THE LONG-RANGE ECONOMIC ASSUMPTIONS

FOR THE 2019 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY

SOCIAL SECURITY ADMINISTRATION

April 22, 2019
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 ultimate economic assumptions used in the 2019 Annual 

Report of the Board of Trustees.

The following changes have been made to the ultimate economic assumptions for the 2019 report: 

(1) a 0.05 percentage point reduction in the average annual percentage change in total economy 

productivity from 1.68 percent used in the 2018 report to 1.63 percent; (2) a 0.05 percentage point 

increase in the assumed price differential (GDP deflator less CPI-W) from -0.40 percentage point

used in the 2018 report to -0.35 percentage point; (3) an increase in the average real wage 

differential from 1.20 percent used in the 2018 report to 1.21 percent; and (4) a reduction in the 

real interest rate from 2.7 percent used in the 2018 report to 2.5 percent. There are no changes in 

the other ultimate economic assumptions.

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. Table A.1, 

below, lists the assumed ultimate (i.e., long-range future) values for these key economic variables 

in the 2019 Trustees Report alternatives I, II, and III. 
Overview, Page 2

Table A.1: Long-Range Values for Key Economic Assumptions and Summary Measures for the Long-Range 

(75-year) Projection Period

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 Trustees Report

Ultimate Assumptions I II III I II III I II III

Average Percentage Change In:

Productivity 

(Total-Economy) 1.93 1.63 1.33 1.98 1.68 1.38 -0.05 -0.05 -0.05

Prices (CPI-W) 3.20 2.60 2.00 3.20 2.60 2.00 0.00 0.00 0.00

Prices (GDP Deflator) 2.95 2.25 1.55 2.90 2.20 1.50 0.05 0.05 0.05

 Price Differential

 (GDP Deflator less CPI-W) -0.25 -0.35 -0.45 -0.30 -0.40 -0.50 0.05 0.05 0.05

Real Wage Differential 

(Percent) 1.83 1.21 0.59 1.82 1.20 0.58 0.01 0.01 0.01

Unemployment Rate (Percent) 4.50 5.50 6.50 4.50 5.50 6.50 0.00 0.00 0.00

Annual Trust Fund Real 

Interest Rate (Percent) 3.00 2.50 2.00 3.20 2.70 2.20 -0.20 -0.20 -0.20

OASDI Taxable Ratio 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 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 for the household sector, 0.0 percent for the nonprofit sector, and 0.0 for the 

government sector. The weighted average of the assumed sector productivity growth rates is equal 

to the Trustees’ assumed ultimate long-range average annual rate of growth in total-economy 

productivity of 1.63 percent, which is 0.05 percentage point less than the 1.68 percent rate used in 

the 2018 report.

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 adjusted CPI-W was 4.22 percent over 

the last 5 complete economic cycles, from 1969 to 2007, and2.51 percent over the last two 
Overview, Page 3

complete economic cycles from 1990 to 2007.1 OCACT expects that monetary policy will

continue to target relatively low inflation, but will not be able to prevent occasional bursts of 

inflation caused by demand and supply shocks. Accordingly, the ultimate long-range average 

annual percentage change in the CPI-W is assumed to be 2.6 percent, which is the same ultimate 

value used in the 2018 report.

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

aggregate GDP and wages and, therefore, OASDI tax revenues. The CPI-W and the GDP deflator 

are assumed to grow at different rates in the future due to two inherent differences. One difference

is the way that groups of goods and services are weighted in computing the overall price increases. 

Unlike the CPI-W, the GDP deflator formula accounts for shifts in the distribution of purchases

across broad groups of goods and services, and thus reflects changes in the behavior of consumers 

in response to changes in relative price of items that are not close substitutes. Because of this 

difference, the GDP deflator measures lower price inflation compared to the CPI-W. The Bureau 

of Labor Statistics (BLS) provides data showing that the behavioral response of consumers to 

relative price changes would have lowered the average annual rate of change in the CPI-U (and 

therefore CPI-W) between 1990 and 2016 by about 0.3 percentage point. OCACT expects the 

future average annual rate of change in the GDP deflator to be 0.3 percentage point below the 

average annual rate of change in the CPI-W due to this difference in computational methods.

