73 1.66 2.21 1.96 1.78

1986 63.88 1.83 1.80 2.24 2.09 2.06 2.33

1987 64.17 1.64 1.57 1.88 1.68 1.52 1.39 0.45

1988 65.08 1.61 1.55 1.80 1.62 1.49 1.40 0.93 1.42

1989 65.72 1.54 1.48 1.69 1.52 1.39 1.29 0.95 1.20 0.98

1990 66.73 1.54 1.48 1.67 1.52 1.42 1.34 1.10 1.31 1.26 1.53

1991 67.52 1.51 1.45 1.61 1.48 1.38 1.32 1.11 1.28 1.23 1.36 1.19

1992 69.95 1.68 1.65 1.81 1.71 1.66 1.64 1.53 1.74 1.82 2.10 2.39 3.61

1993 70.27 1.58 1.55 1.69 1.59 1.52 1.49 1.37 1.53 1.55 1.69 1.74 2.02 0.46

1994 70.77 1.52 1.48 1.61 1.51 1.44 1.40 1.29 1.41 1.41 1.49 1.48 1.58 0.58 0.71

1995 71.22 1.46 1.42 1.53 1.43 1.37 1.33 1.22 1.31 1.30 1.35 1.31 1.34 0.60 0.67 0.64

1996 72.60 1.49 1.46 1.56 1.47 1.42 1.38 1.29 1.38 1.38 1.43 1.42 1.46 0.93 1.09 1.29 1.94

1997 73.94 1.51 1.48 1.58 1.50 1.45 1.42 1.34 1.43 1.43 1.48 1.48 1.53 1.12 1.28 1.47 1.90 1.85

1998 75.66 1.56 1.53 1.63 1.55 1.51 1.49 1.42 1.51 1.52 1.58 1.58 1.64 1.32 1.49 1.68 2.04 2.09 2.32

1999 77.91 1.63 1.61 1.70 1.64 1.61 1.60 1.54 1.63 1.65 1.72 1.74 1.81 1.55 1.73 1.94 2.27 2.38 2.65 2.98

2000 79.89 1.68 1.66 1.75 1.69 1.67 1.66 1.61 1.70 1.72 1.79 1.82 1.89 1.67 1.85 2.04 2.32 2.42 2.61 2.76 2.54

2001 81.65 1.70 1.69 1.77 1.72 1.70 1.69 1.65 1.74 1.76 1.82 1.85 1.92 1.73 1.89 2.06 2.30 2.38 2.51 2.57 2.37

2002 84.15 1.76 1.75 1.84 1.79 1.77 1.77 1.74 1.82 1.85 1.92 1.95 2.02 1.87 2.02 2.19 2.41 2.49 2.62 2.70 2.60

2003 87.00 1.83 1.83 1.91 1.87 1.86 1.86 1.83 1.92 1.95 2.02 2.06 2.14 2.00 2.16 2.32 2.53 2.62 2.75 2.83 2.80

2004 89.31 1.87 1.86 1.95 1.91 1.90 1.90 1.88 1.96 2.00 2.07 2.10 2.17 2.06 2.20 2.35 2.55 2.62 2.73 2.80 2.77

2005 91.11 1.87 1.87 1.95 1.91 1.90 1.91 1.89 1.97 2.00 2.06 2.10 2.16 2.05 2.19 2.32 2.49 2.56 2.64 2.69 2.64

2006 91.99 1.84 1.83 1.91 1.87 1.86 1.86 1.84 1.91 1.94 2.00 2.03 2.08 1.98 2.09 2.21 2.35 2.40 2.46 2.47 2.40

2007 92.96 1.81 1.80 1.87 1.84 1.82 1.83 1.80 1.87 1.89 1.95 1.97 2.02 1.91 2.02 2.12 2.24 2.27 2.31 2.31 2.23

2008 94.00 1.78 1.78 1.84 1.81 1.80 1.80 1.77 1.83 1.86 1.90 1.92 1.97 1.86 1.96 2.05 2.16 2.18 2.21 2.19 2.11

2009 96.95 1.83 1.82 1.89 1.86 1.85 1.85 1.83 1.89 1.92 1.96 1.99 2.03 1.94 2.03 2.12 2.23 2.25 2.28 2.28 2.21

2010 99.48 1.86 1.85 1.92 1.89 1.88 1.88 1.86 1.92 1.95 1.99 2.02 2.06 1.98 2.07 2.15 2.25 2.28 2.31 2.31 2.25

2011 99.54 1.80 1.79 1.85 1.82 1.81 1.81 1.79 1.85 1.86 1.90 1.92 1.96 1.87 1.95 2.03 2.11 2.13 2.15 2.13 2.06

2012 100.00 1.76 1.75 1.81 1.77 1.76 1.76 1.74 1.79 1.81 1.84 1.86 1.89 1.80 1.87 1.94 2.02 2.02 2.03 2.01 1.94

2013 100.60 1.72 1.71 1.77 1.74 1.72 1.72 1.70 1.74 1.76 1.79 1.80 1.83 1.75 1.81 1.87 1.94 1.94 1.94 1.92 1.84

2014 101.23 1.69 1.68 1.73 1.70 1.68 1.68 1.66 1.70 1.71 1.74 1.75 1.78 1.69 1.75 1.81 1.87 1.86 1.86 1.84 1.76

2015 102.20 1.67 1.66 1.71 1.68 1.66 1.66 1.63 1.68 1.69 1.71 1.72 1.74 1.66 1.72 1.77 1.82 1.82 1.81 1.78 1.71

2016 102.62 1.63 1.62 1.67 1.64 1.62 1.62 1.59 1.63 1.64 1.66 1.67 1.69 1.61 1.66 1.70 1.75 1.75 1.74 1.71 1.63

2017 103.64 1.62 1.60 1.65 1.62 1.60 1.60 1.57 1.61 1.62 1.64 1.64 1.66 1.58 1.63 1.67 1.72 1.71 1.70 1.67 1.60

2018 104.73 1.60 1.59 1.63 1.60 1.59 1.58 1.56 1.59 1.60 1.62 1.62 1.64 1.56 1.61 1.65 1.69 1.68 1.67 1.64 1.57

2019 106.09 1.59 1.58 1.62 1.59 1.58 1.57 1.55 1.58 1.59 1.61 1.61 1.63 1.55 1.60 1.63 1.67 1.66 1.65 1.62 1.56

From

To Variable 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1999 77.91

2000 79.89 2.54

2001 81.65 2.37 2.20

2002 84.15 2.60 2.63 3.07

2003 87.00 2.80 2.88 3.23 3.39

2004 89.31 2.77 2.83 3.04 3.02 2.65

2005 91.11 2.64 2.66 2.78 2.68 2.33 2.02

2006 91.99 2.40 2.38 2.41 2.25 1.87 1.49 0.96

2007 92.96 2.23 2.19 2.19 2.01 1.67 1.34 1.01 1.05

2008 94.00 2.11 2.05 2.03 1.86 1.56 1.29 1.05 1.09 1.12

2009 96.95 2.21 2.17 2.17 2.04 1.82 1.66 1.57 1.77 2.13 3.14

2010 99.48 2.25 2.22 2.22 2.11 1.93 1.81 1.77 1.98 2.29 2.87 2.60

2011 99.54 2.06 2.02 2.00 1.88 1.70 1.56 1.48 1.59 1.72 1.93 1.32 0.06

2012 100.00 1.94 1.89 1.86 1.74 1.56 1.42 1.34 1.40 1.47 1.56 1.04 0.26 0.46

2013 100.60 1.84 1.79 1.76 1.64 1.46 1.33 1.25 1.29 1.33 1.37 0.93 0.37 0.53 0.60

2014 101.23 1.76 1.71 1.67 1.55 1.39 1.26 1.18 1.20 1.23 1.24 0.87 0.44 0.56 0.61 0.63

2015 102.20 1.71 1.66 1.62 1.51 1.35 1.23 1.16 1.18 1.19 1.20 0.88 0.54 0.66 0.73 0.79 0.96

2016 102.62 1.63 1.58 1.54 1.43 1.28 1.16 1.09 1.10 1.10 1.10 0.81 0.52 0.61 0.65 0.66 0.68 0.40

2017 103.64 1.60 1.54 1.50 1.40 1.26 1.15 1.08 1.09 1.09 1.09 0.84 0.59 0.68 0.72 0.75 0.79 0.70 1.00

2018 104.73 1.57 1.52 1.48 1.38 1.24 1.14 1.08 1.09 1.09 1.09 0.86 0.64 0.73 0.77 0.81 0.85 0.82 1.02 1.05

2019 106.09 1.56 1.50 1.47 1.37 1.25 1.15 1.09 1.10 1.11 1.11 0.90 0.72 0.80 0.85 0.89 0.94 0.94 1.12 1.17 1.30
Productivity, Page 16

Table 1.5: Nonfarm Business Productivity: Compound Annual Rates of Growth (%) Base Year = 2012

From

To Variable 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

1961 34.11

1962 35.66 4.54

1963 36.88 3.98 3.42

1964 37.92 3.59 3.12 2.82

1965 39.14 3.49 3.15 3.01 3.20

1966 40.54 3.51 3.26 3.21 3.40 3.60

1967 41.31 3.24 2.99 2.88 2.90 2.75 1.90

1968 42.76 3.28 3.07 3.00 3.05 3.00 2.70 3.50

1969 42.84 2.89 2.66 2.53 2.47 2.29 1.86 1.83 0.19

1970 43.48 2.73 2.51 2.38 2.30 2.13 1.76 1.72 0.83 1.48

1971 45.19 2.85 2.66 2.57 2.53 2.42 2.19 2.26 1.86 2.70 3.93

1972 46.76 2.91 2.75 2.67 2.65 2.58 2.41 2.51 2.26 2.96 3.71 3.49

1973 48.20 2.92 2.78 2.71 2.70 2.64 2.50 2.60 2.42 2.99 3.50 3.28 3.07

1974 47.41 2.56 2.40 2.31 2.26 2.15 1.97 1.98 1.73 2.05 2.19 1.61 0.69 -1.64

1975 48.72 2.58 2.43 2.35 2.30 2.21 2.06 2.08 1.88 2.16 2.30 1.90 1.37 0.54 2.76

1976 50.42 2.64 2.50 2.43 2.40 2.33 2.20 2.24 2.08 2.35 2.50 2.22 1.90 1.51 3.13 3.49

1977 51.29 2.58 2.45 2.38 2.35 2.28 2.16 2.19 2.04 2.27 2.39 2.13 1.86 1.56 2.66 2.60 1.72

1978 52.00 2.51 2.39 2.32 2.28 2.21 2.10 2.11 1.98 2.18 2.26 2.03 1.79 1.53 2.34 2.20 1.56 1.39

1979 51.89 2.36 2.23 2.16 2.11 2.03 1.92 1.92 1.77 1.93 1.98 1.74 1.50 1.24 1.82 1.59 0.96 0.58 -0.22

1980 51.87 2.23 2.10 2.03 1.98 1.90 1.78 1.77 1.62 1.75 1.78 1.55 1.31 1.06 1.51 1.26 0.72 0.38 -0.12 -0.02

1981 52.64 2.19 2.07 2.00 1.95 1.87 1.76 1.75 1.61 1.73 1.75 1.54 1.33 1.11 1.51 1.30 0.87 0.66 0.41 0.73 1.48

1982 52.24 2.05 1.93 1.85 1.80 1.71 1.60 1.58 1.44 1.54 1.54 1.33 1.11 0.90 1.22 1.00 0.59 0.37 0.11 0.22 0.35

1983 54.36 2.14 2.03 1.96 1.91 1.84 1.74 1.73 1.61 1.72 1.73 1.55 1.38 1.21 1.53 1.38 1.08 0.98 0.89 1.17 1.58

1984 55.58 2.14 2.04 1.97 1.93 1.86 1.77 1.76 1.65 1.75 1.77 1.61 1.45 1.30 1.60 1.47 1.23 1.16 1.12 1.38 1.74

1985 56.55 2.13 2.02 1.96 1.92 1.86 1.77 1.76 1.66 1.75 1.77 1.62 1.47 1.34 1.62 1.50 1.28 1.23 1.21 1.45 1.74

1986 58.24 2.16 2.06 2.01 1.97 1.91 1.83 1.82 1.73 1.82 1.84 1.71 1.58 1.47 1.73 1.64 1.45 1.42 1.43 1.66 1.95

1987 58.58 2.10 2.00 1.95 1.91 1.85 1.77 1.76 1.67 1.75 1.77 1.64 1.51 1.40 1.64 1.55 1.37 1.34 1.33 1.53 1.75

1988 59.54 2.08 1.99 1.93 1.90 1.84 1.76 1.76 1.67 1.75 1.76 1.64 1.52 1.42 1.64 1.55 1.40 1.37 1.36 1.54 1.74

1989 60.08 2.04 1.95 1.89 1.86 1.80 1.72 1.72 1.63 1.71 1.72 1.60 1.49 1.39 1.59 1.51 1.36 1.33 1.32 1.48 1.65

1990 61.10 2.03 1.94 1.89 1.85 1.80 1.72 1.72 1.64 1.71 1.72 1.60 1.50 1.41 1.60 1.52 1.38 1.36 1.35 1.50 1.65

1991 62.10 2.02 1.93 1.88 1.84 1.79 1.72 1.71 1.64 1.70 1.71 1.60 1.50 1.42 1.60 1.53 1.40 1.38 1.38 1.51 1.65

1992 64.89 2.10 2.02 1.97 1.94 1.89 1.83 1.82 1.75 1.82 1.84 1.74 1.65 1.58 1.76 1.70 1.59 1.58 1.59 1.74 1.88

1993 64.96 2.03 1.95 1.91 1.87 1.83 1.76 1.76 1.69 1.75 1.76 1.66 1.58 1.50 1.67 1.61 1.50 1.49 1.50 1.62 1.75

1994 65.42 1.99 1.91 1.87 1.83 1.79 1.72 1.72 1.65 1.71 1.72 1.62 1.54 1.47 1.62 1.56 1.46 1.44 1.45 1.56 1.67

1995 66.14 1.97 1.89 1.84 1.81 1.76 1.70 1.69 1.63 1.68 1.69 1.60 1.52 1.45 1.60 1.54 1.44 1.42 1.43 1.53 1.63

1996 67.54 1.97 1.90 1.85 1.82 1.78 1.72 1.71 1.65 1.70 1.71 1.62 1.54 1.48 1.62 1.57 1.47 1.46 1.46 1.56 1.66

1997 68.85 1.97 1.90 1.85 1.82 1.78 1.72 1.72 1.66 1.71 1.72 1.63 1.56 1.50 1.64 1.58 1.49 1.48 1.49 1.58 1.68

1998 70.96 2.00 1.93 1.89 1.86 1.82 1.76 1.76 1.70 1.76 1.77 1.69 1.62 1.56 1.69 1.65 1.57 1.56 1.57 1.66 1.76

1999 73.67 2.05 1.98 1.94 1.92 1.88 1.83 1.82 1.77 1.82 1.84 1.76 1.70 1.65 1.78 1.74 1.66 1.66 1.67 1.77 1.86

2000 76.11 2.08 2.02 1.98 1.95 1.92 1.87 1.87 1.82 1.87 1.88 1.81 1.76 1.71 1.84 1.80 1.73 1.73 1.75 1.84 1.94

2001 78.19 2.10 2.03 2.00 1.98 1.94 1.89 1.89 1.85 1.90 1.91 1.84 1.79 1.74 1.87 1.84 1.77 1.77 1.79 1.88 1.97

2002 81.57 2.15 2.09 2.06 2.04 2.00 1.96 1.96 1.92 1.97 1.99 1.92 1.87 1.83 1.96 1.93 1.87 1.87 1.89 1.99 2.08

2003 84.68 2.19 2.13 2.10 2.08 2.05 2.01 2.01 1.97 2.02 2.04 1.98 1.93 1.90 2.02 1.99 1.94 1.95 1.97 2.06 2.15

2004 87.12 2.20 2.15 2.12 2.10 2.07 2.03 2.04 2.00 2.05 2.07 2.01 1.96 1.93 2.05 2.02 1.97 1.98 2.00 2.09 2.18

2005 89.03 2.20 2.15 2.12 2.10 2.08 2.04 2.04 2.00 2.05 2.07 2.01 1.97 1.94 2.05 2.03 1.98 1.99 2.01 2.10 2.18

2006 90.00 2.18 2.13 2.10 2.08 2.05 2.01 2.02 1.98 2.03 2.04 1.99 1.94 1.91 2.02 2.00 1.95 1.96 1.98 2.06 2.14

2007 91.56 2.17 2.12 2.09 2.07 2.04 2.01 2.01 1.97 2.02 2.03 1.98 1.94 1.91 2.01 1.99 1.94 1.95 1.97 2.05 2.13

2008 92.61 2.15 2.10 2.07 2.05 2.02 1.99 1.99 1.95 2.00 2.01 1.96 1.92 1.88 1.99 1.97 1.92 1.92 1.94 2.02 2.09

2009 95.90 2.18 2.13 2.10 2.08 2.06 2.02 2.03 1.99 2.03 2.05 2.00 1.96 1.93 2.03 2.01 1.97 1.98 1.99 2.07 2.14

2010 99.16 2.20 2.15 2.13 2.11 2.09 2.05 2.06 2.02 2.07 2.08 2.04 2.00 1.97 2.07 2.05 2.01 2.02 2.04 2.11 2.18

2011 99.15 2.16 2.11 2.08 2.07 2.04 2.01 2.01 1.98 2.02 2.03 1.98 1.95 1.92 2.01 1.99 1.95 1.96 1.98 2.04 2.11

2012 100.00 2.13 2.08 2.06 2.04 2.02 1.98 1.98 1.95 1.99 2.00 1.96 1.92 1.89 1.98 1.96 1.92 1.93 1.94 2.01 2.07

2013 100.50 2.10 2.05 2.03 2.01 1.98 1.95 1.95 1.92 1.96 1.97 1.92 1.88 1.85 1.95 1.92 1.88 1.89 1.90 1.96 2.02

2014 101.36 2.08 2.03 2.00 1.99 1.96 1.93 1.93 1.89 1.93 1.94 1.90 1.86 1.83 1.92 1.90 1.85 1.86 1.87 1.93 1.99

2015 102.96 2.07 2.02 1.99 1.98 1.95 1.92 1.92 1.89 1.92 1.93 1.89 1.85 1.82 1.91 1.89 1.85 1.85 1.86 1.92 1.98

2016 103.30 2.03 1.99 1.96 1.95 1.92 1.89 1.89 1.85 1.89 1.90 1.85 1.82 1.79 1.87 1.85 1.81 1.81 1.82 1.88 1.93

2017 104.59 2.02 1.98 1.95 1.93 1.91 1.88 1.88 1.84 1.88 1.89 1.84 1.81 1.78 1.86 1.84 1.80 1.80 1.81 1.86 1.91

2018 106.10 2.01 1.97 1.94 1.92 1.90 1.87 1.87 1.83 1.87 1.88 1.83 1.80 1.77 1.85 1.83 1.79 1.79 1.80 1.85 1.90

2019 107.91 2.01 1.96 1.94 1.92 1.90 1.86 1.86 1.83 1.86 1.87 1.83 1.80 1.77 1.84 1.82 1.79 1.79 1.80 1.85 1.90
Productivity, Page 17

Table 1.5 (continued): Nonfarm Business Productivity: Compound Annual Rates of Growth (%) Base Year = 2012

From

To Variable 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1980 51.87

1981 52.64 1.48

1982 52.24 0.35 -0.78

1983 54.36 1.58 1.62 4.07

1984 55.58 1.74 1.82 3.15 2.23

1985 56.55 1.74 1.81 2.68 1.99 1.75

1986 58.24 1.95 2.04 2.76 2.32 2.37 2.99

1987 58.58 1.75 1.80 2.32 1.88 1.77 1.77 0.57

1988 59.54 1.74 1.77 2.20 1.83 1.73 1.73 1.10 1.64

1989 60.08 1.65 1.67 2.02 1.68 1.57 1.53 1.04 1.28 0.92

1990 61.10 1.65 1.67 1.98 1.68 1.59 1.56 1.21 1.42 1.31 1.70

1991 62.10 1.65 1.67 1.94 1.68 1.60 1.57 1.29 1.47 1.42 1.67 1.64

1992 64.89 1.88 1.92 2.19 1.99 1.96 1.99 1.82 2.07 2.18 2.60 3.05 4.49

1993 64.96 1.75 1.77 2.00 1.80 1.75 1.75 1.57 1.74 1.76 1.97 2.06 2.28 0.11

1994 65.42 1.67 1.69 1.89 1.70 1.64 1.63 1.46 1.59 1.58 1.72 1.72 1.75 0.41 0.71

1995 66.14 1.63 1.64 1.83 1.65 1.59 1.58 1.42 1.53 1.51 1.61 1.60 1.59 0.64 0.90 1.10

1996 67.54 1.66 1.67 1.85 1.68 1.64 1.63 1.49 1.59 1.59 1.68 1.68 1.69 1.00 1.30 1.60 2.11

1997 68.85 1.68 1.69 1.86 1.70 1.66 1.65 1.53 1.63 1.63 1.72 1.72 1.73 1.19 1.46 1.72 2.03 1.94

1998 70.96 1.76 1.77 1.93 1.79 1.76 1.76 1.66 1.76 1.77 1.87 1.89 1.92 1.50 1.78 2.05 2.37 2.50 3.07

1999 73.67 1.86 1.88 2.04 1.92 1.90 1.91 1.82 1.93 1.96 2.06 2.10 2.16 1.83 2.12 2.40 2.73 2.94 3.44 3.82

2000 76.11 1.94 1.96 2.11 2.00 1.98 2.00 1.93 2.04 2.07 2.17 2.22 2.29 2.01 2.29 2.55 2.85 3.03 3.40 3.57 3.32

2001 78.19 1.97 2.00 2.15 2.04 2.03 2.05 1.98 2.08 2.12 2.22 2.27 2.33 2.09 2.34 2.58 2.83 2.97 3.23 3.29 3.02

2002 81.57 2.08 2.11 2.25 2.16 2.15 2.18 2.13 2.23 2.27 2.38 2.44 2.51 2.31 2.56 2.80 3.04 3.20 3.45 3.55 3.46

2003 84.68 2.15 2.18 2.33 2.24 2.24 2.27 2.23 2.33 2.38 2.48 2.54 2.62 2.45 2.69 2.91 3.14 3.28 3.51 3.60 3.54

2004 87.12 2.18 2.21 2.35 2.27 2.27 2.30 2.26 2.36 2.41 2.51 2.57 2.64 2.49 2.70 2.91 3.11 3.23 3.42 3.48 3.41

2005 89.03 2.18 2.21 2.35 2.27 2.27 2.29 2.26 2.35 2.39 2.49 2.54 2.61 2.46 2.66 2.84 3.02 3.12 3.27 3.29 3.21

2006 90.00 2.14 2.17 2.29 2.22 2.22 2.24 2.20 2.29 2.32 2.41 2.45 2.50 2.36 2.54 2.69 2.84 2.91 3.02 3.02 2.90

2007 91.56 2.13 2.15 2.27 2.20 2.19 2.21 2.18 2.26 2.29 2.37 2.41 2.46 2.32 2.48 2.62 2.75 2.81 2.89 2.87 2.76

2008 92.61 2.09 2.11 2.23 2.15 2.15 2.17 2.13 2.21 2.23 2.30 2.34 2.38 2.25 2.39 2.51 2.62 2.67 2.73 2.70 2.57

2009 95.90 2.14 2.17 2.28 2.21 2.21 2.23 2.19 2.27 2.30 2.37 2.40 2.44 2.32 2.46 2.58 2.69 2.73 2.80 2.78 2.67

2010 99.16 2.18 2.21 2.32 2.25 2.25 2.27 2.24 2.32 2.35 2.41 2.45 2.49 2.38 2.52 2.63 2.74 2.78 2.85 2.83 2.74

2011 99.15 2.11 2.13 2.23 2.17 2.17 2.18 2.15 2.22 2.24 2.30 2.33 2.37 2.26 2.38 2.48 2.56 2.59 2.64 2.61 2.51

2012 100.00 2.07 2.09 2.19 2.12 2.12 2.13 2.10 2.16 2.18 2.24 2.26 2.29 2.19 2.30 2.39 2.46 2.48 2.52 2.48 2.38

2013 100.50 2.02 2.04 2.13 2.07 2.06 2.07 2.04 2.10 2.12 2.17 2.19 2.21 2.10 2.21 2.29 2.35 2.37 2.39 2.35 2.24

2014 101.36 1.99 2.01 2.09 2.03 2.02 2.03 2.00 2.05 2.07 2.11 2.13 2.15 2.05 2.14 2.21 2.27 2.28 2.30 2.25 2.15

2015 102.96 1.98 1.99 2.08 2.02 2.01 2.02 1.98 2.03 2.05 2.09 2.11 2.13 2.03 2.12 2.18 2.24 2.24 2.26 2.21 2.11

2016 103.30 1.93 1.94 2.03 1.96 1.96 1.96 1.93 1.98 1.99 2.03 2.04 2.06 1.96 2.04 2.10 2.15 2.15 2.16 2.11 2.01

2017 104.59 1.91 1.93 2.00 1.94 1.93 1.94 1.91 1.95 1.96 2.00 2.01 2.03 1.93 2.00 2.06 2.11 2.10 2.11 2.06 1.97

2018 106.10 1.90 1.91 1.99 1.93 1.92 1.93 1.89 1.93 1.94 1.98 1.99 2.00 1.91 1.98 2.04 2.08 2.07 2.08 2.03 1.94

2019 107.91 1.90 1.91 1.98 1.92 1.91 1.92 1.89 1.93 1.94 1.97 1.98 1.99 1.90 1.97 2.02 2.06 2.06 2.06 2.02 1.93

From

To Variable 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1999 73.67

2000 76.11 3.32

2001 78.19 3.02 2.73

2002 81.57 3.46 3.52 4.32

2003 84.68 3.54 3.62 4.07 3.81

2004 87.12 3.41 3.43 3.67 3.35 2.88

2005 89.03 3.21 3.18 3.30 2.96 2.53 2.19

2006 90.00 2.90 2.83 2.85 2.49 2.05 1.64 1.10

2007 91.56 2.76 2.68 2.67 2.34 1.97 1.67 1.42 1.73

2008 92.61 2.57 2.48 2.45 2.14 1.81 1.54 1.32 1.44 1.14

2009 95.90 2.67 2.60 2.58 2.34 2.10 1.94 1.88 2.14 2.34 3.56

2010 99.16 2.74 2.68 2.67 2.47 2.28 2.18 2.18 2.45 2.69 3.48 3.40

2011 99.15 2.51 2.43 2.40 2.19 1.99 1.87 1.81 1.96 2.01 2.30 1.68 -0.01

2012 100.00 2.38 2.30 2.26 2.06 1.86 1.74 1.67 1.77 1.78 1.94 1.40 0.42 0.85

2013 100.50 2.24 2.16 2.11 1.92 1.73 1.60 1.53 1.59 1.56 1.65 1.18 0.45 0.68 0.50

2014 101.36 2.15 2.07 2.02 1.83 1.65 1.53 1.45 1.50 1.46 1.52 1.11 0.55 0.74 0.68 0.86

2015 102.96 2.11 2.03 1.98 1.81 1.64 1.53 1.46 1.51 1.48 1.52 1.19 0.75 0.95 0.98 1.21 1.57

2016 103.30 2.01 1.93 1.87 1.70 1.54 1.43 1.36 1.39 1.35 1.38 1.07 0.68 0.82 0.82 0.92 0.95 0.34

2017 104.59 1.97 1.89 1.83 1.67 1.52 1.42 1.35 1.38 1.34 1.36 1.09 0.77 0.89 0.90 1.00 1.05 0.79 1.25

2018 106.10 1.94 1.86 1.81 1.66 1.51 1.42 1.36 1.38 1.35 1.37 1.13 0.85 0.97 0.99 1.09 1.15 1.01 1.35 1.44

2019 107.91 1.93 1.85 1.81 1.66 1.53 1.44 1.38 1.41 1.38 1.40 1.19 0.94 1.06 1.09 1.19 1.26 1.18 1.47 1.57 1.71
Productivity, Page 18

1.6 Appendix 

Nordhaus demonstrates how the growth rates in productivity in n sectors of the economy can be 

aggregated to the growth rate in total-economy productivity.25 Monaco adopts the formulation to 

aggregate the growth rates in productivity in the nonfarm business, farm, and “all other” 

sectors.26 Equation A1 is a similar adaptation to five sectors: nonfarm business (n), farm (f), 

households (h), nonprofit institutions (i), and general government (g).

H (wt wt ) H (wt wt )

H (wt wt ) H (wt wt ) H (wt wt )

(A1) P P wt P wt P wt P wt P wt

H

g

Q

g g

H

i

Q

i i

H

h

Q

h h

H

f

Q

f f

H

n

Q

n n

Q

g g

Q

i i

Q

h h

Q

f f

Q

t n n

− + −

− + − + − +

= + + + + +

• •

• • •

• • • • • •

Where,

 ▪

X = rate of change in x

P = productivity

H = hours worked

wtQf = nominal output weight for farm sector defined as the ratio of nominal GDP 

in the farm sector to nominal GDP for the total economy 

wtHf = hours worked weight for farm sector defined as the ratio of hours worked 

in the farm sector to hours worked in the total economy 

t = total economy

In the long-range, it is reasonable to assume that the growth rate in hours worked in all sectors 

will be equal. Thus, Equation A1 can be simplified to A2.

Q

g g

Q

i i

Q

h h

Q

f f

Q (A2) Pt Pn wt n P wt P wt P wt P wt • • • • • •

= + + + +

Furthermore, if the ultimate growth rates in productivity in the household, nonprofits, and 

general government sectors are zero, Equation A2 can be further simplified to A3.

Q

f f

Q (A3) Pt Pn wt n P wt • • •

= +

 25 Nordhaus, William D., “Productivity Growth and the New Economy.” Brookings Papers on Economic 

Activity, (Volume 2, 2002). pp.211-265.

26 Monaco, Ralph, “Issues in Projecting Productivity in the Very Long Term.” Sept. 28, 2005. Treasury 

Office of Economic Policy. Unpublished.
Price Inflation, Page 1

2. PRICE INFLATION

THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

2 PRICE INFLATION.............................................................................................................. 2

2.1 SUMMARY ............................................................................................................................................................. 2

2.2 RECENT REVISIONS TO BLS AND BEA DATA..................................................................................................... 2

2.2.1 Recent and Expected Future Changes to Methods BLS Uses to Compute the CPI.............................................. 2

2.2.2 OCACT Adjustments to the Published CPI-W................................................................................................... 2

2.2.3 BEA Annual Update ........................................................................................................................................ 3

2.2.4 OCACT Adjustments to the Published PGDP................................................................................................... 3

2.3 CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS (CPI-W).......................... 4

2.3.1 Historical Growth in the Adjusted CPI-W ........................................................................................................ 4

2.3.2 Future Growth in the CPI-W ........................................................................................................................... 6

2.4 GROSS DOMESTIC PRODUCT IMPLICIT PRICE DEFLATOR (PGDP)..................................................................... 6

2.4.1 Historical Behavior of the Adjusted PGDP ...................................................................................................... 6

2.4.1.1 Adjusted Deflator for Personal Consumption Expenditures (PGDP_C)......................................................... 8

2.4.1.2 Deflator for Investment Expenditures (PGDP_I) .........................................................................................10

2.4.1.3 Deflator for Government Expenditures (PGDP_G)......................................................................................13

2.4.1.4 Ultimate Assumption for the GDP Deflator.................................................................................................14

2.5 PRICE DIFFERENTIAL .......................................................................................................................................... 15

2.6 PROJECTIONS FROM OTHER SOURCES ............................................................................................................... 15

2.7 APPENDIX............................................................................................................................................................ 20

TABLE OF TABLES PAGE

TABLE 2.1: ASSUMED ULTIMATE ANNUAL RATES OF INCREASE IN PRICE LEVEL MEASURES......................................... 2

TABLE 2.2: HISTORICAL GROWTH IN THE ADJUSTED CPI-W, THE GDP DEFLATOR, AND THE PRICE DIFFERENTIAL..... 5

TABLE 2.3: AVERAGE ANNUAL PERCENTAGE CHANGE IN THE GDP DEFLATOR, AND THE IMPLICIT PRICE DEFLATORS 

FOR CONSUMPTION EXPENDITURES (PGDP_C), INVESTMENT EXPENDITURES (PGDP_I) AND GOVERNMENT 

EXPENDITURES (PGDP_G)........................................................................................................................................... 7

TABLE 2.4: CPI-U VS. C-CPI-U GROWTH RATES................................................................................................................. 9

TABLE 2.5: ADJUSTED CPI-W: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 1982-1984 .................... 16

TABLE 2.6: ADJUSTED GDP DEFLATOR: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 2012............... 18
Price Inflation, Page 2

2 Price Inflation

2.1 Summary

For the 2021 Trustees Report, the assumed ultimate annual rates of increase in the CPI-W are

3.00 percent, 2.40 percent, and 1.80 percent for alternatives I, II, and III, respectively, as shown 

in Table 2.1. The Trustees also assume the ultimate annual rates of increase in the gross domestic 

product implicit price deflator (PGDP) to be 2.75 percent, 2.05 percent, and 1.35 percent for

alternatives I, II, and III, respectively. Thus, the ultimate price differential, defined as the PGDP 

less CPI-W average annual rates of increase, is assumed to be -0.25, -0.35, -0.45 percentage 

point for alternatives I, II, and III, respectively.27 The assumed ultimate annual rates of increase 

for CPI-W and PGDP are unchanged from those assumed for the 2020 Trustees Report.

Table 2.1: Assumed Ultimate Annual Rates of Increase in Price Level Measures

2.2 Recent Revisions to BLS and BEA Data

2.2.1 Recent and Expected Future Changes to Methods BLS Uses to Compute the CPI

The Bureau of Labor Statistics (BLS) collects and publishes data on the CPI. BLS updated the 

consumption expenditure weights in the CPI-W and in the CPI for all Urban Consumers (CPI-U) 

from the 2015-2016 to 2017-2018 period, effective January 2020. Since 2000, BLS has been 

updating the weights at regular intervals every two years, while before 2000 the updates occurred

about once per decade. 28

2.2.2 OCACT Adjustments to the Published CPI-W

Over the years, BLS has introduced numerous improvements to the CPI-W. For example, 

beginning in January 1995 and July 1996, BLS introduced changes to correct methodological 

errors introduced into the index in January 1978 and January 1987. In addition, beginning in 

 27 The projected price differential is important because it affects the real rate of increase in the average 

OASDI covered wage (see Section 3.3.2.4) and, therefore, the long-range actuarial balance. 

28 For BLS’s CPI methodology, see https://www.bls.gov/opub/hom/pdf/cpihom.pdf. The new weights are 

in https://www.bls.gov/cpi/tables/relative-importance/2019.txt, and the weights they replaced are in 

https://www.bls.gov/cpi/tables/relative-importance/old-weights-2019.pdf.

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

I II III I II III I II III

 CPI-W 3.00 2.40 1.80 3.00 2.40 1.80 0.00 0.00 0.00

 PGDP 2.75 2.05 1.35 2.75 2.05 1.35 0.00 0.00 0.00

 Price Differential

 (PGDP less CPI-W) -0.25 -0.35 -0.45 -0.25 -0.35 -0.45 0.00 0.00 0.00 
Price Inflation, Page 3

January 1999, BLS introduced a new geometric mean formula that assumes some lower-level 

substitution among items purchased by consumers within broad categories of goods and services 

due to changes in relative prices.

Because BLS has no plans to revise the historical CPI, these improvements present a 

comparability problem. The goal is to project future growth rates in the CPI, based, in part, on an 

analysis of historical growth rates. Any projected growth rate in the CPI will be affected by the 

BLS method improvements mentioned above. Thus, OCACT adjusted the historical CPI to 

reflect the estimated effects of these method changes, effectively reducing the measured growth 

rate in the CPI-W over the historical period.29 This adjustment is the same as in last year’s 

Trustees Report. Table 2.4 lists the adjusted CPI-W. (See Section 2.6 Appendix for details on 

OCACT’s adjustments to the actual published CPI-W annual growth rates.)

2.2.3 BEA Annual Update

On July 30, 2020, BEA released a regular annual update to the NIPA data, including GDP, 

PGDP, and their components for 2015 and later.

30

Compared to the values reported a year earlier, the revised growth rate of PGDP is changed by 

less than 0.1 percentage point in each year from 2015 to 2018, and the total change in PGDP 

level for 2018 is about -0.05 percent. 

2.2.4 OCACT Adjustments to the Published PGDP 

BEA’s estimate of the PGDP is based, in part, on the CPI. BLS has introduced numerous 

improvements to the CPI that have lowered its post-1995 growth rate. BEA “backcasted” these 

improvements in the NIPA, lowering the growth rate in the PGDP (and raising the real growth 

rate in GDP). However, because BEA only backcasted these effects to 1978, OCACT has 

lowered the pre-1978 growth rate in the PGDP for consistency (see Section 2.7 Appendix for 

further details on the adjustments to the actual published annual growth rates in PGDP and 

annual real growth rates in GDP). The adjusted PGDP is shown in Table 2.5.

 29 While historical values in this document are adjusted for consistency with assumptions about the future, 

the historical values shown in the Trustees Report are unadjusted published values.

30 BEA’s data release with the new GDP data reflecting the annual update can be found at 

https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-and-annual-update. 
Price Inflation, Page 4

2.3 Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)

2.3.1 Historical Growth in the Adjusted CPI-W31

Over the last forty years (1979 to 2019), the adjusted CPI-W grew at an average annual rate of 

2.96 percent, or about 0.56 percentage point higher than the assumed ultimate rate of increase of 

2.4 percent in the 2020 Trustees Report alternative II. Over the last six complete economic 

cycles (1969 to 2019), the adjusted CPI-W grew at an average annual rate of 3.62 percent. The 

growth rates by cycle were 4.44, 7.59, 5.00, 2.45, 2.64, and 1.75 percent for the 1969-1973, 

1973-1979, 1979-1990, 1990-2001, 2001-2007, and 2007-2019 periods, respectively. The 

relatively higher inflation rates experienced from the late 1960s to the mid-1980s can be 

reasonably attributed to high capacity utilization associated with the Vietnam War, the two oil 

price shocks in the early and late 1970s, and the fiscal and monetary policy responses to those 

events.

The high inflation rate in the late 1970s led the Federal Reserve to place a greater emphasis on 

price stability as part of their mandate to pursue maximum employment and stable prices. In the 

early 1980s, the Federal Reserve raised the federal funds rate to reduce the double-digit inflation 

rates that occurred in 1979 and 1980. In the mid-1990s, the Federal Reserve made a judgment 

that inflation at the rate of 2 percent (as measured by the annual change in the price index for 

personal consumption expenditures, or PCE) is most consistent over the longer run with the 

Federal Reserve's statutory mandate. The Federal Reserve publicly announced their 2 percent 

goal in 2012, and in their May 2018 meeting clarified that the goal was meant to be symmetric 

and that “a temporary period of inflation modestly above 2 percent would be consistent with the 

Committee's symmetric inflation objective.” In August 2020, the Federal Reserve announced an 

update to its “Statement on Longer-Run Goals and Monetary Policy Strategy”. The new 

statement indicates that the Federal Reserve will now more strongly emphasize the maximum 

employment part of its mandate. This implies that the Federal Reserve will be willing to allow 

inflation to exceed the target of 2 percent in the interest of promoting maximum employment. 

Specifically, the statement says that “following periods when inflation has been running 

persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation 

moderately above 2 percent for some time.”32

After 1981, various other factors also contributed to the slowdown in the inflation rate. Oil prices 

were mostly stable between 1980 and 2001, and the dependence of the U.S. economy on oil has 

decreased. The economic output of developing nations with relatively low labor costs (for 

example, China and India) increased substantially, as did the share of U.S. imports from those 

countries. The dollar appreciated relative to the trade-weighted average of other currencies 

between 1980 and 1985 and again between 1995 and 2002, further contributing to decreases in 

prices of imported goods. Between 2002 and 2008, some of those factors reversed: the price of 

oil and other commodities increased sharply and the dollar depreciated sharply, but there was 

 31 See section 2.2.2 for a description of the adjusted CPI-W.

32 See https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20180502.pdf (page 9) and 

https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communicationsstatement-on-longer-run-goals-monetary-policy-strategy.htm.
Price Inflation, Page 5

relatively little corresponding increase in the inflation rate. Since 2008, the inflation rate has 

been even lower, due to a recession, a decrease in the price of oil and other commodities, and 

appreciation of the dollar.

33 This period has also been characterized by unusually weak 

aggregate demand for goods and services. The Trustees do not expect this weak demand to 

continue into the long-range future.

Table 2.2: Historical Growth in the Adjusted CPI-W, the GDP Deflator, and the Price Differential

Period

CPI-W Average 

Annual Rate of 

Growth (percent)

GDP Deflator 

Average Annual 

Rate of Growth

Price Differential 

= GDP Deflator 

less CPI-W

Historical:

1969-2019 (50 years) 3.62 3.43 -0.19

 1969-1994 (25 years) 5.13 5.00 -0.13

 1994-2019 (25 years) 2.14 1.89 -0.25

By Complete Economic Cycle (Peak-to-Peak)

 Individual Cycle

 1969-1973 4.44 4.93 0.49

 1973-1979 7.59 7.45 -0.14

 1979-1990 5.00 4.61 -0.39

 1990-2001 2.45 2.08 -0.37

 2001-2007 2.64 2.49 -0.15

 2007-2019 1.75 1.63 -0.12

 Last Six Cycles

 1969-2019 3.62 3.43 -0.19

 Last Five Cycles

 1973-2019 3.55 3.30 -0.25

 Last Four Cycles

 1979-2019 2.96 2.70 -0.26

 Last Three Cycles

 1990-2019 2.20 1.98 -0.22

 Last Two Cycles

 2001-2019 2.04 1.92 -0.13

 33 CPI-W grew at a 2.22 percent annual rate over the 7-year period 1995-2002, 3.09 percent over the 6-year 

period 2002-2008, and 1.54 percent over the 11-year period 2008-2019. The dollar has appreciated significantly 

relative to the euro and the British pound since 2008, and has not changed much relative to the yen and the yuan.
Price Inflation, Page 6

2.3.2 Future Growth in the CPI-W 

If only past inflation rates were used to determine the assumed ultimate rate for the future, then 

only the period (e.g., the most recent 40 or 20 years) and method (e.g., a simple, weighted, or 

geometric average) would need to be chosen. The best historical period would be the one that is 

most representative of the conditions that are expected to prevail over the upcoming 75-year 

projection period. The 50-year historical record is filled with inflation-related events, some of 

which occurred in unique circumstances and have limited relevance for projecting the future. 

These include the Vietnam War, oil price shocks, and periods of price controls. Furthermore, 

after a historically unusual departure in the 1970s, monetary policy returned to a relatively strong 

emphasis on price stability. 

While these specific historical events will not recur in the future (at least not exactly as they have 

in the past), other inflation-related events may take their place. It is reasonable to expect some 

additional upward pressure on the future growth rate in the CPI due to changes in international 

trade. The ratio of net exports (i.e., exports less imports) to GDP averaged about -3.2 percent 

over the last economic cycle, i.e., the 12-year period from 2008 through 2019. Part of this 

imbalance is due to imports of relatively low-priced consumer goods from emerging economies, 

such as China. However, as these developing economies mature, their average wage and 

consumption levels are expected to rise relative to their output, and their currencies and price 

levels are expected to rise relative to those of the U.S. This may lessen the downward pressure 

on the prices of basic commodities and, therefore, the CPI. These trends are also expected to 

ultimately return the ratio of net exports to GDP to zero in the future. 

OCACT believes that the 2.96 percent average annual growth rate for the adjusted CPI-W for the

last four economic cycles from 1979 to 2019 is higher than the most reasonable assumption for 

the ultimate CPI-W annual rate of increase, because it includes several years of high inflation 

rates unlikely to be repeated at a similar frequency under the current monetary policy. Over the 

last three complete economic cycles (from 1990 to 2019), which better reflect the current 

domestic monetary policy environment, the average annual growth rate for the adjusted CPI-W 

was 2.20 percent. However, that period includes unusually low inflation rates of the last cycle,

heavily influenced by a deep recession, slower-than-usual recovery, and a continuation of a trend 

of inexpensive imported goods, a set of circumstances also not likely to be typical in the long 

run. Thus, the assumed ultimate rate of increase in the CPI-W for the 2021 Trustees Report is

2.40 percent for alternative II, and 3.00 and 1.80 percent for alternatives I and III, respectively, 

the same as the rates assumed for the 2020 Trustees Report. 

2.4 Gross Domestic Product Implicit Price Deflator (PGDP)

2.4.1 Historical Behavior of the Adjusted PGDP 

Table 2.3 shows historical data for the average annual percentage change in PGDP and its key 

components. The PGDP can be viewed as a weighted average of its key components, which 

include the implicit price deflator for personal consumption expenditures (PGDP_C), the implicit 

price deflator for gross private domestic investment (PGDP_I), and the implicit price deflator for 

government consumption expenditures and gross investment (PGDP_G). While the implicit price 

deflators for imports and exports also contribute to PGDP over the historical period, the effect of 
Price Inflation, Page 7

net exports on the deflator is assumed to be zero on average over the 75-year projection period. 

The weights are the ratios of the components’ nominal expenditures to total nominal GDP. The 

weights have been relatively stable in the historical period. In 2019, the weights for personal 

consumption, investment, and government expenditures were about 0.68, 0.18, and 0.17, 

respectively. These weights summed to more than one because net exports were negative. 

Adjusting for the assumed effect of net exports on the PGDP, the weights for personal 

consumption, investment, and government expenditures are assumed to be 0.63, 0.18, and 0.19, 

respectively. These values are consistent with the average values observed in the historical 

period. 

Table 2.3: Average Annual Percentage Change in the GDP Deflator, and the Implicit Price Deflators for 

Consumption Expenditures (PGDP_C), Investment Expenditures (PGDP_I) and Government Expenditures

(PGDP_G)

Period GDP Deflator PGDP_C PGDP_I PGDP_G

Historical:

1969-2019 (50 years) 3.45 3.46 2.73 4.14

 1969-1994 (25 years) 5.04 5.16 4.48 5.62

 1994-2019 (25 years) 1.89 1.80 1.01 2.69

By Complete Economic Cycle (Peak-to-Peak)

 Individual Cycle

 1969-1973 4.93 4.43 4.72 7.57

 1973-1979 7.45 7.75 8.64 7.55

 1979-1990 4.61 4.95 3.42 4.88

 1990-2001 2.08 2.11 0.68 2.79

 2001-2007 2.49 2.31 2.18 4.04

 2007-2019 1.63 1.54 0.75 2.00

 Last Six Cycles

 1969-2019 3.43 3.46 2.73 4.14

 Last Five Cycles

 1973-2019 3.30 3.38 2.55 3.85

 Last Four Cycles

 1979-2019 2.70 2.74 1.67 3.31

 Last Three Cycles

 1990-2019 1.98 1.92 1.02 2.72

 Last Two Cycles

 2001-2019 1.92 1.80 1.22 2.67

PGDP tends to have a lower annual percentage change than the CPI-W, as shown in Table 2.2, 

primarily due to two factors. First, the computational weighting method for the PGDP allows for 

substitution between items over time, which contributes to a slower annual rate of change when 
Price Inflation, Page 8

compared to the CPI-W. Second, the PGDP covers investment and government expenditures in 

addition to consumer expenditures. The second factor generally contributes to slower growth in 

GDP due to the PGDP_I, with the exception of the 1969-1973 period and the 2001-2007 period 

where the average annual growth in PGDP_G was elevated due to the Vietnam war and the 

Afghanistan and Iraq wars, respectively. While there are other differences between the two 

measures, such differences are relatively less important in explaining the differences in the 

annual percentage change.

The long-run historical growth rate in PGDP is mostly explained by the separate historical 

growth rates in PGDP_C, PGDP_I, and PGDP_G. The historical and expected future growth 

rates for each component deflator are examined below.

2.4.1.1 Adjusted Deflator for Personal Consumption Expenditures (PGDP_C)

While both the PGDP_C and the CPI-W focus on changes in the prices of consumer goods, the 

PGDP_C differs from the CPI-W in terms of the formula used for the computation and the scope 

of items covered. The PGDP_C formula allows for substitution between items, which tends to 

result in a lower annual rate of change when compared to the CPI-W. The difference in the scope 

of items covered tends to contribute less to systematic differences over time than the difference 

in the formula. Thus, all else equal, the average annual change in the PGDP_C contributes to the 

annual percentage change in the PGDP being lower than the annual percentage change in the 

CPI-W. 

When examining the historical data on the PGDP_C and the CPI-W, the more recent complete 

economic cycles provide a good basis for assessing the future relationship between the two price 

measures because the BLS provides the information necessary to produce a good approximation 

of the current CPI-W computation method from 1979 to the present. Over the 40-year period 

from 1979 to 2019, the average annual growth rate for the adjusted PGDP_C was 2.74 percent, 

or 0.22 percentage point below the CPI-W growth rate of 2.96 percent. Over the 29-year period 

from 1990 to 2019, the average annual growth rate for the adjusted PGDP_C was 1.92 percent, 

or 0.28 percentage point below the CPI-W growth rate of 2.20 percent. Over the 18-year period 

from 2001 to 2019, the average annual growth rate for the adjusted PGDP_C was 1.80 percent, 

rounding to 0.25 percentage point below the CPI-W growth rate of 2.04 percent. Over the most 

recently completed cycle from 2007 to 2019, the average annual growth rate for the adjusted 

PGDP_C was 1.54 percent, or 0.21 percentage point below the CPI-W growth rate of 1.75

percent. 

The historical difference in the last two complete economic cycles between the PGDP_C and the 

CPI-W of 0.25 percentage point is very similar to the difference between the CPI-U and the 

chained-CPI-U (C-CPI-U), as shown in Table 2.4. Like the PGDP_C, the C-CPI-U allows for 

substitution between items over time and tends to grow at a slower rate than the CPI-U. BLS has 

published monthly values for the C-CPI-U for each year beginning in January 2000. Final values 

are now available for 2018. The average annual growth rate in the C-CPI-U from the first quarter 

of 2000 to the fourth quarter of 2018 was 1.84 percent. Over the same period, the average annual 

growth rates in the PGDP_C, CPI-U, and CPI-W were approximately 1.82, 2.12, and 2.10

percent, respectively. The data suggest that over this period, the contribution of the difference in 

computational methods was about 0.28 percentage point (i.e., 2.12 – 1.84), and that the PGDP_C 
Price Inflation, Page 9

price differential (the difference between the growth rates of PGDP_C and CPI-W) was -0.28

percentage point (i.e., 1.82 – 2.10).34 OCACT believes that the difference of -0.28 may be 

somewhat low due to the unusually low inflation rate over the 2008-2018 period that may have 

limited the substitution between items over that time. 

Table 2.4: CPI-U vs. C-CPI-U growth rates

CPI-U growth rate less C-CPI-U growth rate

(December-to-December, percentage points)

Year

All Items Less Food 

and Energy All Items

2000 0.7 0.8

2001 0.6 0.3

2002 0.3 0.4

2003 0.4 0.2

2004 -0.1 0.1

2005 0.3 0.5

2006 0.4 0.3

2007 0.5 0.4

2008 0.0 -0.1

2009 0.3 0.3

2010 0.2 0.2

2011 0.0 0.0

2012 0.3 0.3

2013 0.2 0.2

2014 0.4 0.2

2015 0.4 0.3

2016 0.3 0.3

2017 0.5 0.4

2018 0.5 0.4

Average 2000-2018 0.33 0.28

Over the long-range period, it is reasonable to assume that the average annual growth rates in the 

CPI-W and CPI-U will be roughly equal. It also seems reasonable to assume that the difference 

in the long-range average annual growth rates (PGDP_C less CPI-W) will be -0.30 percentage 

point, and that this difference will be only due to the expected 0.30 percentage point effect from 

the different computational weighting methods. Stated differently, the expected growth-rate 

differential for the personal consumption deflator (PGDP_C less CPI-W) due to factors other 

than the computational weighting methods is assumed to be zero. Thus, the assumed ultimate 

annual growth rate for PGDP_C is 2.1 percent, equal to the assumed ultimate annual growth rate 

 34 The data also suggest that from the first quarter of 2000 to the fourth quarter of 2018, the average annual 

growth rate in the C-CPI-U (1.85 percent) was a reasonable approximation of the average annual growth rate in the 

PGDP_C (1.82 percent). 
Price Inflation, Page 10

for CPI-W (i.e., 2.4 percent) less the 0.30 percentage point effect of the different computational 

weighting methods.