The second important difference between the CPI-W and the GDP deflator is coverage. The 

CPI-W measures the annual growth rate in consumer prices for urban wage earners and clerical 

workers, while the GDP deflator reflects the annual growth rate in prices covered by all 

consumption, investment, and government expenditures. OCACT expects that the net effect of this 

difference in coverage is that the average annual growth rate in the GDP deflator will be about 

0.05 percentage point lower than the average annual growth rate in the CPI-W. 

Thus, the ultimate assumed long-range average annual growth rate in the GDP deflator is 2.25

percent, or 0.35 percentage point below the 2.6 percent assumed ultimate long-range average 

annual growth rate in the CPI-W. The price differential of -0.35 percentage point is the sum of -0.3 

percentage point for computational difference and -0.05 percentage point for coverage difference. 

The assumed -0.35 percentage point price differential represents a change from the -0.40 used in 

the 2018 report. The change is a result of an updated analysis of the coverage component of the 

price differential, in particular, the data on the implicit price deflators for investment and 

government goods. This analysis indicates that a -0.05 percentage point difference is more 

consistent with the long-term corresponding price trends than the -0.10 percentage point difference 

used in the 2018 report.

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

last 65 years of the 75-year projection horizon (i.e., from 2028 to 2093), averaging 1.21 percent, 

which is 0.01 percentage point higher than in the 2018 report. The Centers for Medicare and 

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

Medicaid Services (CMS) projects slightly lower average growth in the share of employee 

compensation that is provided as employer-sponsored group health insurance (ESI) than in last 

year’s report.

The Trustees assume the ultimate average annual rate of change in the average OASDI covered 

wage to 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 1.18 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, -0.06 percent

for the average earnings ratio, 0.0 percent for the compensation ratio, and -0.05 percent for the

average hours worked per week. 

Unemployment Rate – The aggregate civilian unemployment rate, adjusted for the 2011 age-sex 

distribution of the labor force, averaged about 5.2 percent over the last five complete economic 

cycles from 1969 to 2007, and about 5.6 percent over the last 50 years (from 1968 to 2017). The 

ultimate long-range civilian age-sex adjusted unemployment rate is assumed to be 5.5 percent, 

which is the same ultimate age-sex adjusted unemployment rate used in the 2018 report.

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. Future

real interest rates on long-term Treasury securities will depend in part on the market view of the 

stability and solidity of the domestic financial markets and the domestic economy. Real ex-post 

(actual) interest rates on long-term Treasury securities averaged 3.30 percent over the last five 

economic cycles (from 1969 to 2007). Real interest rates have been substantially lower recently 

due to the weak economy in most of the developed world.

The assumed ultimate long-range real interest rate for new issues is 2.5 percent, which is 0.2 

percentage point less than in 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, and has continued to decline between 2001 

and 2015, but much more slowly. The ratio is assumed to stabilize at about 82.5 percent in 2028 

and thereafter, which is the same ultimate ratio assumed for the 2018 report. 
Productivity, Page 1

1. PRODUCTIVITY

THE 2019 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).............................................................................................................................. 8

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

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

1.4 PROJECTIONS FROM OTHER SOURCES...........................................................................................................12

1.5 APPENDIX.....................................................................................................................................................17

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 2019 TRUSTEES REPORT....................................................................................................4

TABLE 1.4: TOTAL-ECONOMY PRODUCTIVITY: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 2009 ....13

TABLE 1.5: NONFARM BUSINESS PRODUCTIVITY: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 2009 15
Productivity, Page 2

1 Productivity

1.1 Summary

For the 2019 Trustees Report, the assumed ultimate annual rates of increase in total-economy 

productivity2 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 0.05 percentage points lower than

those used in the 2018 Trustees Report. The assumed rates of increase for total-economy 

productivity for the 2019 Trustees Report 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

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 Trustees Report

I II III I II III I II III

Total-Economy Productivity 1.93 1.63 1.33 1.98 1.68 1.38 -0.05 -0.05 -0.05

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 three subsections. The first reviews any 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 several 

periods. A final subsection provides alternative long-run assumptions from private forecasters.