2.4.1.2 Deflator for Investment Expenditures (PGDP_I)

The PGDP_I can be viewed as a weighted average of deflators for its principal components: 

investment in equipment (PGDP_INE), investment in intellectual property (PGDP_INIP), 

residential investment (PGDP_IR), and investment in nonresidential structures (PGDP_INS).35

The equipment and intellectual property components in their current form were first used in the 

2013 revisions to NIPA. The 2018 comprehensive revisions to NIPA further refined the 

definition, which resulted in revisions to historical data for investment in software and computer 

equipment.

Deflator for Equipment (PGDP_INE): Over the 40-year period from 1979 to 2019, the average 

annual growth rate was about -0.13 percent for the PGDP_INE, compared to 2.74 percent for the 

PGDP_C. The PGDP_INE growth rate has been depressed by the rise in nominal investment 

expenditures for computers and the sharp decline in their quality-adjusted prices. Over this 

period, the deflator for computers fell at an average annual rate of about 11.15 percent, and the 

ratio of nominal investment expenditures for computers to all investment expenditures for 

equipment rose from about 5 percent in 1979 to about 13 percent in the late 1990s, followed by a 

decline to about 9 percent in 2015-2016. The ratio rose slightly to about 10 percent in 2018-

2019.

It seems reasonable to assume that quality-adjusted computer prices will continue to decline in 

the future, but at a somewhat slower rate. The average annual rate of decline was about 12.9 

percent over the 1982 to 1994 period, 20.2 percent over the 1994 to 2001 period, 10.1 percent 

over the 2001 to 2009 period, and 1.6 percent over the 2009 to 2019 period. The large rate of 

decline in the late 1990s was probably due to a combination of technological advances and 

production volume increases that are unlikely to be sustained over a longer period. On the other 

hand, the recent slowdown has been dramatic, but it is unclear if it is permanent. It seems 

reasonable to assume that the future rate of price decline will be similar to that over the last 18

years; thus, the assumed rate of decline in quality-adjusted computer prices is 5.5 percent per 

year. Furthermore, it is expected that the ratio of nominal investment expenditures for computers 

to all investment expenditures for equipment will stabilize at the approximate average value of 

the ratio over the last decade (i.e., 10 percent).

Over the period from 1979 to 2019, the deflator for equipment other than computers grew on 

average at a 1.20 percent annual rate, or 1.54 percentage points less than the 2.74 percent annual 

growth rate for the PGDP_C. OCACT believes that the growth rate in the price deflator for other 

equipment will continue to be depressed relative to the PGDP_C, since the prices for at least 

some items in other equipment will be driven down by the same types of future technological 

advancements expected for computers. Thus, it is reasonable to expect that, in the future, the 

average annual growth rate in other equipment will be about 0.8 percent, or 1.3 percentage points

less than the 2.1 percent assumed ultimate average annual growth rate in the PGDP_C. 

 35 This decomposition excludes the change in business inventories, which has averaged roughly 1.8 percent 

of total investment expenditures over the 40-year period from 1979 to 2019. 
Price Inflation, Page 11

Using these average annual growth rates and weights, it is reasonable to set the assumed ultimate 

average annual rate of growth in PGDP_INE in the future to about 0.17 percent (i.e., -5.5 * 0.10 

+ 0.8 * 0.90).

Deflator for Intellectual Property (PGDP_INIP): Over the 40-year period from 1979 to 2019, the 

average annual growth rate was about 1.32 percent for the PGDP_INIP, compared to 2.74

percent for the PGDP_C. The PGDP_INIP growth rate has been depressed by the rise in nominal 

investment expenditures for software and a slow but steady decline in its quality-adjusted prices. 

Over this period, the deflator for software fell at an average annual rate of about 1.63

percent, and the ratio of nominal investment expenditures for software to all investment 

expenditures for intellectual property rose from about 17 percent to about 38 percent by 2000, 

and has slowly increased to about 41 percent since.

Software prices have been declining slowly, but steadily. They declined over five of the last six

economic cycles (the only exception being the 1973-1979 cycle), and their rate of decline ranged 

from 0.16 percent in the 1969-1973 cycle to 2.41 percent in 2001-2007. Over the last cycle (a 12-

year period from 2007 to 2019), software prices declined at an average annual rate of 1.37 

percent. It seems reasonable to expect some future price decline, but at a somewhat slower rate 

than the average over the last 40 years. OCACT expects that software prices will decline at a rate 

of 1 percent per year. OCACT also expects that the ratio of nominal investment expenditures for 

software to all investment expenditures for intellectual property will stabilize at about 45 percent.

Over the period from 1979 to 2019, the deflator for intellectual property other than software 

grew on average at a 2.63 percent annual rate, or 0.11 percentage point less than the 2.74 percent 

annual growth rate for the PGDP_C. OCACT believes that it is reasonable to expect that, in the 

future, the average annual growth rate in the price deflator for other intellectual property will 

continue to be somewhat lower than the PGDP_C. The assumed growth rate in the deflator for 

other intellectual property is 2.0 percent, or 0.1 percentage point less than the 2.1 percent

assumed ultimate average annual growth rate in the PGDP_C. 

Using these average annual growth rates and weights, it is reasonable to set the assumed ultimate 

average annual rate of growth in PGDP_INIP in the future to about 0.65 percent (i.e., -1 * 0.45 + 

2.0 * 0.55).

Deflator for Residential Investment (PGDP_IR): Residential investment is almost entirely 

composed of investment in fixed structures, which, in turn, is composed of single-family, 

multifamily, and other structures (e.g., manufactured homes, dormitories, etc.). Over the 22-year 

period from 1979 to 2001, the average annual growth rate was about 3.80 percent for the 

PGDP_IR, compared to 3.52 percent for the PGDP_C. Thus, the average annual growth rate for 

the PGDP_IR was about 0.28 percentage point (3.80 – 3.52) higher than the average annual 

growth rate in the PGDP_C over the period. However, over the next 6-year period, this 

differential increased substantially. From 2001 to 2007, the average annual growth rate was 

about 4.74 percent for the PGDP_IR and 2.31 percent for the PGDP_C. Thus, the average annual 

growth rate for the PGDP_IR was about 2.43 percentage points (4.74 – 2.31) higher than the 

average annual growth rate in the PGDP_C over the period.
Price Inflation, Page 12

OCACT believes that the 2.43 percent growth rate differential between the PGDP_IR and the 

PGDP_C over the 2001-2007 period was a temporary market phenomenon characterized by 

overheated demand for housing, house “flipping,” subprime mortgage lending, and unusually 

high profits and gains in stock prices for the builders of new homes. Since 2007, there has been a 

market correction: the housing bubble has collapsed, new and existing home sales have dropped 

nationally, prices of new homes in most markets have declined, and the profits and stock prices 

of new homebuilders have plummeted. Although the housing market has been recovering lately, 

home prices in 2019 are only slightly above the 2006 level, and the number of sales is well 

below the mid-2000s level. For the 2007 to 2019 period, the average annual growth in PGDP_IR 

and PGDP_C was 2.17 and 1.54 percent, respectively, indicating a 0.63 percent (2.17 – 1.54) 

differential between the two deflators.

OCACT believes it is reasonable to disregard the post-2000 period and set the assumed ultimate 

average annual rate of increase in the PGDP_IR to 2.35 percent, or about 0.25 percentage point 

higher than the 2.1 percent assumed ultimate average annual rate of increase in the PGDP_C. 36

Deflator for Investment in Nonresidential Structures (PGDP_INS): Investment in nonresidential 

structures includes investment in structures used for drilling for petroleum and natural gas. Over 

the 22-year period from 1979 to 2001, the average annual growth rate for PGDP_INS was 3.69

percent, or slightly less than the 3.80 percent growth rate in PGDP_IR. However, over the 6-year 

period from 2001 to 2007, the average annual growth rates for PGDP_INS and PGDP_IR were 

7.49 and 4.74 percent, respectively. The relatively faster average annual growth rate for 

PGDP_INS occurred because the average annual growth rate in the deflator for investment in 

petroleum and natural gas was about 20.3 percent. Excluding the effects of petroleum and natural 

gas, the average annual growth rate for PGDP_INS was about 5.0 percent, closer to the 4.74

percent average annual growth rate in PGDP_IR over the period.

OCACT believes the relatively rapid growth rate in the deflator for investment in petroleum and 

natural gas is a temporary market phenomenon associated with a run-up in oil prices. The price 

of a barrel of oil rose from about $26 in 2001 to $72 in 2007, or at an average annual rate of 

about 19.0 percent. As the market price for oil rose, previously expensive technologies became 

economically profitable. 

OCACT believes that in the future the average annual growth rate in the price of a barrel of oil 

will not be significantly greater than the growth rate in the PGDP_C and that the average annual 

growth rates in the PGDP_INS and PGDP_IR will be approximately equal. Thus, the assumed 

ultimate average annual rate of increase in PGDP_INS is 2.35 percent, or 0.25 percentage point 

higher than the 2.1 percent assumed ultimate average annual growth rate in the PGDP_C, and 

equal to the assumed ultimate average annual rate of increase in the PGDP_IR.

The ratio of investment expenditures in equipment to total investment expenditures has averaged 

about 36 percent over the past 60 years. In the past 20 years, from 1999 to 2019, the average has 

decreased slightly to 35 percent. OCACT assumes that the share of investment expenditures in 

equipment to total investment expenditures will continue to hold at this level, i.e. 35 percent, in 

 36 In the future, the PGDP_IR may grow faster than the PGDP_C due to more rapid increases in the prices 

of scarce land and basic building commodities such as copper, lumber, and cement. 
Price Inflation, Page 13

the future. Investment in intellectual property has been an increasing share of total investment.

Much of the increase, however, has been due to the sharp rise in investment in software from the 

1970s to the early 2000s. Since the share of software in the investment in intellectual property 

has stabilized recently, OCACT believes it is reasonable to assume that the ratio of investment in 

intellectual property to total investment will be similar to its recent levels, or about 25 percent. 

OCACT also assumes that the investment expenditure weights for nonresidential investment for 

structures and residential investment will account for approximately equal shares of the rest of 

the investment expenditures, or 20 percent each. 

Thus, the assumed ultimate average annual rate of increase for PGDP_I is 1.16 percent (i.e., 0.17

* 0.35 + 0.65 * 0.25 + 2.35 * (0.20 + 0.20)).

2.4.1.3 Deflator for Government Expenditures (PGDP_G)

The PGDP_G can be viewed as a weighted average of deflators for government consumption 

expenditures (PGDP_GC) and government investment (PGDP_GI). 

Deflator for Government Consumption Expenditures (PGDP_GC): Government consumption 

expenditures can be separated into employee compensation and other (residual) government 

consumption expenditures. In the NIPA, the deflator for government consumption expenditures 

on employee compensation is defined as an index proportional to average employee 

compensation. From 1979 to 2001, a 22-year period covering two complete economic cycles, the 

average annual growth rate in the average government employee compensation and the adjusted 

CPI-W were about 5.35 and 3.72 percent, respectively. This indicates that over the period, the 

real annual growth rate in average employee compensation was 1.57 percent (i.e., 100 * (1.0535 /

1.0372 – 1)), slightly higher than the 1.23 percent assumed ultimate real annual growth rate in 

average compensation in the 2020 Trustees Report.37

From 2001 to 2007, a 6-year period covering a complete economic cycle, the average annual 

growth rate in the average government employee compensation and the adjusted CPI-W were 

about 4.78 and 2.64 percent, respectively. This indicates that over the period, the real annual 

growth rate in average employee compensation was 2.08 percent (i.e., 100 * (1.0478 / 1.026 –

1)), about 0.8 percentage point higher than the 1.23 percent ultimate real annual growth rate in 

average compensation assumed in the 2020 Trustees Report.

OCACT believes that the relatively high growth rate in the deflator for employee compensation 

over the 2001 to 2007 period is a temporary phenomenon mostly associated with military pay 

incentives related to the conflicts in Iraq and Afghanistan. Over this period, the average annual 

growth rates in the average compensation of state and local, federal civilian, and federal military 

employees were 4.10, 5.62, and 9.52 percent, respectively. By contrast, between 2007 and 2019, 

the latest complete economic cycle, the average annual growth rates in the average compensation 

of state and local, federal civilian, and federal military employees were 2.59, 2.61, and 1.89

percent, respectively, and the average annual growth rate in the deflator for employee 

 37 For the 2020 Trustees Report alternative II, the Trustees assumed that the ultimate average annual 

nominal rates of increase in the average compensation for all employees and in the CPI were 3.66 and 2.4 percent, 

respectively.
Price Inflation, Page 14

compensation was 2.56 percent, or just 0.81 percentage point higher than the 1.75 percent growth 

rate in CPI-W over the same period. It is reasonable to assume that in the future the average 

annual nominal growth rate in the average compensation for all government employees will be 

equal to the rate assumed for the economy-wide average compensation, which is assumed to be 

3.66 percent for the 2021 Trustees Report. Therefore, OCACT believes that the average annual 

growth rate in the deflator for government consumption expenditures on employee compensation 

will be 3.66 percent.

38

It is also reasonable and consistent to assume that the average annual growth rate in the deflator 

for other government consumption will be equal to the assumed ultimate average annual growth 

rate in the PGDP_C, or 2.1 percent.

Using rough averages over the 1979 to 2019 period, OCACT assumes that future government 

consumption expenditures for employee compensation will be about 70 percent of total 

government consumption expenditures. Thus, the assumed ultimate average annual growth rate 

for PGDP_GC is 3.19 percent (i.e., 3.66 * 0.70 + 2.1 * 0.30).

Deflator for Government Investment (PGDP_GI): Government investment can be separated into 

1) structures, 2) equipment, and 3) intellectual property. It is reasonable to assume that the future 

average annual growth rate in the deflator for each of these categories of government investment 

will be equal to the expected future average annual growth rate in the corresponding categories 

of private investment. Thus, OCACT also assumes the future average annual growth rates in the 

deflator for government investment will be 2.35 percent for investment in structures, 0.17 

percent for investment in equipment, and 0.65 percent for investment in intellectual property.

Using rough averages over the 1979 to 2019 period, OCACT assumes the future ratio of 

government investment components to total government investment will be about 0.45 for 

structures, about 0.25 for equipment, and about 0.30 for intellectual property. Thus, the assumed 

ultimate average annual growth rate for PGDP_GI is 1.30 percent (i.e., 2.35 * 0.45 + 0.17 * 0.25 

+ 0.65 * 0.30).

Finally, the historical proportions of government consumption and investment expenditures over 

the 40-year period from 1979 to 2019 averaged about 79 and 21 percent of total government 

expenditures, respectively. OCACT assumes that the future proportions of government 

consumption and investment expenditures will also be 79 and 21 percent of total government 

expenditures, respectively. Hence, the assumed ultimate average annual rate of increase in the 

PGDP_G is 2.80 percent (i.e., 3.19 * 0.79 + 1.30 * 0.21).

2.4.1.4 Ultimate Assumption for the GDP Deflator

The assumed annual growth rates for the components of the GDP deflator, and corresponding 

weights, result in an assumed average annual growth rate of 2.05 percent for the intermediate 

assumption. The 2.05 percent is approximately equal to the sum of the PGDP_C component of 

 38 OCACT assumes the size of the active military remains constant throughout the projection period, rather 

than increasing proportionally with the civilian employment. This implies a gradual shift in weights between civilian 

government employment and the military and, since the average military compensation is higher, a slightly slower 

average growth in government compensation. However, the effect is small.
Price Inflation, Page 15

2.1 percent times its weight of 0.63, the PGDP_I component of 1.16 percent times its weight of 

0.18, and the PGDP_G component of 2.80 percent and its weight of 0.19. For alternatives I and 

III the assumptions are 2.75 and 1.35, respectively. 

The assumed annual increase in the GDP deflator for the 2021 Trustees Report is unchanged 

from that used in the 2020 Trustees Report.

2.5 Price Differential 

The price differential is defined as the annual growth rate in the PGDP less the annual growth 

rate in the CPI-W. For the 2021 Trustees Report, the assumed ultimate price differential 

is -0.25, -0.35, and -0.45 percentage point for alternative I, II, and III, respectively. 

For alternative II, the ultimate price differential of -0.35 percentage point is the sum of -0.30

percentage point due to the difference in computational methods and -0.05 percentage point due 

to coverage differences between the PGDP and CPI-W. These values are unchanged from those

used in the 2020 Trustees Report.

2.6 Projections from Other Sources

At the time assumptions were developed, the following projections from other sources were 

available.

IHS Markit provided projections through 2050 in its August 2020 long-run trend forecast (see

The 30-Year Focus, Third Quarter, August 2020). Over the 20-year period from 2030 to 2050, 

IHS Markit projected an average annual rate of increase of 2.09 percent for the CPI and 2.03

percent for the PGDP, with a resulting price differential of -0.06 percentage point (2.03 – 2.09). 

The Moody’s Analytics’ September 2020 forecast extended to 2050. Over the 20-year period 

from 2030 to 2050, Moody’s Analytics projected an average annual growth rate of 2.21 percent 

for the CPI-W and 1.90 percent for the PGDP, for a price differential of -0.31 percentage point 

(1.90 – 2.21).

The Office of Management and Budget (OMB) Fiscal Year 2021 Budget included projections 

through 2030. OMB’s annual growth rates for the PGDP and CPI-W (and CPI-U) for 2030 were 

2.01 and 2.27 percent, respectively. Thus, OMB projected a price differential of -0.26 percentage 

point (i.e., 2.01 – 2.27). The Congressional Budget Office (CBO) September 2020 report, The 

2020 Long-Term Budget Outlook, included projections through 2050. CBO’s annual growth rates 

for the PGDP and CPI-U for 2030-2050 were 2.00 and 2.20 percent, respectively. Thus, CBO 

projected an average annual price differential of -0.20 percentage point (i.e., 2.00 – 2.20) for the 

period. 

The Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods 

recommended assuming an ultimate (i.e., long-range average) annual rate of increase in the 

CPI-W of 2.4 percent for alternative II, and a price differential of -0.35 percentage point. The 

prior technical panel, which met in 2015, recommended an ultimate annual rate of increase in the 

CPI-W of 2.5 percent for alternative II, and a price differential of -0.4 percentage point.
Price Inflation, Page 16

Table 2.5: Adjusted CPI-W: Compound Annual Rates of Growth (%) Base Year = 1982-1984

From

To Variable 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

1961 35.34

1962 35.62 0.80

1963 36.02 0.96 1.12

1964 36.41 1.00 1.11 1.10

1965 36.92 1.10 1.21 1.25 1.40

1966 37.90 1.41 1.56 1.71 2.02 2.64

1967 38.98 1.65 1.82 2.00 2.30 2.75 2.87

1968 40.34 1.91 2.10 2.29 2.59 2.99 3.17 3.48

1969 42.05 2.20 2.40 2.61 2.92 3.30 3.53 3.86 4.24

1970 43.99 2.46 2.67 2.90 3.20 3.56 3.80 4.11 4.42 4.61

1971 45.78 2.62 2.83 3.04 3.33 3.65 3.85 4.10 4.31 4.34 4.08

1972 47.22 2.67 2.86 3.05 3.30 3.58 3.73 3.91 4.01 3.94 3.60 3.13

1973 50.04 2.94 3.14 3.34 3.59 3.87 4.05 4.25 4.40 4.44 4.39 4.54 5.98

1974 54.98 3.46 3.68 3.92 4.21 4.52 4.76 5.03 5.30 5.51 5.73 6.29 7.91 9.87

1975 59.32 3.77 4.00 4.25 4.54 4.86 5.10 5.39 5.66 5.90 6.16 6.69 7.91 8.88 7.90

1976 62.59 3.88 4.11 4.34 4.62 4.91 5.15 5.40 5.64 5.85 6.05 6.45 7.30 7.75 6.70 5.51

1977 66.42 4.02 4.24 4.47 4.73 5.02 5.23 5.47 5.70 5.88 6.06 6.40 7.07 7.34 6.51 5.82 6.13

1978 70.83 4.18 4.39 4.61 4.87 5.14 5.35 5.58 5.79 5.96 6.14 6.43 6.99 7.20 6.54 6.09 6.38 6.63

1979 77.61 4.47 4.69 4.91 5.17 5.45 5.67 5.91 6.13 6.32 6.51 6.82 7.36 7.59 7.14 6.95 7.43 8.09 9.57

1980 86.22 4.81 5.03 5.27 5.54 5.82 6.05 6.30 6.53 6.75 6.96 7.29 7.82 8.08 7.79 7.77 8.34 9.09 10.33 11.11

1981 94.31 5.03 5.26 5.49 5.76 6.04 6.27 6.51 6.75 6.96 7.18 7.49 7.99 8.25 8.01 8.03 8.55 9.16 10.01 10.24 9.38

1982 99.87 5.07 5.29 5.51 5.77 6.03 6.24 6.47 6.69 6.88 7.07 7.35 7.78 7.98 7.75 7.73 8.10 8.50 8.97 8.77 7.62

1983 104.04 5.03 5.24 5.45 5.68 5.92 6.12 6.33 6.52 6.68 6.85 7.08 7.45 7.59 7.34 7.27 7.53 7.76 7.99 7.60 6.46

1984 108.26 4.99 5.18 5.38 5.60 5.83 6.00 6.19 6.36 6.51 6.64 6.84 7.16 7.27 7.01 6.91 7.09 7.23 7.33 6.89 5.86

1985 111.90 4.92 5.10 5.29 5.49 5.70 5.86 6.03 6.19 6.31 6.42 6.59 6.86 6.94 6.67 6.55 6.67 6.74 6.75 6.29 5.35

1986 113.56 4.78 4.95 5.12 5.31 5.50 5.64 5.79 5.92 6.02 6.11 6.24 6.47 6.51 6.23 6.08 6.14 6.14 6.08 5.59 4.70

1987 117.40 4.73 4.89 5.05 5.22 5.40 5.53 5.67 5.78 5.87 5.94 6.06 6.26 6.28 6.01 5.85 5.88 5.86 5.77 5.31 4.51

1988 121.47 4.68 4.83 4.98 5.15 5.31 5.44 5.56 5.67 5.74 5.81 5.91 6.08 6.09 5.83 5.67 5.68 5.64 5.54 5.10 4.38

1989 126.75 4.67 4.81 4.96 5.12 5.27 5.39 5.51 5.60 5.67 5.73 5.82 5.98 5.98 5.73 5.57 5.58 5.53 5.43 5.03 4.37

1990 132.76 4.67 4.81 4.95 5.10 5.25 5.36 5.47 5.56 5.63 5.68 5.76 5.91 5.91 5.66 5.52 5.52 5.47 5.38 5.00 4.41

1991 137.46 4.63 4.77 4.90 5.04 5.19 5.29 5.39 5.48 5.53 5.58 5.65 5.79 5.77 5.54 5.39 5.39 5.33 5.23 4.88 4.33

1992 140.73 4.56 4.69 4.81 4.95 5.08 5.18 5.27 5.34 5.39 5.43 5.49 5.61 5.59 5.36 5.21 5.19 5.13 5.03 4.69 4.17

1993 144.04 4.49 4.61 4.73 4.86 4.98 5.07 5.16 5.22 5.26 5.29 5.35 5.45 5.43 5.20 5.05 5.03 4.96 4.85 4.52 4.03

1994 146.91 4.41 4.53 4.64 4.76 4.88 4.96 5.04 5.10 5.13 5.15 5.20 5.29 5.26 5.04 4.89 4.85 4.78 4.67 4.35 3.88

1995 150.52 4.35 4.46 4.57 4.68 4.80 4.87 4.94 5.00 5.03 5.04 5.08 5.17 5.13 4.91 4.77 4.73 4.65 4.53 4.23 3.78

1996 154.41 4.30 4.41 4.51 4.62 4.72 4.79 4.86 4.91 4.94 4.95 4.98 5.06 5.02 4.81 4.66 4.62 4.54 4.42 4.13 3.71

1997 157.71 4.24 4.34 4.44 4.54 4.64 4.71 4.77 4.81 4.83 4.84 4.87 4.94 4.90 4.69 4.54 4.50 4.42 4.30 4.02 3.62

1998 159.49 4.16 4.25 4.34 4.44 4.53 4.59 4.65 4.69 4.70 4.71 4.73 4.79 4.75 4.54 4.39 4.34 4.26 4.14 3.86 3.48

1999 162.86 4.10 4.19 4.28 4.37 4.46 4.52 4.57 4.60 4.62 4.62 4.64 4.69 4.64 4.44 4.30 4.25 4.16 4.04 3.78 3.40

2000 168.60 4.09 4.18 4.26 4.35 4.43 4.49 4.54 4.57 4.58 4.58 4.60 4.65 4.60 4.40 4.27 4.22 4.13 4.02 3.76 3.41

2001 173.19 4.05 4.14 4.22 4.30 4.39 4.44 4.48 4.51 4.52 4.52 4.53 4.58 4.53 4.34 4.21 4.16 4.07 3.96 3.72 3.38

2002 175.58 3.99 4.07 4.15 4.23 4.30 4.35 4.39 4.42 4.43 4.42 4.43 4.48 4.42 4.23 4.10 4.05 3.96 3.86 3.61 3.29

2003 179.46 3.94 4.02 4.10 4.17 4.25 4.29 4.33 4.36 4.36 4.35 4.36 4.40 4.35 4.16 4.03 3.98 3.90 3.79 3.55 3.24

2004 184.22 3.91 3.99 4.06 4.14 4.21 4.25 4.29 4.31 4.31 4.30 4.31 4.35 4.29 4.11 3.98 3.93 3.85 3.74 3.52 3.21

2005 190.71 3.91 3.98 4.05 4.12 4.19 4.23 4.27 4.29 4.29 4.28 4.29 4.32 4.27 4.09 3.97 3.92 3.84 3.74 3.52 3.23

2006 196.83 3.89 3.96 4.03 4.10 4.17 4.20 4.24 4.26 4.26 4.25 4.26 4.29 4.24 4.07 3.94 3.89 3.82 3.72 3.51 3.23

2007 202.47 3.87 3.94 4.00 4.07 4.13 4.17 4.20 4.22 4.22 4.21 4.22 4.25 4.20 4.03 3.91 3.86 3.78 3.69 3.48 3.21

2008 210.74 3.87 3.94 4.00 4.07 4.13 4.17 4.20 4.22 4.22 4.21 4.21 4.24 4.19 4.03 3.92 3.87 3.79 3.70 3.50 3.24

2009 209.34 3.78 3.84 3.90 3.96 4.02 4.05 4.08 4.10 4.09 4.08 4.08 4.11 4.06 3.89 3.78 3.73 3.65 3.56 3.36 3.11

2010 213.69 3.74 3.80 3.86 3.92 3.98 4.01 4.04 4.05 4.04 4.03 4.03 4.05 4.00 3.84 3.73 3.68 3.60 3.51 3.32 3.07

2011 221.28 3.74 3.80 3.85 3.91 3.97 4.00 4.02 4.04 4.03 4.02 4.02 4.04 3.99 3.84 3.72 3.67 3.60 3.51 3.33 3.09

2012 226.03 3.71 3.76 3.82 3.88 3.93 3.96 3.98 3.99 3.99 3.97 3.97 3.99 3.94 3.79 3.68 3.63 3.56 3.47 3.29 3.06

2013 229.16 3.66 3.72 3.77 3.83 3.88 3.90 3.93 3.94 3.93 3.91 3.91 3.93 3.88 3.73 3.62 3.57 3.50 3.41 3.24 3.01

2014 232.77 3.62 3.68 3.73 3.78 3.83 3.85 3.88 3.88 3.88 3.86 3.85 3.87 3.82 3.67 3.57 3.52 3.45 3.36 3.19 2.96

2015 231.81 3.54 3.60 3.65 3.70 3.74 3.77 3.78 3.79 3.78 3.76 3.76 3.77 3.72 3.57 3.47 3.41 3.34 3.26 3.09 2.87

2016 234.08 3.50 3.55 3.59 3.64 3.69 3.71 3.73 3.73 3.72 3.70 3.69 3.71 3.65 3.51 3.40 3.35 3.28 3.20 3.03 2.81

2017 239.05 3.47 3.52 3.57 3.61 3.66 3.68 3.69 3.70 3.69 3.67 3.66 3.67 3.62 3.48 3.37 3.32 3.25 3.17 3.00 2.79

2018 245.15 3.46 3.50 3.55 3.59 3.64 3.66 3.67 3.67 3.66 3.64 3.63 3.65 3.59 3.46 3.35 3.30 3.24 3.15 2.99 2.79

2019 249.22 3.43 3.47 3.51 3.56 3.60 3.62 3.63 3.64 3.62 3.60 3.59 3.60 3.55 3.42 3.32 3.27 3.20 3.12 2.96 2.76
Price Inflation, Page 17

Table 2.5 (continued): Adjusted CPI-W: Compound Annual Rates of Growth (%) Base Year = 1982-1984

From

To Variable 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1980 86.22

1981 94.31 9.38

1982 99.87 7.62 5.90

1983 104.04 6.46 5.03 4.17

1984 108.26 5.86 4.71 4.12 4.06

1985 111.90 5.35 4.37 3.86 3.71 3.36

1986 113.56 4.70 3.78 3.26 2.96 2.42 1.48

1987 117.40 4.51 3.72 3.29 3.07 2.74 2.43 3.38

1988 121.47 4.38 3.68 3.32 3.15 2.92 2.78 3.43 3.48

1989 126.75 4.37 3.76 3.46 3.35 3.20 3.16 3.73 3.91 4.34

1990 132.76 4.41 3.87 3.62 3.54 3.46 3.48 3.98 4.19 4.54 4.75

1991 137.46 4.33 3.84 3.61 3.54 3.47 3.49 3.90 4.02 4.21 4.14 3.54

1992 140.73 4.17 3.71 3.49 3.41 3.33 3.33 3.64 3.69 3.75 3.55 2.96 2.38

1993 144.04 4.03 3.59 3.39 3.31 3.22 3.21 3.46 3.47 3.47 3.25 2.75 2.37 2.35

1994 146.91 3.88 3.47 3.27 3.19 3.10 3.07 3.27 3.26 3.22 3.00 2.56 2.24 2.17 1.99

1995 150.52 3.78 3.40 3.21 3.13 3.04 3.01 3.18 3.16 3.11 2.91 2.54 2.29 2.27 2.22 2.46

1996 154.41 3.71 3.34 3.16 3.08 3.00 2.97 3.12 3.09 3.04 2.86 2.55 2.35 2.35 2.34 2.52 2.58

1997 157.71 3.62 3.27 3.09 3.02 2.94 2.90 3.03 3.00 2.94 2.77 2.49 2.32 2.30 2.29 2.39 2.36 2.14

1998 159.49 3.48 3.14 2.97 2.89 2.81 2.76 2.87 2.82 2.76 2.59 2.32 2.15 2.11 2.06 2.08 1.95 1.63 1.13

1999 162.86 3.40 3.08 2.92 2.84 2.76 2.72 2.81 2.77 2.70 2.54 2.30 2.14 2.11 2.07 2.08 1.99 1.79 1.62 2.11

2000 168.60 3.41 3.10 2.95 2.88 2.81 2.77 2.86 2.82 2.77 2.63 2.42 2.29 2.28 2.27 2.32 2.29 2.22 2.25 2.82 3.52

2001 173.19 3.38 3.09 2.94 2.87 2.80 2.77 2.85 2.82 2.77 2.64 2.45 2.34 2.33 2.33 2.38 2.37 2.32 2.37 2.79 3.12

2002 175.58 3.29 3.00 2.86 2.79 2.72 2.69 2.76 2.72 2.67 2.54 2.36 2.25 2.24 2.22 2.25 2.22 2.16 2.17 2.43 2.54

2003 179.46 3.24 2.97 2.83 2.76 2.70 2.66 2.73 2.69 2.64 2.52 2.35 2.25 2.23 2.22 2.25 2.22 2.17 2.18 2.39 2.46

2004 184.22 3.21 2.95 2.82 2.76 2.69 2.66 2.72 2.69 2.64 2.52 2.37 2.28 2.27 2.26 2.29 2.27 2.23 2.24 2.43 2.50

2005 190.71 3.23 2.98 2.85 2.79 2.73 2.70 2.77 2.73 2.69 2.59 2.44 2.37 2.37 2.37 2.40 2.39 2.37 2.40 2.59 2.67

2006 196.83 3.23 2.99 2.87 2.81 2.75 2.73 2.79 2.76 2.72 2.62 2.49 2.42 2.43 2.43 2.47 2.47 2.46 2.49 2.66 2.74

2007 202.47 3.21 2.98 2.87 2.81 2.76 2.73 2.79 2.76 2.73 2.64 2.51 2.45 2.45 2.46 2.50 2.50 2.49 2.53 2.69 2.76

2008 210.74 3.24 3.02 2.91 2.86 2.81 2.79 2.85 2.83 2.79 2.71 2.60 2.55 2.56 2.57 2.61 2.62 2.63 2.67 2.83 2.91

2009 209.34 3.11 2.89 2.78 2.73 2.67 2.64 2.70 2.66 2.63 2.54 2.43 2.36 2.36 2.36 2.39 2.38 2.37 2.39 2.50 2.54

2010 213.69 3.07 2.86 2.75 2.70 2.65 2.62 2.67 2.64 2.60 2.52 2.41 2.35 2.35 2.35 2.37 2.36 2.35 2.36 2.47 2.50

2011 221.28 3.09 2.88 2.78 2.73 2.68 2.66 2.70 2.68 2.64 2.57 2.46 2.41 2.41 2.41 2.44 2.44 2.43 2.45 2.55 2.59

2012 226.03 3.06 2.86 2.76 2.71 2.66 2.64 2.68 2.66 2.62 2.55 2.45 2.40 2.40 2.40 2.42 2.42 2.41 2.43 2.52 2.55

2013 229.16 3.01 2.81 2.72 2.67 2.62 2.59 2.63 2.61 2.57 2.50 2.40 2.35 2.35 2.35 2.37 2.36 2.35 2.36 2.45 2.47

2014 232.77 2.96 2.78 2.68 2.63 2.58 2.56 2.60 2.57 2.53 2.46 2.37 2.32 2.31 2.31 2.33 2.32 2.31 2.32 2.39 2.41

2015 231.81 2.87 2.68 2.58 2.54 2.49 2.46 2.49 2.46 2.42 2.35 2.25 2.20 2.19 2.19 2.20 2.18 2.16 2.16 2.22 2.23

2016 234.08 2.81 2.63 2.54 2.49 2.44 2.41 2.44 2.41 2.37 2.30 2.20 2.15 2.14 2.13 2.14 2.12 2.10 2.10 2.15 2.16

2017 239.05 2.79 2.62 2.53 2.48 2.43 2.40 2.43 2.40 2.36 2.29 2.20 2.15 2.14 2.13 2.14 2.12 2.10 2.10 2.15 2.16

2018 245.15 2.79 2.62 2.53 2.48 2.43 2.41 2.43 2.40 2.37 2.30 2.21 2.17 2.16 2.15 2.16 2.14 2.12 2.12 2.17 2.18

2019 249.22 2.76 2.59 2.50 2.46 2.41 2.38 2.41 2.38 2.35 2.28 2.20 2.15 2.14 2.13 2.14 2.12 2.10 2.10 2.15 2.15

From

To Variable 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1999 162.86

2000 168.60 3.52

2001 173.19 3.12 2.72

2002 175.58 2.54 2.05 1.38

2003 179.46 2.46 2.10 1.79 2.21

2004 184.22 2.50 2.24 2.08 2.43 2.65

2005 190.71 2.67 2.50 2.44 2.79 3.09 3.52

2006 196.83 2.74 2.61 2.59 2.90 3.13 3.37 3.21

2007 202.47 2.76 2.65 2.64 2.89 3.06 3.20 3.04 2.86

2008 210.74 2.91 2.83 2.84 3.09 3.27 3.42 3.39 3.47 4.09

2009 209.34 2.54 2.43 2.40 2.54 2.60 2.59 2.36 2.07 1.68 -0.67

2010 213.69 2.50 2.40 2.36 2.49 2.53 2.50 2.30 2.08 1.81 0.70 2.08

2011 221.28 2.59 2.50 2.48 2.60 2.65 2.65 2.51 2.37 2.25 1.64 2.81 3.55

2012 226.03 2.55 2.47 2.45 2.56 2.60 2.59 2.46 2.33 2.23 1.77 2.59 2.85 2.15

2013 229.16 2.47 2.39 2.36 2.45 2.47 2.46 2.32 2.20 2.09 1.69 2.29 2.36 1.77 1.38

2014 232.77 2.41 2.33 2.30 2.38 2.39 2.37 2.24 2.12 2.01 1.67 2.14 2.16 1.70 1.48 1.57

2015 231.81 2.23 2.15 2.10 2.16 2.16 2.11 1.97 1.83 1.71 1.37 1.71 1.64 1.17 0.84 0.58 -0.41

2016 234.08 2.16 2.07 2.03 2.08 2.06 2.02 1.88 1.75 1.63 1.32 1.61 1.53 1.13 0.88 0.71 0.28 0.98

2017 239.05 2.16 2.08 2.03 2.08 2.07 2.02 1.90 1.78 1.67 1.41 1.67 1.62 1.30 1.13 1.06 0.89 1.55 2.13

2018 245.15 2.18 2.10 2.06 2.11 2.10 2.06 1.95 1.85 1.75 1.52 1.77 1.73 1.47 1.36 1.36 1.30 1.88 2.34 2.55

2019 249.22 2.15 2.08 2.04 2.08 2.07 2.04 1.93 1.83 1.75 1.54 1.76 1.72 1.50 1.40 1.41 1.38 1.83 2.11 2.11 1.66
Price Inflation, Page 18

Table 2.6: Adjusted GDP Deflator: Compound Annual Rates of Growth (%) Base Year = 2012

From

To Variable 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

1961 17.11

1962 17.30 1.11

1963 17.48 1.08 1.04

1964 17.72 1.19 1.23 1.42

1965 18.03 1.32 1.39 1.57 1.72

1966 18.52 1.60 1.72 1.94 2.21 2.70

1967 19.03 1.79 1.93 2.16 2.40 2.74 2.79

1968 19.82 2.13 2.30 2.55 2.84 3.21 3.47 4.15

1969 20.78 2.46 2.65 2.92 3.23 3.61 3.91 4.48 4.80

1970 21.85 2.76 2.96 3.24 3.55 3.92 4.22 4.71 4.98 5.17

1971 22.94 2.98 3.18 3.46 3.75 4.09 4.37 4.77 4.98 5.07 4.97

1972 23.90 3.09 3.29 3.54 3.81 4.11 4.35 4.66 4.79 4.78 4.59 4.21

1973 25.19 3.28 3.47 3.72 3.98 4.27 4.49 4.78 4.90 4.93 4.85 4.79 5.37

1974 27.42 3.69 3.91 4.18 4.46 4.77 5.03 5.35 5.55 5.70 5.84 6.13 7.10 8.86

1975 29.94 4.08 4.31 4.59 4.88 5.20 5.48 5.82 6.06 6.28 6.50 6.89 7.79 9.02 9.18

1976 31.55 4.17 4.39 4.65 4.92 5.22 5.47 5.78 5.98 6.15 6.32 6.59 7.19 7.80 7.28 5.40

1977 33.48 4.29 4.50 4.75 5.01 5.29 5.53 5.81 5.99 6.15 6.29 6.51 6.97 7.38 6.88 5.75 6.10

1978 35.80 4.44 4.65 4.90 5.15 5.42 5.65 5.91 6.09 6.23 6.37 6.57 6.96 7.29 6.89 6.14 6.51 6.93

1979 38.77 4.65 4.86 5.10 5.36 5.62 5.85 6.11 6.29 6.44 6.58 6.78 7.15 7.45 7.17 6.68 7.10 7.61 8.29

1980 42.28 4.88 5.09 5.33 5.58 5.85 6.07 6.33 6.51 6.67 6.82 7.03 7.39 7.68 7.48 7.15 7.59 8.09 8.67 9.06

1981 46.27 5.10 5.31 5.56 5.81 6.07 6.30 6.55 6.74 6.90 7.06 7.27 7.62 7.90 7.76 7.53 7.96 8.43 8.93 9.25 9.44

1982 49.13 5.15 5.36 5.59 5.83 6.07 6.29 6.53 6.70 6.84 6.99 7.17 7.47 7.71 7.56 7.33 7.66 7.97 8.24 8.22 7.80

1983 51.05 5.10 5.29 5.51 5.73 5.95 6.15 6.36 6.51 6.63 6.75 6.90 7.14 7.32 7.15 6.90 7.12 7.29 7.36 7.12 6.49

1984 52.89 5.03 5.21 5.41 5.62 5.83 6.00 6.20 6.33 6.43 6.52 6.64 6.84 6.98 6.79 6.53 6.67 6.75 6.72 6.41 5.76

1985 54.57 4.95 5.12 5.31 5.50 5.69 5.85 6.03 6.14 6.22 6.29 6.39 6.56 6.66 6.46 6.19 6.28 6.30 6.21 5.86 5.24

1986 55.67 4.83 4.99 5.17 5.34 5.52 5.66 5.81 5.90 5.97 6.02 6.09 6.23 6.29 6.08 5.80 5.84 5.81 5.68 5.31 4.69

1987 57.04 4.74 4.89 5.05 5.21 5.37 5.50 5.64 5.72 5.77 5.81 5.86 5.97 6.01 5.80 5.52 5.53 5.47 5.31 4.95 4.37

1988 59.06 4.70 4.84 4.99 5.14 5.29 5.41 5.54 5.61 5.65 5.68 5.72 5.82 5.85 5.63 5.37 5.36 5.30 5.13 4.79 4.27

1989 61.37 4.67 4.80 4.95 5.09 5.24 5.35 5.47 5.53 5.56 5.59 5.62 5.70 5.72 5.52 5.26 5.25 5.18 5.02 4.70 4.23

1990 63.68 4.64 4.76 4.91 5.04 5.18 5.28 5.39 5.45 5.48 5.49 5.52 5.59 5.61 5.41 5.16 5.14 5.07 4.92 4.61 4.18

1991 65.82 4.59 4.72 4.85 4.98 5.11 5.20 5.31 5.36 5.38 5.39 5.41 5.48 5.48 5.29 5.05 5.02 4.95 4.80 4.51 4.11

1992 67.32 4.52 4.63 4.76 4.88 5.00 5.09 5.18 5.23 5.24 5.25 5.26 5.31 5.31 5.12 4.88 4.85 4.77 4.61 4.34 3.95

1993 68.92 4.45 4.56 4.68 4.79 4.91 4.99 5.07 5.11 5.12 5.12 5.13 5.17 5.16 4.97 4.74 4.70 4.62 4.46 4.20 3.83

1994 70.39 4.38 4.48 4.60 4.70 4.81 4.88 4.96 4.99 5.00 4.99 5.00 5.03 5.02 4.83 4.60 4.56 4.47 4.32 4.06 3.71

1995 71.86 4.31 4.41 4.52 4.62 4.72 4.79 4.86 4.89 4.89 4.88 4.87 4.90 4.88 4.70 4.48 4.43 4.34 4.18 3.93 3.60

1996 73.18 4.24 4.33 4.43 4.53 4.62 4.69 4.75 4.77 4.77 4.76 4.75 4.77 4.75 4.56 4.35 4.30 4.20 4.05 3.81 3.49

1997 74.45 4.17 4.26 4.35 4.44 4.53 4.59 4.65 4.67 4.66 4.64 4.63 4.65 4.62 4.44 4.23 4.17 4.08 3.93 3.69 3.38

1998 75.27 4.09 4.17 4.26 4.34 4.43 4.48 4.53 4.55 4.54 4.52 4.50 4.51 4.48 4.30 4.09 4.03 3.93 3.79 3.55 3.26

1999 76.35 4.01 4.09 4.18 4.26 4.34 4.39 4.44 4.45 4.43 4.41 4.39 4.40 4.36 4.18 3.98 3.92 3.82 3.67 3.45 3.16

2000 78.07 3.97 4.05 4.13 4.20 4.28 4.32 4.37 4.38 4.36 4.34 4.31 4.32 4.28 4.11 3.91 3.85 3.75 3.61 3.39 3.11

2001 79.82 3.93 4.00 4.08 4.15 4.22 4.26 4.31 4.31 4.30 4.27 4.24 4.25 4.21 4.04 3.84 3.78 3.69 3.55 3.34 3.07

2002 81.04 3.87 3.94 4.01 4.08 4.15 4.19 4.23 4.23 4.21 4.18 4.16 4.15 4.11 3.95 3.76 3.69 3.60 3.46 3.26 3.00

2003 82.57 3.82 3.89 3.96 4.02 4.09 4.12 4.16 4.16 4.14 4.11 4.08 4.08 4.04 3.87 3.69 3.63 3.53 3.40 3.20 2.95

2004 84.78 3.79 3.86 3.93 3.99 4.05 4.08 4.12 4.12 4.10 4.07 4.04 4.04 3.99 3.83 3.65 3.59 3.50 3.37 3.18 2.94

2005 87.41 3.78 3.84 3.91 3.97 4.03 4.06 4.09 4.09 4.07 4.04 4.01 4.01 3.97 3.81 3.64 3.58 3.49 3.36 3.18 2.95

2006 90.07 3.76 3.82 3.89 3.95 4.00 4.03 4.07 4.06 4.04 4.01 3.99 3.98 3.94 3.79 3.62 3.56 3.47 3.35 3.17 2.95

2007 92.50 3.74 3.80 3.86 3.92 3.97 4.00 4.03 4.03 4.01 3.98 3.95 3.94 3.90 3.75 3.59 3.53 3.45 3.33 3.15 2.94

2008 94.26 3.70 3.75 3.82 3.87 3.92 3.95 3.98 3.97 3.95 3.92 3.89 3.89 3.84 3.70 3.54 3.48 3.40 3.28 3.11 2.91

2009 95.00 3.64 3.69 3.75 3.80 3.85 3.88 3.90 3.90 3.87 3.84 3.81 3.80 3.76 3.61 3.45 3.40 3.31 3.20 3.03 2.83

2010 96.11 3.59 3.64 3.69 3.74 3.79 3.81 3.84 3.83 3.81 3.77 3.74 3.73 3.69 3.55 3.39 3.33 3.25 3.13 2.97 2.78

2011 98.11 3.55 3.61 3.66 3.71 3.75 3.77 3.80 3.79 3.77 3.73 3.70 3.69 3.64 3.51 3.35 3.29 3.21 3.10 2.94 2.75

2012 100.00 3.52 3.57 3.62 3.67 3.71 3.73 3.76 3.75 3.72 3.69 3.66 3.64 3.60 3.46 3.31 3.26 3.18 3.07 2.91 2.73

2013 101.77 3.49 3.54 3.59 3.63 3.67 3.69 3.71 3.70 3.68 3.64 3.61 3.60 3.55 3.42 3.27 3.22 3.14 3.03 2.88 2.70

2014 103.65 3.46 3.50 3.55 3.60 3.63 3.65 3.67 3.66 3.64 3.60 3.57 3.55 3.51 3.38 3.24 3.18 3.10 3.00 2.85 2.67

2015 104.64 3.41 3.45 3.50 3.54 3.58 3.60 3.61 3.60 3.58 3.54 3.51 3.49 3.45 3.32 3.18 3.12 3.04 2.94 2.80 2.62

2016 105.74 3.37 3.41 3.45 3.49 3.53 3.55 3.56 3.55 3.52 3.49 3.45 3.44 3.39 3.27 3.13 3.07 2.99 2.89 2.75 2.58

2017 107.75 3.34 3.38 3.43 3.46 3.50 3.51 3.53 3.52 3.49 3.45 3.42 3.40 3.36 3.23 3.10 3.04 2.97 2.87 2.73 2.56

2018 110.32 3.32 3.36 3.41 3.44 3.48 3.49 3.51 3.49 3.47 3.43 3.40 3.38 3.34 3.21 3.08 3.03 2.95 2.85 2.72 2.56

2019 112.32 3.30 3.34 3.38 3.41 3.45 3.46 3.47 3.46 3.43 3.40 3.37 3.35 3.30 3.18 3.05 3.00 2.92 2.83 2.70 2.54
Price Inflation, Page 19

Table 2.6 (continued): Adjusted GDP Deflator: Compound Annual Rates of Growth (%) Base Year = 2012

From

To Variable 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1980 42.28

1981 46.27 9.44

1982 49.13 7.80 6.18

1983 51.05 6.49 5.04 3.91

1984 52.89 5.76 4.56 3.76 3.61

1985 54.57 5.24 4.21 3.56 3.39 3.16

1986 55.67 4.69 3.77 3.17 2.93 2.59 2.02

1987 57.04 4.37 3.55 3.03 2.81 2.55 2.24 2.46

1988 59.06 4.27 3.55 3.11 2.96 2.79 2.67 2.99 3.53

1989 61.37 4.23 3.59 3.23 3.12 3.02 2.98 3.30 3.73 3.92

1990 63.68 4.18 3.61 3.29 3.21 3.14 3.14 3.41 3.74 3.84 3.76

1991 65.82 4.11 3.59 3.30 3.23 3.17 3.17 3.40 3.64 3.68 3.56 3.37

1992 67.32 3.95 3.47 3.20 3.12 3.06 3.05 3.22 3.37 3.33 3.13 2.82 2.28

1993 68.92 3.83 3.38 3.12 3.05 2.98 2.96 3.10 3.20 3.14 2.94 2.67 2.33 2.37

1994 70.39 3.71 3.28 3.04 2.96 2.90 2.87 2.97 3.05 2.97 2.78 2.54 2.26 2.25 2.13

1995 71.86 3.60 3.20 2.97 2.89 2.83 2.79 2.88 2.93 2.84 2.67 2.45 2.22 2.20 2.12 2.10

1996 73.18 3.49 3.10 2.89 2.81 2.74 2.70 2.77 2.81 2.72 2.55 2.35 2.14 2.11 2.02 1.96 1.83

1997 74.45 3.38 3.02 2.81 2.73 2.66 2.62 2.68 2.70 2.61 2.44 2.26 2.07 2.03 1.95 1.89 1.78 1.73

1998 75.27 3.26 2.90 2.70 2.62 2.55 2.50 2.54 2.55 2.46 2.29 2.11 1.93 1.88 1.78 1.69 1.55 1.42 1.10

1999 76.35 3.16 2.82 2.63 2.55 2.48 2.43 2.46 2.46 2.36 2.21 2.04 1.87 1.81 1.72 1.64 1.52 1.42 1.27 1.43

2000 78.07 3.11 2.79 2.61 2.53 2.46 2.42 2.44 2.44 2.35 2.21 2.06 1.91 1.87 1.80 1.74 1.67 1.63 1.60 1.84 2.26

2001 79.82 3.07 2.76 2.59 2.51 2.45 2.41 2.43 2.43 2.34 2.21 2.08 1.95 1.91 1.85 1.81 1.77 1.75 1.76 1.98 2.25

2002 81.04 3.00 2.70 2.53 2.46 2.40 2.35 2.37 2.37 2.29 2.16 2.03 1.91 1.87 1.82 1.78 1.73 1.72 1.71 1.86 2.01

2003 82.57 2.95 2.67 2.50 2.43 2.37 2.33 2.35 2.34 2.26 2.14 2.02 1.91 1.87 1.82 1.79 1.75 1.74 1.74 1.87 1.98

2004 84.78 2.94 2.67 2.51 2.44 2.39 2.35 2.36 2.36 2.29 2.18 2.07 1.97 1.94 1.90 1.88 1.85 1.86 1.87 2.00 2.12

2005 87.41 2.95 2.69 2.54 2.47 2.42 2.38 2.40 2.40 2.33 2.23 2.13 2.05 2.03 2.00 1.99 1.98 1.99 2.03 2.16 2.28

2006 90.07 2.95 2.70 2.56 2.50 2.45 2.42 2.43 2.43 2.37 2.28 2.19 2.11 2.10 2.08 2.08 2.07 2.10 2.14 2.27 2.39

2007 92.50 2.94 2.70 2.56 2.51 2.46 2.43 2.45 2.45 2.39 2.31 2.22 2.15 2.14 2.12 2.12 2.13 2.15 2.19 2.32 2.43

2008 94.26 2.91 2.67 2.54 2.48 2.44 2.41 2.42 2.42 2.37 2.28 2.20 2.14 2.13 2.11 2.11 2.11 2.13 2.17 2.28 2.37