1.2 Recent BEA and BLS Data Revisions

BEA made a comprehensive update of the NIPA data on July 27, 2018.

3 This update affected 

data back to 1929, and changed the base year for price indices from 2009 to 2012. Compared to 

the values published in October 2017, the nominal GDP estimate was revised up by 0.4 percent 

for 2016, between 0.5 and 0.6 percent for 2013-2015, and about 0.2 percent for 2009-12. For 

years 2008 and earlier, nominal GDP was revised down, with the largest reduction being 0.5 

percent for 2004. Real GDP levels are not directly comparable to last year’s estimates because of 

the change in the base year, but real GDP growth rates generally changed little, with the most 

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

hours worked by all workers (where hours worked are defined and measured by BLS).

3 https://www.bea.gov/information-updates-national-income-and-product-accounts
Productivity, Page 3

significant change being an approximately 0.2 percent per year higher average growth rate from

2004 to 2009.

BLS also revised its estimates of total hours worked for years 1948-2016. Compared to last 

year’s estimates, hours worked are lower by about 0.1 percent for recent years (2008-2016), little 

changed for years between 1992 and 2007, and higher by between 0.1 and 0.4 percent in most 

earlier years. The 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 higher level of

productivity for the period.

4

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

Economic Cycles5

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

1952-2017 (65 years) 1.88 2.05 4.42 4.41 0.53 0.32

1967-2017 (50 years) 1.60 1.86 3.86 4.04 0.39 0.19

 1967-1992 (25 years) 1.64 1.82 5.14 4.03 0.57 0.37

 1992-2017 (25 years) 1.56 1.90 2.59 4.06 0.20 0.02

2007 (peak) - 2017 1.03 1.26 1.59 3.44 0.40 0.21

Economic Cycles

 Last One - 2001-2007 (6 years) 2.19 2.66 3.52 0.21 0.41 0.29

 Last Two - 1990-2007 (17 years) 1.97 2.40 3.82 4.12 -0.02 -0.07

 Last Three - 1979-2007 (28 years) 1.75 2.05 4.68 3.77 0.11 0.23

 Last Four - 1973-2007 (34 years) 1.63 1.90 4.54 3.65 0.16 0.11

 Last Five - 1969-2007 (38 years) 1.73 2.01 4.52 4.00 0.28 0.14

 4 The changes in hours worked are concentrated in two sectors and mainly consist of a small increase in 

nonfarm business hours and a significant decrease in nonprofit hours.

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

1980-81, 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 

2019 Trustees Report

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.

6 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 the ultimate assumptions, the Trustees assume that 

the relative size of employment by sector will stabilize.

The annual growth rate in productivity can vary 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. Productivity growth rates also 

exhibit runs 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, 1.29 percent over the 22-year period from 1973 to 1995, 2.49 percent over the 10-year 

period from 1995 to 2005, and 1.03 percent over the 12-year period from 2005 to 2017. Hence, it 

seems reasonable to analyze productivity growth rates over several economic cycles and long 

timespans, such as the latest 50-year period from 1967 to 2017, a 65-year period from 1952 to 

2017 or even longer periods.7

However, setting the ultimate long-range assumption for the annual rate of increase in 

productivity to its average value over some long-range historical period has its limitations. First, 

the NIPA data are less reliable in earlier periods.8 BEA began measuring income in the 

 6 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 we use unadjusted data 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.

7 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.

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

mid-1930s, and output in the early to mid-1940s.9 It then “backcasted” both measures to 1929. 

Based on conversations with 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 sixty-five 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 limitation is that a significant portion of the total historical average annual 

rate of increase in total-economy productivity occurred because of shifts in workers from 

relatively low- to high-productivity jobs. For example, over the 50-year period from 1967 to 

2017, the ratio of agricultural to total-economy hours worked declined from about 0.047 to

0.017, and the ratio of agricultural to total nominal GDP declined from about 0.023 to 0.007. 