2009 95.00 2.83 2.60 2.47 2.42 2.37 2.34 2.35 2.35 2.29 2.21 2.13 2.06 2.05 2.03 2.02 2.01 2.03 2.05 2.14 2.21

2010 96.11 2.78 2.55 2.43 2.37 2.32 2.29 2.30 2.29 2.24 2.16 2.08 2.01 2.00 1.98 1.97 1.96 1.97 1.98 2.06 2.11

2011 98.11 2.75 2.54 2.41 2.36 2.31 2.28 2.29 2.29 2.23 2.16 2.08 2.02 2.00 1.98 1.97 1.96 1.97 1.99 2.06 2.11

2012 100.00 2.73 2.52 2.40 2.35 2.30 2.27 2.28 2.27 2.22 2.15 2.07 2.01 2.00 1.98 1.97 1.96 1.97 1.99 2.05 2.10

2013 101.77 2.70 2.49 2.38 2.33 2.28 2.25 2.26 2.25 2.20 2.13 2.06 2.00 1.99 1.97 1.96 1.95 1.96 1.97 2.03 2.07

2014 103.65 2.67 2.47 2.36 2.31 2.27 2.24 2.24 2.24 2.19 2.12 2.05 1.99 1.98 1.96 1.95 1.95 1.95 1.97 2.02 2.06

2015 104.64 2.62 2.43 2.32 2.27 2.23 2.19 2.20 2.19 2.14 2.07 2.01 1.95 1.94 1.92 1.91 1.90 1.90 1.91 1.96 1.99

2016 105.74 2.58 2.39 2.28 2.23 2.19 2.16 2.16 2.15 2.10 2.04 1.97 1.91 1.90 1.88 1.87 1.86 1.86 1.86 1.91 1.93

2017 107.75 2.56 2.38 2.27 2.22 2.18 2.15 2.15 2.14 2.10 2.03 1.97 1.91 1.90 1.88 1.87 1.86 1.86 1.87 1.91 1.93

2018 110.32 2.56 2.38 2.27 2.23 2.19 2.16 2.16 2.15 2.10 2.04 1.98 1.93 1.92 1.90 1.89 1.88 1.88 1.89 1.93 1.96

2019 112.32 2.54 2.36 2.26 2.21 2.17 2.15 2.15 2.14 2.10 2.04 1.98 1.93 1.91 1.90 1.89 1.88 1.88 1.89 1.92 1.95

From

To Variable 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1999 76.35

2000 78.07 2.26

2001 79.82 2.25 2.25

2002 81.04 2.01 1.88 1.52

2003 82.57 1.98 1.88 1.70 1.89

2004 84.78 2.12 2.08 2.03 2.28 2.68

2005 87.41 2.28 2.29 2.30 2.55 2.89 3.10

2006 90.07 2.39 2.41 2.45 2.68 2.94 3.08 3.05

2007 92.50 2.43 2.45 2.49 2.68 2.88 2.95 2.87 2.69

2008 94.26 2.37 2.38 2.40 2.55 2.69 2.69 2.55 2.30 1.91

2009 95.00 2.21 2.20 2.20 2.30 2.37 2.30 2.10 1.79 1.34 0.78

2010 96.11 2.11 2.10 2.08 2.15 2.19 2.11 1.92 1.63 1.28 0.97 1.17

2011 98.11 2.11 2.10 2.08 2.15 2.18 2.11 1.94 1.72 1.48 1.34 1.63 2.08

2012 100.00 2.10 2.08 2.07 2.12 2.15 2.09 1.94 1.76 1.57 1.49 1.72 2.00 1.92

2013 101.77 2.07 2.06 2.05 2.09 2.11 2.05 1.92 1.76 1.61 1.54 1.74 1.93 1.85 1.77

2014 103.65 2.06 2.04 2.03 2.07 2.09 2.03 1.91 1.77 1.64 1.59 1.76 1.91 1.85 1.81 1.84

2015 104.64 1.99 1.97 1.95 1.99 1.99 1.93 1.82 1.68 1.55 1.50 1.62 1.72 1.62 1.52 1.40 0.96

2016 105.74 1.93 1.91 1.89 1.92 1.92 1.86 1.75 1.62 1.50 1.45 1.54 1.60 1.51 1.40 1.28 1.00 1.05

2017 107.75 1.93 1.91 1.89 1.92 1.92 1.86 1.76 1.64 1.54 1.50 1.59 1.65 1.57 1.50 1.44 1.30 1.48 1.91

2018 110.32 1.96 1.94 1.92 1.95 1.95 1.90 1.81 1.70 1.61 1.59 1.68 1.74 1.69 1.65 1.63 1.57 1.78 2.15 2.39

2019 112.32 1.95 1.93 1.92 1.94 1.94 1.89 1.81 1.71 1.63 1.61 1.69 1.75 1.70 1.67 1.66 1.62 1.79 2.03 2.10 1.81
Price Inflation, Page 20

2.7 Appendix

OCACT adjustments to the published CPI-W annual growth rates. Between 1978 and 2018, 

OCACT set the annual growth rate in the adjusted CPI-W to the growth rate in the published 

CPI-W plus an annual growth rate differential, defined as the growth rate in the CPI-U “Research 

Series” (CPI-U-RS) less the growth rate in the published CPI-U. BLS constructs the CPI-U-RS 

by recalculating the CPI-U back to 1978 using present methodology (see 

https://www.bls.gov/cpi/research-series/home.htm). An exception to this specification was made 

because BLS introduced an improvement for “rental equivalence” in 1983 for the CPI-U, but not 

until 1985 for the CPI-W. Thus, for 1983 and 1984, the annual percent change in the adjusted 

CPI-W is defined as the percent change in the CPI-U-RS less 0.1 percentage point. This 

adjustment reflects the belief that, had the introductions been simultaneous in 1983, the observed 

differences in growth between the two inflation measures would have been equal to their 

published compound average annual difference (0.1 percentage point) over the post-1985 period.

Between 1967 and 1977, the annual growth rate in the adjusted CPI-W was set to the growth rate 

in the published CPI-W less 0.2 percentage point plus an annual growth rate differential, defined 

as the growth rate in the CPI-U-X1 (a BLS “experimental series” that incorporates the 

improvement for rental equivalence into the historical CPI-U) less the growth rate in the actual 

published CPI-U. The 0.2 percentage point adjustment reflects a BLS estimate of the effect of 

introducing an improved geometric weighting formula into the CPI-W beginning in January 

1999. Finally, for 1966 and earlier, the annual growth rate in the adjusted CPI-W was set to the 

growth rate in the published CPI-W less the 0.2 percentage point adjustment for the improved 

geometric formula. 

OCACT adjustments to the published PGDP and real GDP (and therefore productivity) annual 

growth rates. As mentioned above, starting in January 1999, BLS introduced a new geometric 

weighting formula to the CPI, estimating that it would lower the future annual growth rate in the 

CPI by about 0.2 percentage point. BEA estimates that this change would have had a 50.0 

percent “feed-through” effect on the aggregate annual PGDP growth rate in the past. Thus, due 

to BLS’ introduction of an improved geometric weighting formula to the CPI, BEA lowered the 

annual growth rate in the aggregate PGDP by about 0.1 percentage point (0.2 * 50.0%). In 

addition, since the BLS improvement to the CPI does not alter the historical path of nominal 

GDP, BEA raised the annual real growth rate in the GDP by about 0.1 percentage point. 

However, BEA made these adjustments only back to 1978. Thus, to improve consistency, 

OCACT added the effect of this BLS improvement to the earlier data. That is, for 1978 and each 

earlier year, OCACT lowered the annual growth rate in the CPI by 0.2 percentage point, lowered 

the annual growth rate in the aggregate PGDP index by 0.1 percentage point, and raised the 

annual real growth rate in GDP, and therefore productivity, by 0.1 percentage point. 

Furthermore, a change in the CPI growth rate affects the PGDP through about 85.0% of the 

prices used to determine one of the components of the PGDP, that is, the GDP deflator for 

consumption (PGDP_C). Hence, the annual growth rate for the PGDP_C in 1978 and earlier was

lowered by about 0.17 percent (0.2 * 0.85).
Average Real Wage Differential, Page 1

3. AVERAGE REAL WAGE DIFFERENTIAL

THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

3 AVERAGE REAL WAGE DIFFERENTIAL..................................................................... 2

3.1 SUMMARY ............................................................................................................................................................. 2

3.2 DEFINITION OF AVERAGE REAL WAGE DIFFERENTIAL ...................................................................................... 2

3.3 MEASURES OF REAL EARNINGS GROWTH: ECONOMY-WIDE AND OASDI-COVERED EARNINGS ................... 3

3.3.1 Productivity .................................................................................................................................................... 6

3.3.2 Other Components: Links between Real Earnings and Productivity .................................................................. 6

3.3.2.1 Ratio of Compensation to Nominal GDP ..................................................................................................... 7

3.3.2.2 Ratio of Earnings to Compensation.............................................................................................................. 7

3.3.2.3 Average Hours Worked............................................................................................................................... 9

3.3.2.4 Price Differential (Expressed as Ratio of PGDP to CPI-W) .........................................................................10

3.3.2.5 Total Links................................................................................................................................................10

3.4 PROJECTIONS FROM OTHER SOURCES ............................................................................................................... 11

3.5 APPENDIX............................................................................................................................................................ 14

TABLE OF TABLES PAGE

TABLE 3.1: ASSUMED AVERAGE REAL WAGE DIFFERENTIAL............................................................................................ 2

TABLE 3.2: AVERAGE ANNUAL REAL PERCENTAGE CHANGE IN AVERAGE EARNINGS: COMPARISON OF THE U.S.

ECONOMY TO OASDI COVERED.................................................................................................................................. 5

TABLE 3.3: AVERAGE ANNUAL REAL PERCENTAGE CHANGE IN AVERAGE EARNINGS: TOTAL U.S. ECONOMY AND ITS 

COMPONENTS ................................................................................................................................................................ 7

TABLE 3.4: AVERAGE HOURS WORKED PER WEEK, TOTAL U.S.: COMPOUND ANNUAL RATES OF CHANGE (%) ........ 12
Average Real Wage Differential, Page 2

3 Average Real Wage Differential

3.1 Summary

For the 2021 Trustees Report, over the 65-year period from 2030 to 2095, the average annual 

growth rate in the OASDI covered wage is assumed to be 4.77 percent, 3.55 percent, and 2.33

percent for alternatives I, II, and III, respectively (Table 3.1). 39,40 Also for the 2021 Trustees 

Report, the assumed ultimate annual rates of increase in the CPI-W are 3.00 percent, 2.40 

percent, and 1.80 percent for alternatives I, II, and III, respectively (Table 2.1). Thus, for the 

2021 Trustees Report, the average real wage differential, over the 65-year period 2031 through

2095, is assumed to be 1.77 percent (4.77 less 3.00), 1.15 percent (3.55 less 2.40), and 0.53

percent (2.33 less 1.80) for alternatives I, II, and III, respectively.41 These average real wage 

differentials are 0.01 percentage point higher than those in the 2020 Trustees Report.

Table 3.1: Assumed Average Real Wage Differential

Average Annual Percent Change

(last 65 years of projection period)

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

I II III I II III I II III

Average Nominal Wage 4.77 3.55 2.33 4.76 3.54 2.32 0.01 0.01 0.01

Less: CPI-W 3.00 2.40 1.80 3.00 2.40 1.80 0.00 0.00 0.00

Equals: 

Average Real Wage Differential

1.77 1.15 0.53 1.76 1.14 0.52 0.01 0.01 0.01

3.2 Definition of Average Real Wage Differential 

The average OASDI covered wage is defined as the ratio of total OASDI covered wages in a 

year to the number of workers with any covered wages during the year. The real wage 

differential for a year is defined as the annual percentage change from the prior year in the 

average OASDI covered wage minus the annual percentage change from the prior year in the 

CPI. The average real wage differential over the 65-year period 2031 through 2095 is the average 

of annual real wage differentials over the period.

 39 The 65-year period begins with the last year of the 10-year (2021 to 2030) short-range projection period 

and ends with the last year of the 75-year (2021 to 2095) long-range projection period. 

40 Starting with the 2010 Trustees Report, the annual growth rate in the average OASDI covered wage has 

been assumed to vary over the last 65 years of the projection, as the ratio of wages to compensation would decline at 

a varying rate over the period, reflecting the assumed path of the national health expenditures and the assumed effect 

of the Affordable Care Act on employer contributions to employee group health insurance. 

41 The real wage differential for a year is defined as the annual percentage change from the prior year in the 

average OASDI covered wage minus the annual percentage change from the prior year in the CPI.
Average Real Wage Differential, Page 3

Both the income to the Social Security program and the benefits paid are related to total covered 

earnings (i.e., the combination of covered wages and covered net earnings from 

self-employment). For this reason, the growth in average earnings, not average wages, is the 

subject of the balance of this section. The future real growth rates in average U.S. earnings, 

average U.S. wages, and the average OASDI covered wage, are expected to be similar, with the 

sources of minor differences described below.

For the 2021 Trustees Report, the average annual rate of increase in average real OASDI covered

earnings, over the 65-year period from 2030 to 2095, is assumed to be 1.72 percent, 1.13 percent, 

and 0.54 percent for alternatives I, II, and III, respectively. The values for alternatives I and II are 

0.01 percentage point higher than in the 2020 Trustees Report, while the value for alternative III 

is unchanged. 

3.3 Measures of Real Earnings Growth: Economy-Wide and OASDI Covered Earnings

Average real earnings in the total U.S. economy are defined as the ratio of total nominal earnings 

(wage and salary disbursements and net proprietors’ income) to total adjusted average weekly

civilian employment (see Section 3.5 Appendix A) and U.S. Armed Forces, divided by the 

adjusted CPI-W. BEA estimates historical values for nominal earnings as part of its broader 

responsibility of maintaining the NIPA for the U.S. economy. BLS estimates the CPI-W from its 

sample of prices and the civilian employment from its monthly CPS data. Because CPS data for 

the U.S. represent average weekly employment, the growth in average earnings for the total U.S. 

economy represents the growth in average weekly earnings for those employed.

Average real earnings of OASDI covered workers differ from average U.S. earnings in two 

ways: the types of workers covered and the types of compensation reported.

The types of workers covered by the OASDI program have changed in the past as a result of 

changes in the law and shifts in employment. Even without further changes in the law, the 

proportion of federal civilian government employees covered under the OASDI program will 

continue to increase toward 100 percent. All federal civilian government employees hired after 

1983 are covered under OASDI, while some of those hired earlier are not. Virtually all federal 

civilian government employees will be covered around 2030. As a result, the composition of 

OASDI covered employment, which has varied since 1940, will stabilize around 2030. 

The types of compensation reported for the two measures differ primarily because employeepaid premiums for employer-sponsored group health insurance within cafeteria plans under 

Section 125 of the Internal Revenue Code are counted in the NIPA definition of U.S. earnings, 

but not reported as earnings for OASDI purposes. Like the employer-paid premiums, employeepaid premiums are projected to continue to grow faster than compensation. As a result, OASDI

covered wages are projected to grow at a slightly lower rate than U.S. wages and, similarly, 

covered earnings are projected to grow at a slightly lower rate than U.S. earnings.

Average real weekly earnings in the total U.S. economy increased at an average annual rate of

0.95 percent over the last six complete economic cycles (1969-2019), 0.86 percent over the last 

five cycles (1973-2019), 1.06 percent over the last four cycles (1979-2019), 1.29 percent over the 
Average Real Wage Differential, Page 4

last three cycles (1990-2019), 0.78 percent over the last two cycles (2001-2019), and 0.90

percent over the last complete cycle (2007-2019). The average annual real earnings of OASDI 

covered workers increased at an average annual rate of 0.93 percent over the last six complete 

economic cycles, 0.87 percent over the last five cycles, 0.92 percent over the last four cycles, 

1.04 percent over the last three cycles, 0.69 percent over the last two cycles, and 0.64 percent 

over the last complete cycle (see Table 3.2 below). 

As the proportion of workers covered by OASDI is expected to change much less in the future 

than it has in the past, it is reasonable to evaluate the 1.13 percent assumed average real rate of 

increase for average covered earnings for alternative II in relation to the historical real growth 

rate in average earnings for all workers in the total economy. The other difference between the 

average-weekly total economy and average-annual OASDI covered earnings measures is

fluctuation in average weeks worked per year, which is mitigated by considering growth over 

complete economic cycles. Therefore, the balance of this section focuses on the past trends for 

average earnings in the U.S. economy.

Considering complete economic cycles, the average annual real growth rate in earnings for all 

workers in the total U.S. economy was 1.93 percent from 1969 to 1973 (4 years), -0.44 percent 

from 1973 to 1979 (6 years), 0.47 percent from 1979 to 1990 (11 years), 2.13 percent from 1990

to 2001 (11 years), and 0.53 percent from 2001 to 2007 (6 years), and 0.90 percent from 2007 to 

2019 (12 years).

42 The 1.13 percent assumed average future annual real growth rate in average 

OASDI covered earnings is between the historical average annual real growth rates in average 

U.S. earnings over the last four complete cycles (1.06 percent) and over the last three complete 

cycles (1.29 percent).

 42 Peaks in economic cycles roughly follow the NBER cycle dating, except for short recoveries such as 

1980-1981, which are not counted as separate cycles.
Average Real Wage Differential, Page 5

Table 3.2: Average Annual Real Percentage Change in Average Earnings: Comparison of the U.S. Economy to 

OASDI Covered

The real growth rate in average earnings of all workers in the economy was depressed for the 

1973-1979 and 1979-1990 cycles in a way not expected to be repeated in the future. During this 

period, the baby boom generation reached working age and the proportion of women in the labor 

force increased dramatically. As a result, the economy accommodated an extraordinary number 

of relatively low-paid (inexperienced and young) workers, thus depressing real growth in overall 

average earnings. However, the inclusion of baby boomers in the labor force ended in the 

mid-1980s, and the increasing percentage of women under age 60 in the labor force stabilized 

more recently.

The rapid increase in average earnings during the economic cycle from 1990 to 2001 was likely 

due in part to maturation of the baby boomers and women in the labor force. The large number 

of baby boomers and women in the labor force have been reaching prime working ages and thus 

boosted growth since 1990. This kind of swing in demographic trends is not projected to occur in 

the future, so consideration of the longer period of the last four complete economic cycles seems 

Average Real Ratio of Employed Ratio of Average Real

Earnings for Total Labor Force to Covered Earnings Earnings for

Period U.S. Economy Links Covered Workers to U.S. Earnings OASDI Covered

Historical: (1) (2) (3) (4) (5)

 By Decade:

 1969-1979 0.50 0.47 0.19 0.28 0.97

 1979-1989 0.48 0.21 0.11 0.09 0.69

 1989-1999 1.96 -0.37 -0.18 -0.19 1.58

 1999-2009 0.48 -0.16 -0.05 -0.11 0.32

 2009-2019 1.33 -0.25 -0.04 -0.21 1.08

 1969-2019 0.95 -0.02 0.01 -0.03 0.93

 1979-2019 1.06 -0.14 -0.04 -0.10 0.92

 1989-2019 1.26 -0.26 -0.09 -0.17 0.99

 1999-2019 0.91 -0.20 -0.05 -0.16 0.70

 2009-2019 1.33 -0.25 -0.04 -0.21 1.08

 By Complete Economic Cycle (Peak-to-Peak):

 Individual Cycle

 1969-1973 1.93 -0.33 -0.23 -0.10 1.60

 1973-1979 -0.44 1.00 0.46 0.53 0.56

 1979-1990 0.47 0.11 0.09 0.02 0.58

 1990-2001 2.13 -0.49 -0.23 -0.26 1.62

 2001-2007 0.53 0.27 0.09 0.18 0.81

 2007-2019 0.90 -0.26 -0.05 -0.21 0.64

 Last Six Cycles

 1969-2019 0.95 -0.02 0.01 -0.03 0.93

 Last Five Cycles

 1973-2019 0.86 0.01 0.03 -0.02 0.87

 Last Four Cycles

 1979-2019 1.06 -0.14 -0.04 -0.10 0.92

 Last Three Cycles

 1990-2019 1.29 -0.24 -0.09 -0.15 1.04

 Last Two Cycles

 2001-2019 0.78 -0.08 0.00 -0.08 0.69
Average Real Wage Differential, Page 6

appropriate. This approach averages out the effects of past demographic trends, which initially 

depressed and later boosted average earnings growth. 

Additional changing conditions contributing to the potential future growth of average earnings 

are discussed in the next two sections on productivity growth and earnings links to productivity.

3.3.1 Productivity

Total-economy productivity growth ultimately affects the growth of real earnings. 

Total-economy productivity is defined as the ratio of real GDP to total hours worked in the U.S. 

economy. For the 2021 Trustees Report, the assumed ultimate annual rates of increase in 

total-economy productivity are 1.93 percent, 1.63 percent, and 1.33 percent for alternatives I, II, 

and III, respectively. These ultimate rates of increase for total-economy productivity are 

consistent with ultimate annual rates of increase in nonfarm business productivity of 2.36

percent, 2.00 percent, and 1.63 percent for alternatives I, II, and III, respectively (see Section 1).

3.3.2 Other Components: Links between Real Earnings and Productivity

Not all of the historical gains in productivity have resulted in proportional increases in average 

real earnings. For example, over the last five economic cycles (1973-2019), average real earnings 

increased at an average annual rate of only 0.86 percent per year, while productivity for the total 

U.S. economy increased at 1.50 percent per year. The approximate difference of -0.63 percent 

per year (1.0086 / 1.0150; values are rounded) was due to changes in the links, that is, factors 

that connect productivity to average real earnings in a multiplicative fashion. Table 3.3 

summarizes the U.S. experience over the last six economic cycles for each of those factors.43

Those factors include the ratio of compensation to nominal GDP, the ratio of earnings to 

compensation, the ratio of total hours worked to total average weekly employment, and the ratio 

of the gross domestic product implicit price deflator (PGDP) to the CPI-W. Each of those links is 

discussed separately below.

 43 This section calculates values for productivity, hours per week, price differential, and average real 

earnings using adjusted data for the CPI, PGDP, real GDP, and employment (weeks worked). Hence, Table 3.3 

contains adjusted productivity values, which may not equal the unadjusted productivity values in Table 1.4 in 

Section 1. Adjustments to the CPI, PGDP, and real GDP are described in Section 2.7 Appendix. Adjustments to 

employment are described in Section 3.5 Appendix. 
Average Real Wage Differential, Page 7

3.3.2.1 Ratio of Compensation to Nominal GDP 

The first link is the ratio of total compensation to nominal GDP, or the total compensation ratio 

(CR). The CR is the ratio of the sum of employee compensation and self-employed (proprietors’) 

income to nominal GDP. For the 2021 Trustees Report, the assumed ultimate annual rate of 

change in the CR is 0.0 percent for alternatives I, II, and III. The CR is closely related to the 

labor share of total output. Most economists believe that the shares of total output going to the 

various factors of production tend toward stable proportions in the long run. Therefore, it is 

assumed that the CR will be constant over the last 65 years of the long-range period.

3.3.2.2 Ratio of Earnings to Compensation 

The second link is the ratio of total worker earnings to compensation. Worker earnings differ 

from compensation because part of compensation comes in the form of employer contributions 

to employee pension plans, health and other insurance premiums, and government social 

insurance programs. Using NIPA definitions, total worker earnings are the sum of total wage and 

Total Compensation Earnings to Hours per PGDP Average

Period Productivity Links to GDP Compensation Week to CPI-W Residual Real Earnings

Historical: (1) (2) (3) (4) (5) (6) (7) (8)

 By Decade:

 1969-1979 1.80 -1.27 -0.30 -0.40 -0.68 0.11 0.00 0.50

 1979-1989 1.40 -0.90 -0.22 -0.29 -0.09 -0.31 0.00 0.48

 1989-1999 1.72 0.24 0.26 0.06 0.24 -0.32 0.00 1.96

 1999-2009 2.21 -1.69 -0.51 -0.22 -0.64 -0.32 0.00 0.48

 2009-2019 0.90 0.42 0.15 0.14 0.21 -0.07 0.00 1.33

 1969-2019 1.60 -0.64 -0.12 -0.14 -0.19 -0.18 0.00 0.95

 1979-2019 1.56 -0.49 -0.08 -0.08 -0.07 -0.26 0.00 1.06

 1989-2019 1.61 -0.35 -0.03 -0.01 -0.06 -0.24 0.00 1.26

 1999-2019 1.56 -0.64 -0.18 -0.04 -0.22 -0.20 0.00 0.91

 2009-2019 0.90 0.42 0.15 0.14 0.21 -0.07 0.00 1.33

 By Complete Economic Cycle (Peak-to-Peak):

 Individual Cycle

 1969-1973 2.76 -0.81 -0.04 -0.34 -0.89 0.46 0.00 1.93

 1973-1979 1.16 -1.58 -0.48 -0.43 -0.55 -0.13 0.00 -0.44

 1979-1990 1.41 -0.92 -0.16 -0.29 -0.11 -0.37 0.00 0.47

 1990-2001 1.85 0.27 0.43 0.05 0.16 -0.36 0.00 2.13

 2001-2007 2.19 -1.62 -0.93 -0.18 -0.37 -0.15 0.00 0.53

 2007-2019 1.11 -0.20 -0.04 0.05 -0.09 -0.11 0.00 0.90

 Last Six Cycles

 1969-2019 1.60 -0.64 -0.12 -0.14 -0.19 -0.18 0.00 0.95

 Last Five Cycles

 1973-2019 1.50 -0.63 -0.13 -0.13 -0.13 -0.24 0.00 0.86

 Last Four Cycles

 1979-2019 1.56 -0.49 -0.08 -0.08 -0.07 -0.26 0.00 1.06

 Last Three Cycles

 1990-2019 1.61 -0.32 -0.05 0.00 -0.06 -0.21 0.00 1.29

 Last Two Cycles

 2001-2019 1.47 -0.68 -0.34 -0.03 -0.19 -0.12 0.00 0.78

 I 1.93 -0.20 0.00 -0.01 0.05 -0.24 0.00 1.72

 II 1.63 -0.49 0.00 -0.10 -0.05 -0.34 0.00 1.13

 III 1.33 -0.77 0.00 -0.18 -0.15 -0.44 0.00 0.55

Recommended Future Average Annual Rates of Increase for the 2021 Trustees Report (2030-2095)

Table 3.3: Average Annual Real Percentage Change in Average Earnings: Total U.S. Economy and Its 

Components
Average Real Wage Differential, Page 8

salary disbursements and total proprietors’ income. Total compensation is the sum of employee 

compensation and total proprietors’ income. Total employee compensation is the sum of total 

wage and salary disbursements, employer contributions for employee pension and insurance 

funds, and employer contributions to government social insurance programs. Employer 

contributions to government social insurance programs include payments for public insurance 

and publicly mandated insurance such as for unemployment, workers’ compensation, Medicare, 

and Social Security.

The average annual rate of change for the ratio was -0.14 percent from 1969 to 2019, a 50-year 

period that covers the last six complete economic cycles. The historical decline in the ratio has 

been due primarily to relatively faster growth in employer contributions to employee pensions 

and health insurance. This decline has not followed a uniform pattern. The ratio of earnings to 

compensation declined much faster (at an average annual rate of -0.34 percent) over the three 

complete economic cycles from 1969 to 1990 and did not change on average over the last three

complete economic cycles, from 1990 to 2019.

Most employer contributions to pensions are for employees in the private sector and are 

composed of contributions to defined-benefit (DB) and defined-contribution (DC) plans. After 

declining in the 1980s and 1990s, when the work force was relatively young, asset returns 

relatively high, and the proportion of employees covered by DB plans was beginning to decline, 

employer contributions to pension plans rose sharply between 1997 and 2010 as the work force

aged, the stock market experienced two major crashes, and interest rates reached unusually low 

levels. Counteracting these trends is the continuing decline in DB coverage. Contributions have

declined somewhat since 2010 as the stock market rebounded and may decline further in the near 

future if interest rates rise from current low levels. OCACT also expects a relative increase in 

employer contributions to employee pension plans due to increased life expectancy, and a 

relative decrease due to a continued shift from DB to DC plans.

Contributions to employer-sponsored group health insurance (ESI) in the future have been 

assumed to be significantly affected by provisions in the Affordable Care Act (ACA) enacted in 

2010. This expectation led to a significant change in the assumed future path of the ratio of 

earnings to compensation for the 2010 through 2019 Trustees Reports. However, a major 

provision of the ACA affecting the projected growth in ESI—the excise tax on ESI premiums 

(commonly referred to as the “Cadillac Tax”)—was repealed in December 2019. As a result, 

beginning with the 2020 Trustees Report, the Trustees assume ESI premiums will increase faster, 

and wages therefore more slowly, than was assumed in the 2019 and several previous reports. 

For the 2021 Trustees Report, the annual rates of change in the ratio of wages to employee 

compensation are assumed to be consistent with the most recent long-range projections of ESI

premium growth developed by the Centers for Medicare and Medicaid Services (CMS), provided 

in October 2020. Based on those projections, the average annual rate of growth in the ratio of 

wages to employee compensation is about -0.12 percent for alternative II over the last 65 years 

of the 75-year projection period. This rate of change is 0.01 percentage point higher (less 

negative) than the rate used in the 2020 Trustees Report.

For the 2021 Trustees Report, the average annual rate of change in the ratio of wages to 

employee compensation over the last 65 years of the projection horizon (2030 to 2095) is 
Average Real Wage Differential, Page 9

assumed to be -0.02, -0.12, and -0.22 percentage point for alternatives I, II, and III, respectively. 

Consistent with this, the assumed average annual rate of change in the ratio of earnings to total 

compensation over the last 65 years of the projection horizon (2030 to 2095) is -0.01, -0.10, and 

-0.18 percentage point for alternatives I, II, and III, respectively.

3.3.2.3 Average Hours Worked

The third link is average hours worked per week (AHW), defined as the ratio of total hours 

worked to total employment in the U.S. economy. Its compounded annual rate of change is 

shown in Table 3.4. Total hours worked in the U.S. economy is a special request series provided 

by BLS, based mostly on the Current Employment Statistics (CES), which surveys 

establishments. Total employment is the sum of civilian average weekly employment and the 

U.S. Armed Forces. BLS publishes total civilian employment from the Current Population 

Survey (CPS), which surveys households. The Census Bureau provides estimates for the U.S. 

Armed Forces. For the 2021 Trustees Report, the assumed ultimate annual rate of change in 

average hours worked is +0.05 percent, -0.05 percent and -0.15 percent in alternatives I, II, and 

III, respectively. These rates of change are the same as those used in the 2020 Trustees Report.

The average annual rate of change in AHW was -0.19 percent over the last six complete 

economic cycles, a 50-year period from 1969 to 2019, and -0.07 percent over the last four cycles, 

from 1979 to 2019. Looking at individual cycles, the average annual rate of change in AHW 

was -0.89 percent, -0.55 percent, -0.11 percent, 0.16 percent, -0.37, and -0.09 percent, over the 

1969-1973, 1973-1979, 1979-1990, 1990-2001, 2001-2007, and 2007-2019 periods, respectively. 

The historical pattern of AHW is also affected by the difference between CES and CPS 

employment measures. While CES estimates the number of jobs in the economy, CPS estimates 

the number of employed persons. Furthermore, CPS estimates are controlled to population 

annually between censuses. This causes the ratio of the two measures to change over time. Since 

2015, BLS has made both the total hours worked and the employment estimate on which it is 

based available as a special request file.44 The ratio between the employment measure implicit in 

the BLS measure of total hours worked and the total employment measure used in this section 

(i.e., CPS-based civilian employment plus the Census estimate of armed forces) has fluctuated 

between about 1.03 and 1.07. Notably, it was rising steadily between 1990 and 2000 and 

declining between 2000 and 2010. The average annual rate of change in the average weekly 

hours implicit in the BLS calculation of total hours worked was -0.58 percent, -0.49

percent, -0.11 percent, -0.04 percent, -0.12 percent, and -0.07 percent, over the 1969-1973, 

1973-1979, 1979-1990, 1990-2001, 2001-2007, and 2007-2019 economic cycles, respectively. 

The average annual rate of change was -0.17 percent over the last six complete economic cycles 

(1969 to 2019), and -0.08 percent over the last four cycles (1979 to 2019), both of which are very 

close to the corresponding average rates of change calculated using the CPS-based employment 

measure.

45

 44 http://www.bls.gov/lpc/special_requests/us_total_hrs_emp.xlsx.

45 One could further decouple the “average hours worked” link into two links, roughly corresponding to 

average hours per job and average jobs per worker. However, despite fluctuations over economic cycles and 
Average Real Wage Differential, Page 10

The average annual rate of change in AHW was -0.37 percent over the 6-year economic cycle

from 2001 to 2007, suggesting a return to the steep declines seen over the period from 1969 to 

1979. Accordingly, the Trustees lowered the assumed ultimate annual rate of change in AHW 

to -0.05 percent starting with the 2012 report, or approximately equal to the average annual rate 

of change of -0.06 percent over the previous three complete economic cycles, a 28-year period 

from 1979 to 2007.

46 In the last complete cycle, the decline in AHW has slowed down. The 

average rate of change in AHW over the period from 2007 to 2019 was -0.09 percent (or -0.07 

percent using the alternative CES-based employment measure), similar to the average over the 

last four cycles and close to the current Trustees’ assumption. 

There are factors that may affect the future AHW in offsetting ways. On one hand, the assumed 

steady increases in productivity will allow workers to gradually increase leisure time while still 

maintaining increases in weekly and annual earnings. On the other hand, it is reasonable to 

assume that the assumed future increases in life expectancy will raise labor force participation 

rates for older workers and it may also raise AHW, holding other factors constant. The average 

projected changes in the education and age-sex distributions of the workforce are not expected to 

significantly affect the average annual rate of change in the AHW in the future. Thus, for the 

2021 Trustees Report the assumed ultimate annual rate of change in AHW is -0.05 percent for 

alternative II.

3.3.2.4 Ratio of PGDP to CPI-W

The final link is the ratio of the PGDP to the CPI-W. Including this ratio is necessary because 

nominal earnings depend on nominal GDP (i.e., the product of real GDP and the PGDP), but are 

converted to real earnings using the CPI-W. The projected ratio is based on the assumed 

difference between the growth rates. For the 2021 Trustees Report, the assumed ultimate “price 

differential”, that is, the average annual rate of increase in PGDP less the average annual rate of 

increase in CPI-W, is -0.25, -0.35, and -0.45 percentage point for alternative I, II, and III, 

respectively. For alternative II, the -0.35 percentage point price differential is the sum of a -0.30

percentage point computational difference and a -0.05 percentage point coverage difference (see 

Section 2.5). These assumed values are the same as those assumed in the 2020 Trustees Report.

3.3.2.5 Total Links

The average annual change in the total links was -0.49 percent over the last four complete 

economic cycles and -0.64 percent over the last six complete cycles. For the 2021 Trustees 

Report, the assumed average annual changes in the total links are approximately -0.20

percentage point, -0.49 percentage point, and -0.77 percentage point for alternatives I, II, and III, 

respectively.

 

between censuses, the latter link seems to be very stable over longer time periods, so that such an additional step 

seems unnecessary for the purpose of deriving assumptions about the future.

46 The corresponding value implicit in the BLS estimate of total hours worked is -0.09 percent.
Average Real Wage Differential, Page 11

3.4 Projections from Other Sources

At the time assumptions were developed, the following projections from other sources were 

available.

IHS Markit provided projections through 2050 in its August 2020 long-run trend forecast (see

The 30-Year Focus, Third Quarter, August 2020). IHS Markit projected that the average annual 

real growth rate for average U.S. earnings would be 1.99 percent over the 20-year period from 

2030 to 2050.

47 Moody’s Analytics’ September 2020 forecast extended to 2050. Over the 

20-year period from 2030 to 2050, Moody’s Analytics projected that the annual real growth rate 

for average U.S. earnings would average 1.44 percent.

The Office of Management and Budget (OMB) Fiscal Year 2021 Budget included projections 

through 2030. OMB projected that the annual growth real rate for average U.S. earnings would

be about 2.22 percent for 2030. The Congressional Budget Office (CBO) September 2020 report, 

The 2020 Long-Term Budget Outlook, included projections through 2050. CBO projected that 

the annual real growth rate for average U.S. wages would average about 0.9 percent over the 

period 2030 to 2050. 

The Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods 

recommended reducing the assumed long-range average annual real rate of increase in the 

average earnings from 1.18 percent in the 2019 Trustees Report, alternative II, to 1.08 percent. 

The prior technical panel, which met in 2015, recommended no changes to the long-range 

average annual real wage differential of 1.17 percent in the 2015 Trustees Report, alternative II.

 47 OCACT calculation estimated from IHS projections of wage and salary disbursements, nonfarm proprietors’ 

income, and total nonfarm payrolls.
Differential, Page 

Average Real Wage 

12

Table 3.4: Average Hours Worked per Week, Total U.S.: Compound Annual Rates of Change (%)

From

To Variable 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

1961 37.57

1962 37.85 0.73

1963 37.62 0.07 -0.60

1964 37.79 0.19 -0.08 0.44

1965 37.96 0.26 0.10 0.45 0.46

1966 38.15 0.31 0.20 0.47 0.48 0.51

1967 37.68 0.05 -0.09 0.04 -0.10 -0.37 -1.25

1968 37.57 0.00 -0.12 -0.03 -0.14 -0.34 -0.77 -0.28

1969 37.57 0.00 -0.11 -0.03 -0.12 -0.26 -0.52 -0.15 -0.01

1970 36.69 -0.27 -0.39 -0.36 -0.49 -0.68 -0.98 -0.88 -1.18 -2.34

1971 36.38 -0.32 -0.44 -0.42 -0.54 -0.71 -0.95 -0.87 -1.07 -1.59 -0.84

1972 36.29 -0.32 -0.42 -0.40 -0.50 -0.64 -0.83 -0.75 -0.86 -1.15 -0.55 -0.25

1973 36.25 -0.30 -0.39 -0.37 -0.46 -0.58 -0.73 -0.64 -0.71 -0.89 -0.40 -0.18 -0.12

1974 35.70 -0.39 -0.49 -0.48 -0.57 -0.68 -0.83 -0.77 -0.85 -1.01 -0.68 -0.62 -0.81 -1.50

1975 35.08 -0.49 -0.58 -0.58 -0.67 -0.79 -0.93 -0.89 -0.98 -1.14 -0.89 -0.91 -1.12 -1.62 -1.75

1976 34.96 -0.48 -0.57 -0.56 -0.65 -0.75 -0.87 -0.83 -0.90 -1.02 -0.80 -0.79 -0.93 -1.20 -1.04 -0.34

1977 34.93 -0.45 -0.53 -0.53 -0.60 -0.69 -0.80 -0.75 -0.81 -0.90 -0.70 -0.67 -0.76 -0.92 -0.72 -0.21 -0.08

1978 35.04 -0.41 -0.48 -0.47 -0.54 -0.61 -0.71 -0.66 -0.69 -0.77 -0.57 -0.53 -0.58 -0.67 -0.47 -0.04 0.12 0.31

1979 35.07 -0.38 -0.45 -0.44 -0.50 -0.56 -0.65 -0.59 -0.62 -0.68 -0.50 -0.46 -0.48 -0.55 -0.35 0.00 0.11 0.20 0.09

1980 34.77 -0.41 -0.47 -0.46 -0.52 -0.58 -0.66 -0.62 -0.64 -0.70 -0.54 -0.50 -0.53 -0.59 -0.44 -0.18 -0.14 -0.16 -0.39 -0.88

1981 34.53 -0.42 -0.48 -0.48 -0.53 -0.59 -0.66 -0.62 -0.65 -0.70 -0.55 -0.52 -0.55 -0.60 -0.47 -0.26 -0.25 -0.29 -0.49 -0.77 -0.67

1982 34.16 -0.45 -0.51 -0.51 -0.56 -0.62 -0.69 -0.65 -0.68 -0.73 -0.59 -0.57 -0.60 -0.66 -0.55 -0.38 -0.39 -0.45 -0.64 -0.88 -0.88

1983 34.31 -0.41 -0.47 -0.46 -0.51 -0.56 -0.62 -0.58 -0.60 -0.64 -0.51 -0.49 -0.51 -0.55 -0.44 -0.27 -0.27 -0.30 -0.42 -0.55 -0.43

1984 34.59 -0.36 -0.41 -0.40 -0.44 -0.49 -0.54 -0.50 -0.51 -0.55 -0.42 -0.39 -0.40 -0.42 -0.32 -0.16 -0.13 -0.14 -0.22 -0.28 -0.13

1985 34.68 -0.33 -0.38 -0.37 -0.41 -0.45 -0.50 -0.46 -0.47 -0.50 -0.37 -0.34 -0.35 -0.37 -0.26 -0.11 -0.09 -0.09 -0.15 -0.19 -0.05

1986 34.27 -0.37 -0.41 -0.40 -0.44 -0.49 -0.54 -0.50 -0.51 -0.54 -0.42 -0.40 -0.41 -0.43 -0.34 -0.21 -0.20 -0.21 -0.28 -0.33 -0.24

1987 34.40 -0.34 -0.38 -0.37 -0.41 -0.45 -0.49 -0.45 -0.46 -0.49 -0.38 -0.35 -0.36 -0.37 -0.29 -0.16 -0.15 -0.15 -0.21 -0.24 -0.15

1988 34.56 -0.31 -0.35 -0.34 -0.37 -0.41 -0.45 -0.41 -0.42 -0.44 -0.33 -0.30 -0.30 -0.32 -0.23 -0.11 -0.10 -0.10 -0.14 -0.16 -0.08

1989 34.76 -0.28 -0.31 -0.30 -0.33 -0.37 -0.40 -0.37 -0.37 -0.39 -0.28 -0.25 -0.25 -0.26 -0.18 -0.06 -0.04 -0.04 -0.07 -0.09 0.00

1990 34.67 -0.28 -0.31 -0.30 -0.33 -0.36 -0.40 -0.36 -0.36 -0.38 -0.28 -0.25 -0.25 -0.26 -0.18 -0.08 -0.06 -0.06 -0.09 -0.11 -0.03

1991 34.50 -0.28 -0.32 -0.31 -0.34 -0.37 -0.40 -0.37 -0.37 -0.39 -0.29 -0.26 -0.26 -0.27 -0.20 -0.10 -0.09 -0.09 -0.12 -0.14 -0.07

1992 34.25 -0.30 -0.33 -0.32 -0.35 -0.38 -0.41 -0.38 -0.38 -0.40 -0.31 -0.29 -0.29 -0.30 -0.23 -0.14 -0.13 -0.13 -0.16 -0.18 -0.12

1993 34.53 -0.26 -0.30 -0.29 -0.31 -0.34 -0.37 -0.34 -0.34 -0.35 -0.26 -0.24 -0.24 -0.24 -0.18 -0.09 -0.07 -0.07 -0.10 -0.11 -0.05

1994 35.03 -0.21 -0.24 -0.23 -0.25 -0.28 -0.30 -0.27 -0.27 -0.28 -0.19 -0.16 -0.16 -0.16 -0.10 -0.01 0.01 0.02 0.00 -0.01 0.05

1995 35.21 -0.19 -0.22 -0.21 -0.23 -0.25 -0.28 -0.24 -0.24 -0.25 -0.16 -0.14 -0.13 -0.13 -0.07 0.02 0.04 0.04 0.03 0.02 0.08

1996 35.31 -0.18 -0.20 -0.19 -0.21 -0.23 -0.26 -0.22 -0.22 -0.23 -0.15 -0.12 -0.11 -0.11 -0.05 0.03 0.05 0.06 0.04 0.04 0.10

1997 35.39 -0.17 -0.19 -0.18 -0.20 -0.22 -0.24 -0.21 -0.21 -0.21 -0.13 -0.11 -0.10 -0.10 -0.04 0.04 0.06 0.06 0.05 0.05 0.10

1998 35.58 -0.15 -0.17 -0.16 -0.18 -0.20 -0.22 -0.18 -0.18 -0.19 -0.11 -0.08 -0.08 -0.07 -0.01 0.06 0.08 0.09 0.08 0.08 0.13

1999 35.61 -0.14 -0.16 -0.15 -0.17 -0.19 -0.21 -0.18 -0.17 -0.18 -0.10 -0.08 -0.07 -0.07 -0.01 0.06 0.08 0.09 0.08 0.08 0.13

2000 35.69 -0.13 -0.15 -0.14 -0.16 -0.18 -0.20 -0.16 -0.16 -0.16 -0.09 -0.07 -0.06 -0.06 0.00 0.07 0.09 0.09 0.08 0.08 0.13

2001 35.28 -0.16 -0.18 -0.17 -0.19 -0.20 -0.22 -0.19 -0.19 -0.20 -0.13 -0.10 -0.10 -0.10 -0.04 0.02 0.04 0.04 0.03 0.03 0.07

2002 34.94 -0.18 -0.20 -0.19 -0.21 -0.22 -0.24 -0.22 -0.21 -0.22 -0.15 -0.13 -0.13 -0.13 -0.08 -0.01 0.00 0.00 -0.01 -0.02 0.02

2003 34.61 -0.20 -0.22 -0.21 -0.22 -0.24 -0.26 -0.24 -0.23 -0.24 -0.18 -0.16 -0.15 -0.15 -0.11 -0.05 -0.04 -0.04 -0.05 -0.06 -0.02

2004 34.57 -0.19 -0.22 -0.21 -0.22 -0.24 -0.26 -0.23 -0.23 -0.24 -0.17 -0.15 -0.15 -0.15 -0.11 -0.05 -0.04 -0.04 -0.05 -0.06 -0.02

2005 34.51 -0.19 -0.21 -0.21 -0.22 -0.24 -0.26 -0.23 -0.23 -0.24 -0.17 -0.15 -0.15 -0.15 -0.11 -0.05 -0.04 -0.04 -0.06 -0.06 -0.03

2006 34.53 -0.19 -0.21 -0.20 -0.21 -0.23 -0.25 -0.22 -0.22 -0.23 -0.17 -0.15 -0.15 -0.15 -0.10 -0.05 -0.04 -0.04 -0.05 -0.06 -0.03

2007 34.50 -0.19 -0.21 -0.20 -0.21 -0.23 -0.25 -0.22 -0.22 -0.22 -0.17 -0.15 -0.14 -0.15 -0.10 -0.05 -0.04 -0.04 -0.05 -0.06 -0.03

2008 34.11 -0.21 -0.23 -0.22 -0.23 -0.25 -0.27 -0.24 -0.24 -0.25 -0.19 -0.17 -0.17 -0.17 -0.13 -0.08 -0.08 -0.08 -0.09 -0.10 -0.07

2009 33.40 -0.25 -0.27 -0.26 -0.27 -0.29 -0.31 -0.29 -0.29 -0.29 -0.24 -0.22 -0.22 -0.23 -0.19 -0.14 -0.14 -0.14 -0.15 -0.16 -0.14

2010 33.53 -0.23 -0.25 -0.25 -0.26 -0.28 -0.29 -0.27 -0.27 -0.28 -0.22 -0.21 -0.21 -0.21 -0.17 -0.13 -0.12 -0.12 -0.14 -0.15 -0.12

2011 33.72 -0.22 -0.24 -0.23 -0.24 -0.26 -0.27 -0.25 -0.25 -0.26 -0.21 -0.19 -0.19 -0.19 -0.15 -0.11 -0.10 -0.10 -0.12 -0.12 -0.10

2012 33.76 -0.21 -0.23 -0.22 -0.23 -0.25 -0.27 -0.24 -0.24 -0.25 -0.20 -0.18 -0.18 -0.18 -0.15 -0.10 -0.10 -0.10 -0.11 -0.12 -0.09

2013 33.87 -0.20 -0.22 -0.21 -0.22 -0.24 -0.25 -0.23 -0.23 -0.23 -0.19 -0.17 -0.17 -0.17 -0.13 -0.09 -0.09 -0.09 -0.10 -0.10 -0.08

2014 33.98 -0.19 -0.21 -0.20 -0.21 -0.23 -0.24 -0.22 -0.22 -0.22 -0.17 -0.16 -0.16 -0.16 -0.12 -0.08 -0.07 -0.07 -0.09 -0.09 -0.07

2015 34.21 -0.17 -0.19 -0.18 -0.19 -0.21 -0.22 -0.20 -0.20 -0.20 -0.16 -0.14 -0.14 -0.14 -0.10 -0.06 -0.06 -0.06 -0.06 -0.07 -0.05

2016 34.14 -0.17 -0.19 -0.18 -0.19 -0.21 -0.22 -0.20 -0.20 -0.20 -0.16 -0.14 -0.14 -0.14 -0.11 -0.07 -0.06 -0.06 -0.07 -0.07 -0.05

2017 34.09 -0.17 -0.19 -0.18 -0.19 -0.21 -0.22 -0.20 -0.20 -0.20 -0.16 -0.14 -0.14 -0.14 -0.11 -0.07 -0.06 -0.06 -0.07 -0.08 -0.05

2018 34.29 -0.16 -0.18 -0.17 -0.18 -0.19 -0.21 -0.18 -0.18 -0.19 -0.14 -0.13 -0.12 -0.12 -0.09 -0.05 -0.05 -0.05 -0.05 -0.06 -0.04

2019 34.11 -0.17 -0.18 -0.18 -0.19 -0.20 -0.21 -0.19 -0.19 -0.19 -0.15 -0.13 -0.13 -0.13 -0.10 -0.06 -0.06 -0.06 -0.07 -0.07 -0.05
Differential, Page 

Average Real Wage 

13

Table 3.4 (continued): Average Hours Worked per Week, Total U.S.: Compound Annual Rates of Change (%)

From

To Variable 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1980 34.77

1981 34.53 -0.67

1982 34.16 -0.88 -1.08

1983 34.31 -0.43 -0.31 0.46

1984 34.59 -0.13 0.06 0.63 0.81

1985 34.68 -0.05 0.11 0.51 0.53 0.26

1986 34.27 -0.24 -0.15 0.08 -0.04 -0.46 -1.18

1987 34.40 -0.15 -0.07 0.14 0.06 -0.19 -0.41 0.37

1988 34.56 -0.08 0.01 0.19 0.14 -0.02 -0.12 0.42 0.46

1989 34.76 0.00 0.08 0.25 0.22 0.10 0.06 0.48 0.53 0.59

1990 34.67 -0.03 0.04 0.19 0.15 0.04 -0.01 0.29 0.26 0.16 -0.27

1991 34.50 -0.07 -0.01 0.11 0.07 -0.04 -0.09 0.14 0.08 -0.05 -0.37 -0.47

1992 34.25 -0.12 -0.07 0.03 -0.02 -0.12 -0.18 -0.01 -0.08 -0.22 -0.49 -0.60 -0.72

1993 34.53 -0.05 0.00 0.10 0.06 -0.02 -0.06 0.11 0.06 -0.02 -0.17 -0.13 0.04 0.80

1994 35.03 0.05 0.11 0.21 0.19 0.13 0.11 0.27 0.26 0.23 0.15 0.26 0.50 1.13 1.45

1995 35.21 0.08 0.14 0.23 0.21 0.16 0.15 0.30 0.29 0.27 0.21 0.31 0.51 0.92 0.98 0.51

1996 35.31 0.10 0.15 0.24 0.22 0.17 0.16 0.30 0.29 0.27 0.22 0.31 0.46 0.76 0.75 0.40 0.29

1997 35.39 0.10 0.15 0.24 0.22 0.18 0.17 0.29 0.28 0.26 0.22 0.29 0.42 0.65 0.62 0.34 0.26 0.23

1998 35.58 0.13 0.18 0.26 0.24 0.20 0.20 0.31 0.31 0.29 0.26 0.33 0.44 0.64 0.60 0.39 0.35 0.38 0.54

1999 35.61 0.13 0.17 0.25 0.23 0.19 0.19 0.30 0.29 0.27 0.24 0.30 0.40 0.56 0.52 0.33 0.29 0.29 0.32 0.10

2000 35.69 0.13 0.17 0.24 0.23 0.20 0.19 0.29 0.28 0.27 0.24 0.29 0.38 0.52 0.47 0.31 0.27 0.27 0.28 0.16 0.22

2001 35.28 0.07 0.11 0.17 0.15 0.12 0.11 0.19 0.18 0.16 0.12 0.16 0.22 0.33 0.27 0.10 0.03 -0.02 -0.08 -0.28 -0.47

2002 34.94 0.02 0.06 0.11 0.10 0.06 0.04 0.12 0.10 0.08 0.04 0.07 0.11 0.20 0.13 -0.03 -0.11 -0.17 -0.25 -0.45 -0.63

2003 34.61 -0.02 0.01 0.06 0.04 0.00 -0.01 0.06 0.04 0.01 -0.03 -0.01 0.03 0.09 0.02 -0.13 -0.21 -0.28 -0.37 -0.55 -0.71