Furthermore, although farm productivity grew faster than total economy productivity over the 

last 50 years, the average level of productivity for agricultural workers in 2017 was about 63

percent of the average level of productivity for all workers. 

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

long-range 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.10 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 

long-range value for the annual rate of increase in total-economy productivity to a weighted 

average of the expected ultimate long-range 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 2.66 percent over the last complete

economic cycle (i.e., a 6-year period from 2001 to 2007), and 2.40 percent over the last two 

economic cycles (17-year period from 1990 to 2007). These relatively high growth rates reflect 

the heavy influence of the 1995-2005 “new economy” period characterized by rapid 

improvements in computers and their assimilation into the economy.

 

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

2000, p. 7.

10 For example, the 0.030 decline (i.e., from 0.047 to 0.017) 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 2017 is only 

0.017 and it cannot become negative.
Productivity, Page 6

Looking at longer periods, the average annual growth rate in NFB productivity was 2.05 percent 

over the last three economic cycles (28-year period from 1979 to 2007), 1.90 percent over the 

last four economic cycles (34-year period from 1973 to 2007), and 2.01 percent over the last five 

economic cycles (38-year period from 1969 to 2007). 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 2.01 percent average annual growth rate for NFB productivity over the last five economic 

cycles (1969 to 2007) is a reasonable starting point for estimating the ultimate growth rate. 

Although productivity growth since the last cycle has been slower (the growth rate in NFB 

productivity has averaged only 1.26 percent over the 10-year period from 2007 to 2017), 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 2.05 percent and 

would be somewhat higher if pre-1978 inflation adjustments were consistent with today’s 

methodology.) Therefore, the Trustees assume an ultimate rate of increase in NFB productivity 

of 2.00 percent. This rate of increase is 0.06 percentage points lower than in the 2018 Trustees 

Report, consistent with taking into account the relatively slow-growth experience of the most 

recent period.

1.3.1.2 Farm 

The average annual growth rate in farm productivity was about 3.86 percent from 1967 to 2017. 

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 0.61 in 1967 to 0.32 in 2017. 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 0.57 percent over the 25-year period 

from 1967 to 1992, 0.20 percent over the 25-year period from 1992 to 2017, and 0.39 percent 

over the combined 50-year period from 1967 to 2017. 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 84 percent of NI nominal GDP. NI 

compensation is summed from five subsectors including education, health, social, religious, and 
Productivity, Page 7

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 sector 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 sectors with 

relatively low (high) average compensation to sectors with relatively high (low) compensation.

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

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

that the growth in employment in health services over the 25-year period from 1967 to 1992 was

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

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

social assistance.11 These three sectors are mostly composed of NI workers.12 The data show that 

the level of average annual compensation for full-time equivalent employment in 2017 was 

$73,900, $58,100, and $33,900 in health care, educational services, and social assistance, 

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

sector to the total for all three sectors rose from about 0.46 in 1967 to 0.61 in 1986, declined to 

0.57 in 2000, and remained relatively stable thereafter.13

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 0.57 percent over the 

25-year period from 1967 to 1992. 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 0.20 percent over the 25-year period from 1992 to 2017. In the 

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

continue, and that the ultimate long-range growth rates in employment in the NI subsectors will 

be roughly equal.14 Thus, the assumed ultimate long-range growth rate in NI productivity is zero.

 

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

12 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.

13 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 at 0.71 under the new categorization from 2000 

to 2011. However, it has since declined to 0.69 for 2013 through 2017.

14Given 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.
Productivity, Page 8

1.3.1.4 General Government (GOV) 

The average annual rate of increase in GOV productivity was 0.37 percent over the 25-year 

period from 1967 to 1992 and 0.02 percent over the 25-year period from 1992 to 2017. These 

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

GOV sector.

GOV labor compensation accounts for about 80 percent of GOV nominal GDP.15 GOV 

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

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

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

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

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 sectors with relatively low (high) average compensation to sectors 

with relatively high (low) compensation.16

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

due to shifts in employment between 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 long-range growth rates in employment in the 

GOV subsectors will be about equal and that the assumed ultimate long-range growth rate in 

GOV productivity will be zero.17

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 

2017, the nominal compensation of private household workers made up only about 1.4 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 equal to the growth rate in hours worked. Hence, the growth rate in 

productivity is, by definition, zero.

 15 BEA, NIPA, Table 3.10.5

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

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

17 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

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. 

Though 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, how should it 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 

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.18 Real IOH could be projected as a fixed ratio to total real GDP less 

IOH. 19 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 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 1967 to 2017 was about 

4.04 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.20

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

19 Over the 30-year period from 1987 through 2016, the ratio of real IOH to real GDP less IOH has been 

fairly constant and averaged 0.078.

20 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
Productivity, Page 10

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.21

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

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 long-range growth rate in employment in 

all sectors of the economy will be about equal, and that the ultimate long-range growth rates in 

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

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

the weighted average of the ultimate long-range 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 0.023 in 1967 to 0.007 in 2017, and it averaged 

about 0.008 over the last complete business cycle from 2001 to 2007. The nominal output weight 

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

from 1968 through 1992, 0.749 over the 25-year period from 1993 through 2017, and 0.751 over 

the last complete business cycle. For the future, the ultimate long-range 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 1977–79 to the 

historically high value of 0.076 in 2009. As mentioned, the increase in the weight occurred 

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 long-range 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.

 

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

21 In this second approach, sector weights would be defined as the ratio of sector to total nominal GDP.
Productivity, Page 11

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 2019

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 0.05 percentage points lower than those used in the 2018 Trustees Report.

1.4 Future Expectations

Growth in total economy labor productivity has been unusually slow since the last economic 

cycle peak. From 2007 to 2017, total economy productivity grew 1.03 percent per year on 

average, while nonfarm business productivity grew 1.26 percent per year on average. This is 

significantly slower than the historical average growth rate over the 65-year period (1952-2017) 

of 1.88 percent for total economy productivity and 2.05 percent for the nonfarm business 

productivity. 

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

profession. Similarly, there is also 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

 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

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 

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 forecast. OCACT believes that it is reasonable to assume that the inevitable slowing 

of the rate of change in educational attainment will slow the rate of productivity growth, even 

assuming that technological advances will continue at a similar pace as in the past. This supports 

the assumed lower value for the ultimate assumption for future total economy productivity 

growth. 

1.5 Projections from Other Sources

IHS Markit (formerly Global Insight, Inc.) provides projections through 2048 in its latest 

long-run trend forecast (see The 30-Year Focus, Third Quarter, August 2018). For the 20-year 

period from 2028 to 2048, IHS Markit projects that the average annual rate of increase in 

productivity will be about 1.50 percent for the nonfarm business sector. Moody’s Analytics’ 

September 2018 forecast extends to 2048. For the 20-year period from 2028 to 2048, Moody’s 

Analytics projects the average annual growth rate in productivity will be about 1.58 percent for 

the nonfarm business sector. 

The Office of Management and Budget (OMB) Mid-Session Review of the Fiscal Year 2019

Budget includes projections through 2028. The OMB annual growth rate for the total-economy 

productivity was 2.19 percent for 2028. The Congressional Budget Office (CBO) June 2018

report, The 2018 Long-Term Budget Outlook, includes projections through 2048. CBO’s average 

annual growth rate for total-economy productivity was 1.54 percent over the entire 30-year 

period and 1.56 percent over the last 10 years, 2039 through 2048. The Social Security Advisory 

Board’s 2015 Technical Panel on Assumptions and Methods recommended no changes to the 

assumed ultimate annual rate of increase in total-economy productivity of 1.68 percent in the 

2015 Trustees Report, alternative II.

 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

Table 1.4: Total-Economy Productivity: Compound Annual Rates of Growth (%) Base Year = 2009