2004 34.57 -0.02 0.01 0.06 0.04 0.00 -0.02 0.05 0.03 0.00 -0.04 -0.02 0.02 0.08 0.01 -0.13 -0.20 -0.26 -0.33 -0.48 -0.59

2005 34.51 -0.03 0.00 0.05 0.03 -0.01 -0.02 0.04 0.02 -0.01 -0.04 -0.03 0.00 0.06 0.00 -0.13 -0.20 -0.25 -0.31 -0.43 -0.52

2006 34.53 -0.03 0.00 0.04 0.03 -0.01 -0.02 0.04 0.02 0.00 -0.04 -0.03 0.00 0.06 0.00 -0.12 -0.18 -0.22 -0.27 -0.37 -0.44

2007 34.50 -0.03 0.00 0.04 0.02 -0.01 -0.02 0.03 0.01 -0.01 -0.04 -0.03 0.00 0.05 -0.01 -0.12 -0.17 -0.21 -0.26 -0.34 -0.40

2008 34.11 -0.07 -0.05 -0.01 -0.02 -0.06 -0.07 -0.02 -0.04 -0.07 -0.10 -0.09 -0.07 -0.03 -0.08 -0.19 -0.24 -0.29 -0.33 -0.42 -0.48

2009 33.40 -0.14 -0.12 -0.08 -0.10 -0.14 -0.16 -0.11 -0.13 -0.16 -0.20 -0.20 -0.18 -0.15 -0.21 -0.32 -0.38 -0.43 -0.48 -0.57 -0.64

2010 33.53 -0.12 -0.10 -0.07 -0.09 -0.12 -0.14 -0.09 -0.11 -0.14 -0.17 -0.17 -0.15 -0.12 -0.17 -0.27 -0.33 -0.37 -0.42 -0.49 -0.55

2011 33.72 -0.10 -0.08 -0.04 -0.06 -0.09 -0.11 -0.06 -0.08 -0.11 -0.14 -0.13 -0.11 -0.08 -0.13 -0.22 -0.27 -0.31 -0.34 -0.41 -0.45

2012 33.76 -0.09 -0.07 -0.04 -0.06 -0.09 -0.10 -0.06 -0.07 -0.10 -0.13 -0.12 -0.10 -0.07 -0.12 -0.20 -0.25 -0.28 -0.31 -0.37 -0.41

2013 33.87 -0.08 -0.06 -0.03 -0.04 -0.07 -0.08 -0.04 -0.06 -0.08 -0.11 -0.10 -0.08 -0.05 -0.10 -0.18 -0.21 -0.24 -0.27 -0.33 -0.36

2014 33.98 -0.07 -0.05 -0.02 -0.03 -0.06 -0.07 -0.03 -0.05 -0.06 -0.09 -0.08 -0.07 -0.04 -0.08 -0.15 -0.19 -0.21 -0.24 -0.29 -0.31

2015 34.21 -0.05 -0.03 0.00 -0.01 -0.04 -0.05 -0.01 -0.02 -0.04 -0.06 -0.05 -0.04 -0.01 -0.04 -0.11 -0.14 -0.17 -0.19 -0.23 -0.25

2016 34.14 -0.05 -0.03 0.00 -0.02 -0.04 -0.05 -0.01 -0.03 -0.04 -0.07 -0.06 -0.04 -0.01 -0.05 -0.12 -0.15 -0.17 -0.19 -0.23 -0.25

2017 34.09 -0.05 -0.04 -0.01 -0.02 -0.04 -0.05 -0.02 -0.03 -0.05 -0.07 -0.06 -0.05 -0.02 -0.05 -0.12 -0.15 -0.17 -0.19 -0.23 -0.24

2018 34.29 -0.04 -0.02 0.01 0.00 -0.03 -0.03 0.00 -0.01 -0.03 -0.05 -0.04 -0.02 0.00 -0.03 -0.09 -0.11 -0.13 -0.15 -0.18 -0.20

2019 34.11 -0.05 -0.03 0.00 -0.02 -0.04 -0.05 -0.01 -0.03 -0.04 -0.06 -0.06 -0.04 -0.02 -0.05 -0.11 -0.13 -0.15 -0.17 -0.20 -0.22

From

To Variable 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1999 35.61

2000 35.69 0.22

2001 35.28 -0.47 -1.15

2002 34.94 -0.63 -1.06 -0.96

2003 34.61 -0.71 -1.02 -0.95 -0.94

2004 34.57 -0.59 -0.79 -0.67 -0.53 -0.11

2005 34.51 -0.52 -0.67 -0.55 -0.41 -0.14 -0.18

2006 34.53 -0.44 -0.55 -0.43 -0.30 -0.08 -0.07 0.04

2007 34.50 -0.40 -0.49 -0.37 -0.26 -0.08 -0.08 -0.03 -0.09

2008 34.11 -0.48 -0.57 -0.48 -0.40 -0.29 -0.34 -0.39 -0.61 -1.12

2009 33.40 -0.64 -0.74 -0.68 -0.64 -0.59 -0.69 -0.82 -1.10 -1.61 -2.09

2010 33.53 -0.55 -0.62 -0.57 -0.52 -0.45 -0.51 -0.58 -0.73 -0.95 -0.86 0.39

2011 33.72 -0.45 -0.52 -0.45 -0.39 -0.33 -0.36 -0.39 -0.47 -0.57 -0.38 0.48 0.58

2012 33.76 -0.41 -0.46 -0.40 -0.34 -0.28 -0.30 -0.31 -0.37 -0.43 -0.26 0.36 0.35 0.12

2013 33.87 -0.36 -0.40 -0.34 -0.28 -0.22 -0.23 -0.23 -0.27 -0.30 -0.14 0.35 0.34 0.23 0.33

2014 33.98 -0.31 -0.35 -0.29 -0.23 -0.17 -0.17 -0.17 -0.20 -0.22 -0.06 0.35 0.34 0.26 0.32 0.31

2015 34.21 -0.25 -0.28 -0.22 -0.16 -0.10 -0.10 -0.09 -0.10 -0.10 0.04 0.40 0.41 0.36 0.44 0.50 0.68

2016 34.14 -0.25 -0.28 -0.22 -0.16 -0.10 -0.10 -0.10 -0.11 -0.11 0.01 0.32 0.31 0.25 0.28 0.27 0.24 -0.19

2017 34.09 -0.24 -0.27 -0.22 -0.17 -0.11 -0.11 -0.10 -0.12 -0.12 -0.01 0.26 0.24 0.18 0.19 0.16 0.10 -0.18 -0.17

2018 34.29 -0.20 -0.22 -0.17 -0.12 -0.06 -0.06 -0.05 -0.06 -0.05 0.05 0.29 0.28 0.24 0.26 0.25 0.23 0.08 0.21 0.60

2019 34.11 -0.22 -0.24 -0.19 -0.14 -0.09 -0.09 -0.08 -0.09 -0.09 0.00 0.21 0.19 0.14 0.15 0.11 0.07 -0.08 -0.04 0.03 -0.54
Average Real Wage Differential, Page 14

3.5 Appendix

BLS has introduced numerous changes to the Current Population Survey (CPS) concepts over 

the historical period, such that values for employment are not historically comparable (for more 

detail on noncomparability of CPS concepts, see http://www.bls.gov/cps/eetech_methods.pdf). 

To make the total employment series more comparable, OCACT adjusted the published values 

for the following: 

1990 Census: BLS introduced 1990 Census-based population controls in January 1994, 

increasing employment levels for 1990 from the originally-published estimates by about 880,000 

(0.7%). BLS later revised the 1990 to 1993 estimates, but not those for earlier years. 

Consequently, OCACT adjusted the CPS data for 1981 to 1989 using a linear interpolation of the 

0.7% increase.

2000 Census: BLS introduced population controls based on Census 2000 results in January 2003. 

The revised employment series for 2000 was 1.27% (or 1.724 million persons) higher than the 

previously published series. BLS revised the CPS data only back to January 2000. OCACT 

adjusted the CPS data back to 1991 by linearly interpolating the 1.27% adjustment.

1994 CPS Methodology Change: In 1994, BLS introduced methodology changes and a complete 

redesign of its CPS. Because the survey redesign and methodology changes raised the aggregate 

employment for 1994, the series was not comparable with earlier years. Thus, OCACT applied a 

multiplicative-adjustment factor estimated by Polivka and Miller (1995)48 to the series for years 

prior to 1994. The aggregate employment series was adjusted for 1993 and earlier years by a 

factor of 1.0053.

Population Controls since the 2000 Census: In January 2003, the U.S. Census Bureau introduced 

its updated population controls in the CPS estimates. The difference between the updated and 

originally published employment values for December 2002 is an increase of 576,000 persons. 

Data from December 2002 and earlier are not updated by BLS. OCACT adjusted the 

employment series back to 2000. 

In January 2004, the U.S. Census Bureau reflected revised net international migration estimates 

in its updated population controls. The difference between the updated and originally published 

employment values for December 2003 is a decrease of 409,000 persons. Data from December 

2003 and earlier are not updated by BLS. OCACT adjusted the employment series back to 2000. 

In January 2005, the U.S. Census Bureau introduced updated population controls, which 

reflected updated vital statistics information, as well as revised estimates of net international 

 48 Anne E. Polivka and Stephen M. Miller, "The CPS after the Redesign: Refocusing the Economic Lens,” 

Labor Statistics Measurement Issues; Studies in Income and Wealth Volume 60, Edited by John Haltiwanger, 

Marilyn E. Manser and Robert Topel, National Bureau of Economic Research, 1998, Table 6. Also available at

http://www.bls.gov/ore/pdf/ec950090.pdf. Polivka and Miller’s adjustment factors are for employment-population 

ratios, not employment levels. Because the CPS methodology change affected the employment levels, but not the 

civilian noninstitutional population, their multiplicative employment-population ratio factors are used to adjust the 

employment levels.
Average Real Wage Differential, Page 15

migration. The difference between the updated and originally published employment values for 

December 2004 is a decrease of 45,000 persons. Data from December 2004 and earlier are not 

updated by BLS. OCACT adjusted the employment series back to 2000. 

In January 2006, the U.S. Census Bureau introduced updated population controls, which 

reflected updated vital statistics information, as well as revised estimates of net international 

migration. The difference between the updated and originally published employment values for 

December 2005 is a decrease of 123,000 persons. Data from December 2005 and earlier are not 

updated by BLS. OCACT adjusted the employment series back to 2000.

In January 2007, the U.S. Census Bureau introduced updated population controls, which 

reflected revised estimates of net international migration and updated vital statistics information. 

The difference between the updated and originally published employment values for December 

2006 is an increase of 153,000 persons. Data from December 2006 and earlier are not updated by 

BLS. OCACT adjusted the employment series back to 2000.

In January 2008, the U.S. Census Bureau introduced updated population controls, which 

reflected updated vital statistics information, as well as revised estimates of net international 

migration and the institutional population. The difference between the updated and originally 

published employment values for December 2007 is a decrease of 598,000 persons. Data from 

December 2007 and earlier are not updated by BLS. OCACT adjusted the employment series 

back to 2000.

In January 2009, the U.S. Census Bureau introduced updated population controls, reflecting 

revised net international migration and vital statistics information. The difference between the 

updated and originally published employment values for December 2008 is a decrease of 

407,000 persons. Data from December 2008 and earlier are not updated by BLS. OCACT 

adjusted the employment series back to 2000.

In January 2010, the U.S. Census Bureau introduced updated population controls, reflecting 

updated vital statistics information, revised estimates of net international migration, as well as 

methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2009 is a decrease of 

243,000 persons. BLS does not update data from December 2009 and earlier. OCACT adjusted 

the employment series back to 2000.

In January 2011, the U.S. Census Bureau introduced updated population controls, reflecting 

revised net international migration, vital statistics information, and some methodological changes 

in the population estimation process. The difference between the updated and originally 

published employment values for December 2010 is a decrease of 472,000 persons. BLS does 

not update data from December 2010 and earlier. OCACT adjusted the employment series back 

to 2000.

In January 2012, the U.S. Census Bureau incorporated the Census 2010 population base, as well 

as adjustments for net international migration, updated vital statistics information, and 

methodological changes in the population estimation process. The difference between the 
Average Real Wage Differential, Page 16

updated and originally published employment values for December 2011 is an increase of 

216,000 persons. BLS does not update data from December 2011 and earlier. OCACT adjusted 

the employment series back to 2000.

In January 2013, the U.S. Census Bureau introduced updated population controls, reflecting net 

international migration adjustments, updated vital statistics information, and some 

methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2012 is an increase of 

127,000 persons. BLS does not update data from December 2012 and earlier. OCACT adjusted 

the employment series back to 2000. 

In January 2014, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2013 is an increase of 22,000

persons. BLS does not update data from December 2013 and earlier. OCACT adjusted the 

employment series back to 2000.

In January 2015, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2014 is an increase of 

324,000 persons. BLS does not update data from December 2014 and earlier. OCACT adjusted 

the employment series back to 2000.

In January 2016, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2015 is an increase of 

265,000 persons. BLS does not update data from December 2015 and earlier. OCACT adjusted 

the employment series back to 2000.

In January 2017, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The Census Bureau’s 

methodological improvements included changes in the estimation of the foreign-born emigration 

subcomponent of net international migration. These method changes resulted in higher foreignborn emigration and lower overall net international migration than previously estimated. The 

difference between the updated and originally published employment values for December 2016 

is a decrease of 831,000 persons. BLS does not update data from December 2016 and earlier. 

OCACT adjusted the employment series back to 2000.

In January 2018, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2017 is an increase of 
Average Real Wage Differential, Page 17

318,000 persons. BLS does not update data from December 2017 and earlier. OCACT adjusted 

the employment series back to 2000.

In January 2019, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2018 is a decrease of 

488,000 persons. BLS does not update data from December 2018 and earlier. OCACT adjusted 

the employment series back to 2000.

In January 2020, the U.S. Census Bureau updated their population controls, reflecting net 

international migration adjustments, updated birth and death statistics and other information, and 

some methodological changes in the population estimation process. The difference between the 

updated and originally published employment values for December 2019 is a decrease of 

507,000 persons. BLS does not update data from December 2019 and earlier. OCACT adjusted 

the employment series back to 2000.
Unemployment Rate, Page 1

4. UNEMPLOYMENT

THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

4 UNEMPLOYMENT RATE .................................................................................................. 2

4.1 SUMMARY ............................................................................................................................................................. 2

4.2 PAST EXPERIENCE................................................................................................................................................. 2

4.3 FUTURE EXPECTATIONS ....................................................................................................................................... 4

4.4 PROJECTIONS FROM OTHER SOURCES ................................................................................................................. 4

TABLE OF TABLES PAGE

TABLE 4.1: ASSUMED ULTIMATE TOTAL CIVILIAN UNEMPLOYMENT RATE ..................................................................... 2

TABLE 4.2: CIVILIAN UNEMPLOYMENT RATES OVER COMPLETE ECONOMIC CYCLES (PEAK-TO-PEAK) ........................ 3

TABLE 4.3: TOTAL AND AGE-SEX ADJUSTED CIVILIAN UNEMPLOYMENT RATES OVER SELECTED INTERVALS (%)...... 6
Unemployment Rate, Page 2

4 Unemployment Rate

4.1 Summary

For the 2021 Trustees Report, the ultimate total civilian unemployment rates (adjusted by the age 

and sex distribution of the 2011 civilian labor force) are assumed to be 3.5 percent, 4.5 percent, 

and 5.5 percent for alternatives I, II, and III, respectively (Table 4.1). These assumptions are 0.5 

percentage point lower than those used for the 2020 Trustees Report.

Table 4.1: Assumed Ultimate Total Civilian Unemployment Rate

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

I II III I II III I II III

Civilian Unemployment Rate 3.5 4.5 5.5 4.0 5.0 6.0 -0.5 -0.5 -0.5

4.2 Past Experience

BLS publishes civilian unemployment rates, defined as the proportion of unemployed persons in 

the civilian labor force, by sex and age group as part of its Current Population Survey. The 

ultimate civilian unemployment rate assumptions are based on analysis of historical experience 

and expected future conditions and trends. Because the aggregate unemployment rate is sensitive 

to changes in the age-sex composition of the civilian labor force, OCACT constructed an 

age-sex-adjusted unemployment rate by weighting the unadjusted age-sex unemployment rates 

by the age-sex distribution of the 2011 civilian labor force. Since the civilian unemployment rate 

varies significantly over an economic cycle, it is useful to look at averages over complete 

economic cycles or long periods (decades). Table 4.2 shows average civilian unemployment 

rates (unadjusted and age-sex-adjusted) over complete (peak-to-peak) economic cycles. The 

age-sex-adjusted unemployment rate averaged 5.6 percent over the last six complete economic 

cycles (1969 through 2019), 5.7 percent over the last five cycles (1973 through 2019), 5.8

percent over the last four cycles (1979 through 2019), 5.6 percent over the last three cycles (1990

through 2019), and 5.9 percent over the last two cycles (2001 through 2019).

49 Table 4.3 shows 

annual values for both the adjusted and unadjusted civilian rates. 

 49 Peaks in economic cycles roughly follow the NBER cycle dating, except for short recoveries such as 

1980-1981, which are not counted as separate cycles.
Unemployment Rate, Page 3

Table 4.2: Civilian Unemployment Rates over Complete Economic Cycles (Peak-to-Peak) 50

Total Rate Age-Sex Adjusted Rate

Individual Cycle:

1969-1972 5.0 4.2

1973-1978 6.6 5.5

1979-1989 7.1 6.1

1990-2000 5.6 5.2

2001-2007 5.2 5.0

2008-2019 6.4 6.4

Last Six Cycles

1969-2019 6.1 5.6

Last Five Cycles

1973-2019 6.2 5.7

Last Four Cycles

1979-2019 6.2 5.8

Last Three Cycles

1990-2019 5.8 5.6

Last Two Cycles

2001-2019 6.0 5.9

It is also useful to look at unemployment rates over specific periods. Beginning around 1975, and 

lasting through about 1994, the U.S. experienced generally high unemployment rates. One factor 

contributing to this may have been rapid changes in technology and increased global 

competition, which made job searches and retraining more frequent and longer-lasting. Another 

contributing factor was the huge influx of women and baby boomers into the labor market, which 

likely increased the quantity of labor supplied relative to the quantity demanded in the 1970s and 

1980s. 

Between 1997 and 2000, rapid economic expansion reduced unemployment rates to levels not 

seen since the 1960s. Although interrupted by a mild recession, rates returned to levels below 

long-run average and remained relatively low until 2007. The recession of 2007-2009 resulted in 

rates that were well above the long-run average level for several years.

Near the peak of the last economic cycle, the unemployment rate was at an extraordinarily low

level. At the same time, the aggregate labor force participation rate was lower than that projected 

by OCACT’s model based on the observed unemployment rate and other factors. These 

deviations from historical patterns were largely offsetting, so that the resulting employment level 

predicted by the model was close to the observed employment level. In recent years, the 

relationship between unemployment rates and labor force participation rates has been different 

than in the past. The 2020 Trustees Report indicated our belief that there has been a structural 

 50 Unlike historical tables in Sections 1–3, which show growth rates, Table 4.2 shows average levels over periods. 

Periods are labeled so that first and last years are included in averaging, and each year is counted in exactly one 

economic cycle.
Unemployment Rate, Page 4

change that will persist in the foreseeable future. Accordingly, the Trustees lowered both the 

ultimate average unemployment rate and the labor force participation rates in that report.

4.3 Future Expectations

For the 2021 Trustees Report, OCACT updated the labor force model, which is now estimated 

based on data including the latest complete economic cycle. The relationship between 

unemployment and labor force in the updated model is in closer alignment with the structural 

shift mentioned above. 

A significant factor affecting future employment measures is the aging of the baby boom

generation. As the baby boomers age and are replaced at working ages by the lower-birth-rate 

generations that followed, the working-age population is expected to grow more slowly, 

particularly in relation to the size of the total population. This demographic shift is expected to

increase the demand for older workers. Meanwhile, the supply of potential older workers is 

expected to increase, as a significant portion of the baby boomers is expected to remain in the 

labor force, in many cases, out of necessity (as their life expectancies increase). Even with 

increases in labor supply from older workers, it is likely that the increasing aged dependency 

ratio will continue to exert downward pressure on the age-sex-adjusted unemployment rate.

The Trustees continue to believe that there are good reasons to assume that the future age-sexadjusted unemployment rates will average somewhat lower than they did over the last six 

complete economic cycles. Therefore, in conjunction with the update to the labor force model, 

the Trustees lowered the assumed ultimate average unemployment rates to 4.5 percent (age-sex 

adjusted to the 2011 labor force) for alternative II, 3.5 percent for alternative I, and 5.5 percent 

for alternative III. These rates are 0.5 percentage point lower than those assumed in the 2020

report.

4.4 Projections from Other Sources

At the time assumptions were developed, the following projections from other sources were 

available.

IHS Markit provided projections through 2050 in its August 2020 long-run trend forecast (see

The 30-Year Focus, Third Quarter, August 2020). IHS Markit projected the civilian 

unemployment rate would average 4.2 percent over the 20-year period 2031 through 2050, but 

would be gradually rising and reaching 4.7 percent in 2050. The Moody’s Analytics’ September 

2020 forecast showed a civilian unemployment rate averaging 4.6 percent from 2031 to 2050.

The Office of Management and Budget (OMB) 2021 Fiscal Year Budget included projections 

through 2030. OMB projected an aggregate civilian unemployment rate of 4.0 percent for 2023

and later. The Congressional Budget Office (CBO) report, The 2020 Long-Term Budget Outlook

(published in September 2020), included projections through 2050. CBO projected an aggregate 

civilian unemployment rate of 4.4 percent for 2030 and 4.0 percent for 2050. 
Unemployment Rate, Page 5

The Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods 

recommended assuming an ultimate aggregate civilian age-sex-adjusted unemployment rate of 

4.8 percent for alternative II. The prior technical panel, which met in 2015, recommended no 

changes to the ultimate age-sex-adjusted unemployment rate of 5.5 percent, assumed in the 2015 

Trustees Report, alternative II.
Unemployment Rate, 

Page 6 Table 4.3: Total and Age-Sex Adjusted Civilian Unemployment Rates over Selected Intervals (%)

Year 1 5 10 15 20 25 30 35 40 45 50 1 5 10 15 20 25 30 35 40 45 50

1961 6.7 6.3

1962 5.5 5.2

1963 5.6 5.2

1964 5.2 4.7

1965 4.5 5.5 4.0 5.1

1966 3.8 4.9 3.3 4.5

1967 3.8 4.6 3.3 4.1

1968 3.5 4.2 3.0 3.6

1969 3.5 3.8 2.9 3.3

1970 5.0 3.9 4.7 4.2 3.3 4.2

1971 6.0 4.4 4.6 5.1 3.7 4.1

1972 5.6 4.7 4.7 4.7 4.0 4.0

1973 4.9 5.0 4.6 3.9 4.2 3.9

1974 5.6 5.4 4.6 4.5 4.5 3.9

1975 8.5 6.1 5.0 5.2 7.2 5.1 4.2 4.5

1976 7.7 6.5 5.4 5.2 6.4 5.3 4.5 4.5

1977 7.0 6.7 5.7 5.3 5.8 5.6 4.8 4.5

1978 6.1 7.0 6.0 5.4 4.9 5.8 5.0 4.5

1979 5.8 7.0 6.2 5.4 4.8 5.8 5.2 4.5

1980 7.2 6.8 6.4 5.6 5.6 5.9 5.6 5.3 4.7 4.8

1981 7.6 6.7 6.6 5.9 5.6 6.3 5.5 5.4 4.9 4.8

1982 9.7 7.3 7.0 6.2 5.8 8.3 6.0 5.8 5.2 4.9

1983 9.6 8.0 7.5 6.6 6.0 8.3 6.7 6.2 5.6 5.1

1984 7.5 8.3 7.7 6.9 6.1 6.6 7.1 6.5 5.8 5.2

1985 7.2 8.3 7.5 7.1 6.3 6.1 6.3 7.2 6.4 5.9 5.3 5.2

1986 7.0 8.2 7.5 7.1 6.4 6.1 6.1 7.1 6.3 6.0 5.4 5.2

1987 6.2 7.5 7.4 7.2 6.6 6.2 5.4 6.6 6.3 6.1 5.5 5.2

1988 5.5 6.7 7.3 7.2 6.7 6.2 4.9 5.9 6.3 6.1 5.6 5.2

1989 5.3 6.2 7.3 7.2 6.7 6.2 4.7 5.5 6.3 6.1 5.7 5.2

1990 5.6 5.9 7.1 7.0 6.8 6.2 6.1 5.0 5.2 6.2 6.0 5.8 5.3 5.2

1991 6.8 5.9 7.0 6.9 6.8 6.3 6.1 6.2 5.3 6.2 6.0 5.8 5.4 5.2

1992 7.5 6.1 6.8 7.0 6.9 6.5 6.2 6.9 5.6 6.1 6.0 5.9 5.5 5.3

1993 6.9 6.4 6.6 7.0 7.0 6.6 6.2 6.4 5.9 5.9 6.1 6.1 5.7 5.3

1994 6.1 6.6 6.4 7.0 7.0 6.7 6.2 5.7 6.1 5.8 6.2 6.1 5.8 5.4

1995 5.6 6.6 6.3 6.9 6.9 6.7 6.3 6.2 5.2 6.1 5.7 6.2 6.0 5.8 5.4 5.4

1996 5.4 6.3 6.1 6.8 6.8 6.7 6.3 6.1 5.0 5.8 5.5 6.1 5.9 5.8 5.5 5.3

1997 4.9 5.8 6.0 6.5 6.7 6.7 6.4 6.1 4.6 5.4 5.5 5.8 5.9 5.8 5.5 5.3

1998 4.5 5.3 5.9 6.1 6.6 6.7 6.4 6.1 4.2 4.9 5.4 5.5 5.8 5.8 5.6 5.3

1999 4.2 4.9 5.8 5.9 6.5 6.6 6.4 6.0 3.9 4.6 5.3 5.4 5.8 5.8 5.6 5.3

2000 4.0 4.6 5.6 5.7 6.4 6.4 6.4 6.0 6.0 3.7 4.3 5.2 5.2 5.7 5.7 5.6 5.3 5.2

2001 4.8 4.5 5.4 5.6 6.2 6.3 6.3 6.1 5.9 4.5 4.2 5.0 5.1 5.6 5.6 5.5 5.3 5.2

2002 5.8 4.6 5.2 5.5 6.0 6.3 6.3 6.1 5.9 5.5 4.4 4.9 5.1 5.5 5.6 5.6 5.3 5.2

2003 6.0 4.9 5.1 5.6 5.8 6.3 6.4 6.2 5.9 5.8 4.7 4.8 5.2 5.3 5.6 5.6 5.4 5.2

2004 5.5 5.2 5.1 5.6 5.7 6.3 6.4 6.2 5.9 5.3 5.0 4.8 5.2 5.3 5.6 5.7 5.5 5.2

2005 5.1 5.4 5.0 5.5 5.6 6.2 6.3 6.2 6.0 5.9 4.9 5.2 4.7 5.2 5.2 5.6 5.6 5.5 5.2 5.2