From

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

1961 40.40

1962 41.82 3.52

1963 43.31 3.53 3.54

1964 44.65 3.39 3.32 3.10

1965 45.98 3.28 3.20 3.04 2.97

1966 47.35 3.22 3.15 3.02 2.98 2.98

1967 48.11 2.95 2.84 2.66 2.52 2.29 1.61

1968 49.58 2.97 2.88 2.74 2.65 2.55 2.33 3.06

1969 49.92 2.68 2.56 2.40 2.26 2.08 1.78 1.87 0.68

1970 50.91 2.60 2.49 2.34 2.21 2.06 1.83 1.91 1.33 1.99

1971 52.83 2.72 2.63 2.52 2.43 2.34 2.22 2.37 2.14 2.87 3.77

1972 54.12 2.69 2.61 2.51 2.43 2.36 2.25 2.38 2.22 2.73 3.11 2.45

1973 55.42 2.67 2.59 2.50 2.43 2.36 2.27 2.39 2.25 2.65 2.87 2.42 2.39

1974 54.92 2.39 2.30 2.18 2.09 1.99 1.87 1.91 1.72 1.93 1.91 1.30 0.73 -0.90

1975 56.42 2.41 2.33 2.23 2.15 2.07 1.97 2.01 1.86 2.06 2.08 1.66 1.40 0.90 2.74

1976 57.77 2.41 2.33 2.24 2.17 2.10 2.01 2.05 1.93 2.11 2.13 1.80 1.64 1.39 2.56 2.39

1977 58.39 2.33 2.25 2.16 2.09 2.01 1.93 1.96 1.83 1.98 1.98 1.68 1.53 1.32 2.07 1.73 1.09

1978 58.93 2.24 2.17 2.07 2.00 1.93 1.84 1.86 1.74 1.86 1.84 1.57 1.43 1.24 1.78 1.46 1.00 0.91

1979 59.07 2.13 2.05 1.96 1.88 1.81 1.72 1.73 1.61 1.70 1.67 1.41 1.26 1.07 1.47 1.15 0.75 0.58 0.24

1980 59.14 2.03 1.94 1.85 1.77 1.69 1.60 1.60 1.48 1.55 1.51 1.26 1.11 0.93 1.24 0.95 0.59 0.42 0.18 0.12

1981 60.37 2.03 1.95 1.86 1.79 1.72 1.63 1.64 1.53 1.60 1.56 1.34 1.22 1.08 1.36 1.13 0.89 0.83 0.81 1.09

1982 60.33 1.93 1.85 1.76 1.69 1.61 1.53 1.52 1.41 1.47 1.42 1.21 1.09 0.95 1.18 0.96 0.73 0.65 0.59 0.71

1983 62.01 1.97 1.89 1.81 1.74 1.68 1.60 1.60 1.50 1.56 1.53 1.34 1.24 1.13 1.36 1.19 1.02 1.01 1.02 1.22

1984 63.34 1.97 1.90 1.83 1.76 1.70 1.63 1.63 1.54 1.60 1.57 1.41 1.32 1.22 1.44 1.29 1.16 1.17 1.21 1.41

1985 64.45 1.97 1.90 1.82 1.76 1.70 1.64 1.64 1.56 1.61 1.58 1.43 1.35 1.27 1.47 1.34 1.22 1.24 1.29 1.46

1986 65.95 1.98 1.92 1.85 1.79 1.73 1.67 1.67 1.60 1.65 1.63 1.49 1.42 1.35 1.54 1.43 1.33 1.36 1.42 1.59

1987 66.26 1.92 1.86 1.79 1.73 1.68 1.61 1.61 1.54 1.59 1.56 1.43 1.36 1.28 1.46 1.35 1.26 1.27 1.31 1.45

1988 67.20 1.90 1.84 1.77 1.72 1.66 1.60 1.60 1.53 1.58 1.55 1.43 1.36 1.29 1.45 1.35 1.27 1.28 1.32 1.44

1989 67.85 1.87 1.81 1.74 1.69 1.64 1.58 1.58 1.51 1.55 1.52 1.40 1.34 1.27 1.42 1.33 1.25 1.26 1.29 1.40

1990 68.88 1.86 1.80 1.73 1.68 1.63 1.57 1.57 1.51 1.55 1.52 1.41 1.35 1.29 1.43 1.34 1.26 1.28 1.31 1.41

1991 69.70 1.83 1.78 1.71 1.66 1.61 1.56 1.56 1.49 1.53 1.51 1.40 1.34 1.28 1.41 1.33 1.26 1.27 1.30 1.39

1992 72.20 1.89 1.84 1.78 1.73 1.69 1.64 1.64 1.58 1.62 1.60 1.50 1.45 1.40 1.53 1.46 1.40 1.43 1.46 1.56

1993 72.54 1.85 1.79 1.73 1.69 1.64 1.59 1.59 1.53 1.57 1.55 1.45 1.40 1.36 1.48 1.41 1.35 1.36 1.39 1.48

1994 73.05 1.81 1.76 1.70 1.65 1.61 1.56 1.56 1.50 1.53 1.52 1.42 1.37 1.32 1.44 1.37 1.31 1.33 1.35 1.43

1995 73.51 1.78 1.72 1.67 1.62 1.58 1.53 1.53 1.47 1.50 1.48 1.39 1.34 1.29 1.40 1.33 1.28 1.29 1.31 1.38

1996 74.94 1.78 1.73 1.68 1.63 1.59 1.54 1.54 1.49 1.52 1.50 1.41 1.37 1.32 1.42 1.36 1.31 1.32 1.34 1.41

1997 76.32 1.78 1.73 1.68 1.64 1.60 1.55 1.55 1.50 1.53 1.51 1.43 1.38 1.34 1.44 1.38 1.34 1.35 1.37 1.43

1998 78.09 1.80 1.75 1.70 1.66 1.62 1.58 1.57 1.53 1.55 1.54 1.46 1.42 1.38 1.48 1.42 1.38 1.39 1.42 1.48

1999 80.41 1.83 1.78 1.73 1.70 1.66 1.62 1.62 1.57 1.60 1.59 1.51 1.48 1.44 1.54 1.49 1.45 1.46 1.49 1.55

2000 82.46 1.85 1.80 1.76 1.72 1.68 1.65 1.65 1.60 1.63 1.62 1.55 1.52 1.48 1.58 1.53 1.49 1.51 1.54 1.60

2001 84.27 1.85 1.81 1.77 1.73 1.70 1.66 1.66 1.62 1.65 1.64 1.57 1.54 1.51 1.60 1.56 1.52 1.54 1.57 1.63

2002 86.86 1.88 1.84 1.80 1.77 1.73 1.70 1.70 1.66 1.69 1.68 1.62 1.59 1.56 1.65 1.61 1.58 1.60 1.63 1.69

2003 89.80 1.92 1.88 1.84 1.81 1.78 1.74 1.75 1.71 1.74 1.73 1.67 1.65 1.62 1.71 1.67 1.65 1.67 1.70 1.76

2004 92.17 1.94 1.90 1.86 1.83 1.80 1.77 1.77 1.74 1.77 1.76 1.70 1.68 1.65 1.74 1.71 1.68 1.70 1.74 1.80

2005 94.04 1.94 1.90 1.86 1.83 1.81 1.78 1.78 1.75 1.77 1.77 1.71 1.69 1.67 1.75 1.72 1.69 1.72 1.75 1.80

2006 94.95 1.92 1.88 1.84 1.81 1.78 1.75 1.76 1.72 1.75 1.75 1.69 1.67 1.65 1.73 1.69 1.67 1.69 1.72 1.77

2007 95.95 1.90 1.86 1.82 1.79 1.77 1.74 1.74 1.71 1.73 1.73 1.67 1.65 1.63 1.71 1.67 1.65 1.67 1.70 1.75

2008 96.97 1.88 1.84 1.81 1.78 1.75 1.72 1.72 1.69 1.72 1.71 1.66 1.63 1.61 1.69 1.65 1.63 1.65 1.67 1.72