2006 4.6 5.4 4.9 5.4 5.5 6.1 6.2 6.2 6.0 5.9 4.5 5.2 4.7 5.1 5.1 5.5 5.5 5.5 5.3 5.2

2007 4.6 5.2 4.9 5.2 5.4 5.8 6.1 6.2 6.0 5.8 4.5 5.0 4.7 4.9 5.1 5.4 5.5 5.5 5.3 5.2

2008 5.8 5.1 5.0 5.1 5.5 5.7 6.1 6.2 6.1 5.8 5.7 5.0 4.8 4.9 5.1 5.3 5.5 5.5 5.4 5.2

2009 9.3 5.9 5.5 5.3 5.7 5.8 6.2 6.3 6.2 5.9 9.2 5.8 5.4 5.1 5.3 5.4 5.7 5.7 5.5 5.3

2010 9.6 6.8 6.1 5.6 5.9 5.9 6.3 6.3 6.3 6.0 6.0 9.6 6.7 6.0 5.4 5.6 5.5 5.8 5.7 5.7 5.4 5.4

2011 8.9 7.7 6.5 5.8 6.0 5.9 6.3 6.4 6.4 6.2 6.0 8.9 7.6 6.4 5.7 5.7 5.6 5.9 5.8 5.8 5.5 5.4

2012 8.1 8.3 6.8 6.1 6.0 6.0 6.3 6.4 6.5 6.3 6.1 8.1 8.3 6.7 5.9 5.8 5.7 5.9 5.9 5.8 5.6 5.5

2013 7.4 8.7 6.9 6.2 6.0 6.1 6.2 6.4 6.5 6.3 6.1 7.4 8.6 6.8 6.1 5.8 5.8 5.8 6.0 5.9 5.7 5.5

2014 6.2 8.0 7.0 6.4 6.0 6.1 6.1 6.5 6.5 6.4 6.1 6.2 8.0 6.9 6.3 5.8 5.9 5.8 6.0 6.0 5.8 5.6

2015 5.3 7.2 7.0 6.5 6.0 6.1 6.1 6.4 6.4 6.4 6.2 5.3 7.2 6.9 6.4 5.8 5.9 5.8 6.0 5.9 5.8 5.6

2016 4.9 6.3 7.0 6.5 6.0 6.0 6.0 6.3 6.4 6.4 6.2 4.9 6.4 7.0 6.4 5.8 5.8 5.7 5.9 5.9 5.8 5.6

2017 4.4 5.6 7.0 6.4 5.9 5.9 5.9 6.2 6.3 6.4 6.2 4.4 5.6 7.0 6.3 5.8 5.7 5.7 5.8 5.9 5.8 5.6

2018 3.9 4.9 6.8 6.2 5.9 5.8 5.9 6.0 6.3 6.3 6.2 3.9 4.9 6.8 6.2 5.8 5.6 5.7 5.7 5.8 5.8 5.7

2019 3.7 4.4 6.2 6.1 5.9 5.7 5.8 5.9 6.2 6.3 6.2 3.7 4.4 6.2 6.1 5.8 5.6 5.6 5.6 5.8 5.8 5.7

Total Rate Age-Sex Adjusted Rate

Annual Average over the Following Number of Years Annual Average over the Following Number of Years
Annual Trust Fund Real Interest Rate, Page 1

5. ANNUAL TRUST FUND REAL INTEREST RATE

THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

5 ANNUAL TRUST FUND REAL INTEREST RATE......................................................... 2

5.1 SUMMARY ............................................................................................................................................................. 2

5.2 PAST EXPERIENCE................................................................................................................................................. 2

5.3 FUTURE EXPECTATIONS ....................................................................................................................................... 4

5.4 PROJECTIONS FROM OTHER SOURCES ................................................................................................................. 5

TABLE OF TABLES PAGE

TABLE 5.1: ASSUMED ULTIMATE REAL INTEREST RATES .................................................................................................. 2

TABLE 5.2: AVERAGE ANNUAL REAL INTEREST RATE (CALCULATED USING THE ADJUSTED-CPIW) ............................. 3

TABLE 5.3: REAL INTEREST RATES FOR OASDI TRUST FUND NEW ISSUES AND THE COMPOUND AVERAGE REAL 

YIELD OVER SELECTED INTERVALS ............................................................................................................................. 6
Annual Trust Fund Real Interest Rate, Page 2

5 Annual Trust Fund Real Interest Rate

5.1 Summary

For the 2021 Trustees Report, the assumed ultimate real interest rates (effective annual real 

yields on special public debt obligations issuable to the trust funds by the U.S. Treasury) are 2.8

percent, 2.3 percent, and 1.8 percent for alternatives I, II, and III, respectively (Table 5.1). These 

assumed rates are the same as the rates used for the 2020 Trustees Report.

Table 5.1: Assumed Ultimate Real Interest Rates

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

I II III I II III I II III

Real Interest Rate 2.8 2.3 1.8 2.8 2.3 1.8 0.0 0.0 0.0

Since October 1960, interest rates on special public debt obligations issuable to the trust funds 

each month have been set equal to the average market yield on all marketable fixed-rate federal 

obligations that are not callable and do not mature within the next 4 years. As such, the rate on 

new issues to the trust funds represents a fair market return for longer-term, highly liquid, 

default-risk-free obligations. The real interest rate (real effective annual yield) on these 

obligations can be computed either as an expected yield (i.e., nominal effective annual yield less 

expected future inflation rate) or as the actual realized yield over some period after issue (i.e., 

nominal effective annual yield less the actual increase in price levels after issue). For the purpose 

of this analysis, actual realized yields over the year after issue will be examined for obligations 

issuable each year. Real interest rates over periods of two or more years are computed as the 

average annual yield of an investment at the beginning of the period that is reinvested annually at 

the new issue rate.

5.2 Past Experience

Tables 5.2 and 5.3 show the average annual real interest rates over various decades and 

economic cycles, using an adjusted CPI-W that reflects BLS improvements to the index.

51 (See 

Section 2.7 Appendix.) 

The average annual real interest rate on trust fund assets over the last six complete economic 

cycles was 2.70 percent (computed as the average annual return for investments in 1969 that

were reinvested annually at the new issue rates for years 1969 through 2019). Annual real 

interest rates for individual years within this period varied substantially from this average of 2.70

percent. Even the average rates of 2.01, -0.12, 5.38, 4.34, 1.96 and 0.84 percent for each 

economic cycle beginning with the 1969-1973 cycle, respectively, varied substantially from one 

 51 Peaks in economic cycles roughly follow the NBER cycle dating, except for short recoveries such as 

1980-1981, which are not counted as separate cycles.
Annual Trust Fund Real Interest Rate, Page 3

another. The large differences among these periods indicate substantially different conditions 

across these cycles.

Table 5.2: Average Annual Real Interest Rate (calculated using the adjusted-CPI-W)

Period

Average Annual Real Interest Rate 

(percent)

Historical:

 By Decade

 1979-1989 5.53

 1989-1999 4.58

 1999-2009 2.25

 2009-2019 0.51

 By Complete Economic Cycle (Peak-to-Peak)

 Individual Cycle

 1969-1973 2.01

 1973-1979 -0.12

 1979-1990 5.38

 1990-2001 4.34

 2001-2007 1.96

 2007-2019 0.84

 Last Six Cycles

 1969-2019 2.70

 Last Five Cycles

 1973-2019 2.76

 Last Four Cycles

 1979-2019 3.20

 Last Three Cycles

 1990-2019 2.39

 Last Two Cycles

 2001-2019 1.21

Alternative

Ultimate Assumptions I II III

2020 Trustees Report 2.8 2.3 1.8

2021 Trustees Report 2.8 2.3 1.8

After experiencing negative real yields in investments in U.S. Treasury securities from 1974 

through 1980, caused largely by higher-than-expected price inflation, investors demanded higher 

interest rates to protect their investments. Sustained high real interest rates in the years after 1981 

resulted from the following factors: constrained money supply growth, increased borrowing by 

businesses, reduced savings rates in the U.S. economy, deregulation of banks and other financial 

institutions, and lower than expected inflation in the beginning of that period.

As the rate of inflation declined from the highs of the early 1980s and remained under control, 

the real interest rate slowly followed suit, declining to 2.34 percent in 2000. In October 2001, the 

federal government, in response to its favorable budget situation, suspended the sale of 30-year 

Treasury securities (leaving the 10-year notes as the longest duration being issued). Since then, 
Annual Trust Fund Real Interest Rate, Page 4

the federal budget has fallen back into deficit and, beginning in February 2006, the Treasury 

re-introduced regular semi-annual auctions of the 30-year nominal Treasury bond. Neither the 

budget deficits nor the federal funds rate hikes by the Federal Reserve between 2004 and 2006 

resulted in a spike in real interest rates, due in part to foreigners’ increased willingness to 

accumulate Treasury securities. Instead, the real interest rate continued to trend downward, 

reaching 0.63 percent in 2008. Since 2008, the annual real interest rate has averaged only 0.86

percent, largely due to slow economic growth, unconventional monetary policies such as 

quantitative easing, a global savings glut, as well as a strong demand for safe assets in order to 

satisfy regulatory requirements in the financial sector. 

5.3 Future Expectations

Over the near term, short-term interest rates are expected to remain low as the Federal Reserve in 

August 2020 adopted a new flexible average inflation targeting policy seeking to support 

maximum employment by keeping interest rates low, with the understanding that this might 

result in periods of inflation in excess of 2.0 percent. With inflation having been well under the 

2.0 percent level in recent years, it appears that there is ample room for this stimulus without risk 

of excessive inflation for the time being.

Over the longer term, several factors are expected to result in a return to higher yields on 

Treasury securities. First, the return on capital has not fallen and risk aversion is expected to 

return to more normal levels after the economy recovers from the pandemic and gradually 

returns to a more sustainable growth path.

Second, federal deficits have been rising this year and debt is expected to continue rising in the 

future. Federal Reserve Board Chairman Jerome Powell has said that federal debt has been on an 

unsustainable path,52 as federal debt is growing faster than the economy. In The 2020 Long-Term 

Budget Outlook, CBO projects that the amount of publicly held debt will rise from 98.2 percent 

of GDP at the end of fiscal year 2020 to 108.9 percent in 2030. With the level of debt rising 

above the size of GDP, this will likely eventually lead to increases in the yields on Treasury 

securities, and such increases could potentially happen suddenly, as seen in the past. 

Third, the Federal Reserve’s flexible inflation targeting policy should not be presumed to last 

indefinitely, given their explicit indication that they will review all aspects of their monetary 

policy every five years.

53 This will likely lead to occasional changes in monetary policy. The 

worsening fiscal situation has been alleviated by recent low interest rates. It is unlikely that such 

an environment of increasing debt and low interest rates can persist. Even if wage inflation 

remains subdued, a prolonged period of unconventional (such as quantitative easing) monetary 

policy would likely lead to unintended consequences, such as a misallocation of credit and asset 

bubbles, potentially leading economists to question the effectiveness as well as the reversibility 

of unconventional monetary policy, which has become part and parcel of the toolkit of the 

current policy. 

 52 For example, see https://www.npr.org/2020/09/04/909590044/transcript-nprs-full-interview-with-fedchairman-jerome-powell. 53 See https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-andcommunications-statement-on-longer-run-goals-monetary-policy-strategy.htm.
Annual Trust Fund Real Interest Rate, Page 5

The low interest rates experienced in the last economic cycle from 2007 to 2019 (averaging 0.84 

percent) do not make a compelling case for further changing the ultimate assumption, which has 

been lowered from 2.7 percent to 2.5 percent for the 2019 Trustees Report and from 2.5 percent 

to 2.3 percent for the 2020 Trustees Report. It remains to be seen for how long the current 

monetary policy regime can co-exist with the increasing federal debt. Thus, the Trustees 

maintain the ultimate real interest rate assumption at 2.3 percent for alternative II. 

5.4 Projections from Other Sources

At the time assumptions were developed, the following projections from other sources were 

available.

IHS Markit included projections through 2050 in its August 2020 30-Year Focus Trend 

Forecast. They projected real yields on 10-year U.S. Treasury notes to fall to -1.4 percent for 

2021, then gradually rise to 0.9 percent for 2033 to 2037, and then gradually decline to 0.7 

percent for 2047 through 2050. Moody’s Analytics’ September 2020 forecast projected real 

yields on 10-year U.S. Treasury notes to be in the 1.7 to 1.8 percent range for the 20-year period 

2031 through 2050. 

The Office of Management and Budget (OMB) Fiscal Year 2021 Budget projected the real yield 

on the trust funds’ special-issue securities to reach 0.9 percent by 2030 and remain at that level 

thereafter (through 2098). The Congressional Budget Office (CBO) report The 2020 Long-Term

Budget Outlook (published in September 2020) included projections through 2050. CBO 

projected real yields on 10-year Treasury notes to rise from 0.3 percent in 2027 to 2.5 percent in 

2050. For the 10-year period from 2041 to 2050, CBO projected real yields on 10-year Treasury 

notes to average 2.2 percent. 

The Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods 

recommended lowering the alternative II real interest rate assumption to 2.3 percent, a level to be 

reached in 25 years. The prior technical panel, which met in 2015, recommended lowering the 

alternative II real interest rate assumption to 2.5 percent.
Annual Trust Fund Real Interest Rate, Page 6

Table 5.3: Real Interest Rates for OASDI Trust Fund New Issues and the Compound Average Real Yield over 

Selected Intervals

Average Annual Percentage Change over the Prior Period of the Following Length (in years):

To RYINDEX 1 5 10 15 20 25 30 35 40 45 50

1961 22.14

1962 22.81 3.03

1963 23.43 2.74

1964 24.09 2.81

1965 24.75 2.74

1966 25.14 1.56 2.58

1967 25.66 2.08 2.39

1968 26.04 1.49 2.14

1969 26.37 1.27 1.83

1970 26.90 2.00 1.68

1971 27.76 3.18 2.00 2.29

1972 28.55 2.85 2.16 2.27

1973 28.56 0.04 1.86 2.00

1974 27.75 -2.84 1.02 1.42

1975 27.68 -0.25 0.57 1.12

1976 28.21 1.92 0.32 1.16 1.63

1977 28.51 1.08 -0.02 1.06 1.50

1978 28.67 0.54 0.08 0.97 1.35

1979 28.35 -1.10 0.43 0.73 1.09

1980 27.90 -1.61 0.16 0.36 0.80

1981 28.39 1.76 0.13 0.23 0.81 1.25

1982 30.50 7.44 1.36 0.66 1.16 1.46

1983 33.14 8.66 2.94 1.50 1.62 1.75

1984 35.46 6.99 4.57 2.48 1.99 1.95

1985 38.69 9.12 6.76 3.41 2.45 2.26

1986 42.35 9.45 8.33 4.15 2.86 2.64 2.63

1987 44.30 4.61 7.75 4.50 2.97 2.77 2.69

1988 46.49 4.93 7.00 4.95 3.30 2.94 2.78

1989 48.57 4.48 6.49 5.53 3.80 3.10 2.84

1990 50.47 3.91 5.46 6.11 4.09 3.20 2.89

1991 53.04 5.09 4.60 6.45 4.30 3.29 3.03 2.96

1992 56.01 5.60 4.80 6.27 4.60 3.43 3.17 3.04

1993 58.67 4.75 4.77 5.88 4.89 3.67 3.30 3.11

1994 61.07 4.08 4.69 5.59 5.25 4.02 3.42 3.15

1995 63.88 4.60 4.82 5.14 5.68 4.27 3.52 3.21

1996 66.62 4.30 4.67 4.63 5.85 4.39 3.56 3.30 3.20

1997 69.60 4.47 4.44 4.62 5.65 4.56 3.63 3.38 3.24

1998 73.44 5.51 4.59 4.68 5.45 4.82 3.85 3.52 3.32

1999 76.02 3.52 4.48 4.58 5.22 5.05 4.11 3.59 3.34

2000 77.80 2.34 4.02 4.42 4.77 5.26 4.22 3.60 3.33

2001 80.54 3.52 3.87 4.27 4.38 5.35 4.29 3.61 3.38 3.28

2002 83.65 3.87 3.75 4.09 4.33 5.17 4.40 3.65 3.43 3.30

2003 85.87 2.66 3.18 3.88 4.18 4.88 4.49 3.74 3.47 3.30

2004 87.09 1.42 2.76 3.61 3.97 4.60 4.59 3.89 3.47 3.27

2005 87.76 0.77 2.44 3.23 3.76 4.18 4.69 3.92 3.44 3.22

2006 88.74 1.11 1.96 2.91 3.49 3.77 4.66 3.89 3.38 3.20 3.13

2007 90.48 1.96 1.58 2.66 3.25 3.63 4.45 3.92 3.35 3.20 3.11

2008 91.02 0.60 1.17 2.17 2.97 3.42 4.12 3.93 3.37 3.18 3.06

2009 94.99 4.36 1.75 2.25 2.99 3.41 4.02 4.11 3.58 3.26 3.10

2010 95.79 0.84 1.77 2.10 2.74 3.26 3.69 4.20 3.61 3.23 3.05

2011 95.08 -0.75 1.39 1.67 2.40 2.96 3.29 4.11 3.53 3.13 3.00 2.96

2012 95.34 0.28 1.05 1.32 2.12 2.70 3.11 3.87 3.51 3.06 2.96 2.90

2013 95.42 0.08 0.95 1.06 1.76 2.46 2.92 3.59 3.50 3.06 2.93 2.85

2014 95.71 0.30 0.15 0.95 1.55 2.27 2.75 3.36 3.54 3.14 2.91 2.80

2015 98.30 2.71 0.52 1.14 1.57 2.18 2.70 3.16 3.66 3.22 2.92 2.80

2016 99.32 1.04 0.88 1.13 1.41 2.02 2.54 2.88 3.64 3.20 2.87 2.79

2017 99.03 -0.30 0.76 0.91 1.13 1.78 2.31 2.72 3.42 3.16 2.80 2.74

2018 98.81 -0.22 0.70 0.82 0.94 1.50 2.11 2.55 3.17 3.14 2.80 2.70

2019 100.00 1.20 0.88 0.51 0.93 1.38 1.99 2.44 3.01 3.20 2.89 2.70

Note: The index for each year is the accumulated value in that year of an investment made in the prior year in the amount of the prior year's index, with 

interest paid at the average rate for special public debt obligations issuable to the OASI and DI Trust Funds during the prior year.
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 1

6. RATIO OF OASDI TAXABLE PAYROLL TO COVERED EARNINGS

THE 2021 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

6 RATIO OF OASDI TAXABLE PAYROLL TO COVERED EARNINGS...................... 2

6.1 SUMMARY ............................................................................................................................................................. 2

6.2 PAST EXPERIENCE................................................................................................................................................. 2

6.3 FUTURE EXPECTATIONS ....................................................................................................................................... 4

6.4 PROJECTIONS FROM OTHER SOURCES ................................................................................................................. 4

TABLE OF TABLES PAGE

TABLE 6.1: ASSUMED TAXABLE EARNINGS RATIOS REACHED IN TENTH YEAR OF PROJECTION PERIOD ....................... 2

TABLE 6.2: OASDI TAXABLE RATIO, 1983 TO 2019 .......................................................................................................... 5

TABLE OF FIGURES PAGE

FIGURE 6.1: PERCENTAGE OF OASDI COVERED EARNINGS BELOW THE TAXABLE MAXIMUM: 1983 TO 2019 .............. 3
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 2

6 Ratio of OASDI Taxable Payroll to Covered Earnings

6.1 Summary

For the 2021 Trustees Report, the assumed ratios of OASDI effective taxable payroll to covered 

earnings (taxable ratio) for 2030 (the tenth year of the projection period), are 84.0 percent, 82.5 

percent, and 81.0 percent for alternatives I, II and III, respectively (Table 6.1). These assumed 

ratios for the tenth year of the projection period are the same as those used for the 2020 Trustees 

Report. The overall taxable earnings ratio varies slightly after 2030 due to changes in the taxable 

ratio for self-employment earnings. 

Table 6.1: Assumed Taxable Earnings Ratios Reached in Tenth Year of Projection Period

2021 Trustees Report 

Alternative

2020 Trustees Report 

Alternative

2021 Trustees Report Less 

2020 Trustees Report

I II III I II III I II III

Taxable Ratio (percent) 84.0 82.5 81.0 84.0 82.5 81.0 0.0 0.0 0.0

OASDI effective taxable payroll (or taxable payroll) is the effective amount of covered earnings 

subject to the full Social Security payroll tax rate (12.4 percent since 1990). Taxable wages for 

an employee are the total covered wages from all wage employment up to the taxable maximum 

(also known as the contribution and benefit base). Taxable wages for an employer are the sum of 

all covered wages paid to each employee up to the taxable maximum. Employees with multiple 

jobs whose total wages exceed the taxable maximum are eligible for a refund of excess employee 

taxes withheld; employers are not eligible for a refund on this basis. For self-employed workers 

with no taxable wages, taxable earnings are the amount of covered self-employment net earnings 

up to the taxable maximum. For self-employed workers with taxable wages, covered selfemployment net earnings are taxable to the extent that they do not exceed the taxable maximum

when added to taxable wages for the year. The taxable ratio is essentially the proportion of 

covered earnings that is at or below the taxable maximum.

6.2 Past Experience

Table 6.2 shows historical values for the taxable ratio from 1983 through 2019. The taxable ratio 

fell from over 89 percent in 1983 to 84.3 percent in 2001, resulting in an average annual rate of 

change in the taxable ratio of about -0.34 percent (see Figure 6.1). The decline was related to 

several factors that increased the concentration of earnings among the very high earners 

compared to all other earners. Some of the drop in the taxable ratio in the late 1980s was due to 

the Tax Reform Act of 1986, which lowered the top marginal income tax rate from 50 percent in 

1986 to 28 percent in 1988. The drop in the income tax rate influenced some high earners to shift 

some non-covered income to covered earnings, thereby lowering the taxable ratio. In the 1990s, 
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 3

the growth in the use of stock options54 in the pay packages of the very high earners, combined 

with a rapid increase in stock prices, contributed to the drop in the taxable ratio. An 

unprecedented expansion of the financial sector in the 1980s and 1990s also contributed to the 

concentration of very high earnings. 

Between 2001 and 2019, the taxable ratio has varied with the business cycle, rising during 

economic downturns and falling during economic recoveries, and it changed at a much slower 

annual rate of -0.09 percent. It has remained largely at or above the low level of 82.6 percent 

experienced for 2000, roughly stabilizing since 2012.

Figure 6.1: Percentage of OASDI Covered Earnings below the Taxable Maximum: 1983 to 2019

 54 Nonqualified stock options are subject to the OASDI tax. For more information on the tax treatment of 

stock options, see publication by Grant Thornton’s G. Edgar Adkins, Jr., entitled “Taxation of Stock Options and 

Restricted Stock: the Basics and Beyond” (https://www.grantthornton.com/~/media/content-pagefiles/tax/pdfs/white-papers-survey-reports-articles/2013/Taxation-of-stock-options-Adkins.ashx).

80

81

82

83

84

85

86

87

88

89

90

1983 1988 1993 1998 2003 2008 2013 2018

Percent

Average Annual Rate of Change

in OASDI Taxable Ratio:

1983-2001 -0.34%

2001-2019 -0.09%
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 4

6.3 Future Expectations

In spite of nine years of economic expansion since 2009 and record stock prices as measured by 

the S&P 500 index, which have been positively correlated with the share of income reported by

the very high earners, the taxable ratio for 2019 (82.9 percent) has not fallen below the lows 

reached in previous economic cycle peaks. In fact, the average annual rate of decline in the 

taxable ratio from 2001 to 2019 was lower by almost three-quarters than the rate for the period 

1983 to 2001, and the ratio has been stable since 2012. OCACT expects the taxable ratio will 

remain essentially stable, declining slightly to 82.5 percent by the end of 2030 for the alternative 

II assumption. Thereafter, the wage taxable ratio is assumed to remain constant. For the selfemployed, the taxable ratio is expected to drift slightly lower, because the taxable maximum is 

driven by the growth in the average wage, which is projected to grow more slowly than average 

self-employment earnings. As the share of self-employment earnings above the taxable 

maximum grows over time, the overall taxable earnings ratio will drift downward.

6.4 Projections from Other Sources

At the time assumptions were developed, the following projections from other sources were 

available.

In The 2020 Long-Term Budget Outlook published in September 2020, the Congressional Budget 

Office (CBO) projected the taxable ratio to fall to 82.3 percent by 2030 and to fall to 81.1

percent by 2050.

The Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods 

recommended lowering the alternative II long-range taxable ratio from 82.5 percent to about 

80.8 percent, to be reached by the 25th year of the projection period. The 2015 Technical Panel 

recommended long-range taxable ratios of 84.0 percent, 82.2 percent and 79.0 percent for 

alternatives I, II, and III, respectively.
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 5

Table 6.2: OASDI Taxable Ratio, 1983 to 2019

Year OASDI Taxable Ratio (percentage)

1983 89.6

1984 88.6

1985 88.2

1986 88.0

1987 87.0

1988 85.5

1989 86.4

1990 86.8

1991 87.2

1992 86.3

1993 86.8

1994 86.8

1995 85.6

1996 85.2

1997 84.6

1998 83.9

1999 83.6

2000 82.6

2001 84.3

2002 85.7

2003 85.6

2004 84.2

2005 83.5

2006 83.1

2007 82.4

2008 83.4

2009 85.2

2010 84.0

2011 83.3

2012 82.5

2013 83.3

2014 82.8

2015 82.6

2016 82.8

2017 83.2

2018 83.0

2019 82.9