2009 100.00 1.91 1.87 1.84 1.81 1.78 1.75 1.76 1.73 1.75 1.75 1.69 1.67 1.65 1.73 1.70 1.68 1.70 1.72 1.77

2010 102.59 1.92 1.89 1.85 1.83 1.80 1.77 1.78 1.75 1.77 1.77 1.72 1.70 1.68 1.75 1.72 1.70 1.72 1.75 1.80

2011 102.64 1.88 1.85 1.81 1.79 1.76 1.73 1.74 1.71 1.73 1.72 1.67 1.65 1.64 1.70 1.68 1.66 1.67 1.70 1.74

2012 103.13 1.85 1.82 1.79 1.76 1.73 1.71 1.71 1.68 1.70 1.70 1.65 1.63 1.61 1.67 1.64 1.62 1.64 1.66 1.70

2013 103.75 1.83 1.80 1.76 1.74 1.71 1.68 1.68 1.65 1.68 1.67 1.62 1.60 1.58 1.64 1.62 1.60 1.61 1.63 1.67

2014 104.34 1.81 1.77 1.74 1.71 1.69 1.66 1.66 1.63 1.65 1.64 1.60 1.58 1.56 1.62 1.59 1.57 1.58 1.60 1.64

2015 105.13 1.79 1.75 1.72 1.69 1.67 1.64 1.64 1.61 1.63 1.62 1.58 1.56 1.54 1.60 1.57 1.55 1.56 1.58 1.61

2016 105.39 1.76 1.73 1.69 1.67 1.64 1.61 1.61 1.58 1.60 1.59 1.55 1.53 1.51 1.56 1.54 1.51 1.53 1.54 1.58

2017 106.30 1.74 1.71 1.68 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
Productivity, Page 14

Table 1.4 (continued). Total-Economy Productivity: Compound Annual Rates of Growth (%) Base Year = 2009

From

To Variable 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

1979 59.07

1980 59.14 0.12

1981 60.37 1.09 2.08

1982 60.33 0.71 1.00 -0.07

1983 62.01 1.22 1.59 1.35 2.78

1984 63.34 1.41 1.73 1.61 2.47 2.15

1985 64.45 1.46 1.74 1.65 2.23 1.95 1.76

1986 65.95 1.59 1.83 1.79 2.25 2.08 2.04 2.33

1987 66.26 1.45 1.64 1.56 1.89 1.67 1.51 1.39 0.47

1988 67.20 1.44 1.61 1.54 1.81 1.62 1.49 1.40 0.94 1.42

1989 67.85 1.40 1.54 1.47 1.69 1.51 1.39 1.29 0.95 1.19 0.97

1990 68.88 1.41 1.54 1.48 1.67 1.51 1.41 1.34 1.09 1.30 1.24 1.51

1991 69.70 1.39 1.50 1.45 1.62 1.47 1.38 1.31 1.11 1.27 1.23 1.35 1.19

1992 72.20 1.56 1.68 1.64 1.81 1.71 1.65 1.64 1.52 1.73 1.81 2.09 2.38 3.59

1993 72.54 1.48 1.58 1.54 1.69 1.58 1.52 1.49 1.37 1.52 1.54 1.68 1.74 2.01 0.46

1994 73.05 1.43 1.52 1.48 1.61 1.50 1.44 1.40 1.28 1.40 1.40 1.49 1.48 1.57 0.58 0.70

1995 73.51 1.38 1.46 1.42 1.53 1.43 1.36 1.32 1.21 1.31 1.29 1.34 1.31 1.34 0.60 0.67 0.64

1996 74.94 1.41 1.49 1.45 1.56 1.47 1.41 1.38 1.29 1.38 1.37 1.43 1.41 1.46 0.93 1.09 1.29 1.94

1997 76.32 1.43 1.51 1.48 1.58 1.49 1.44 1.42 1.34 1.42 1.42 1.48 1.48 1.52 1.12 1.28 1.47 1.89 1.85

1998 78.09 1.48 1.56 1.53 1.63 1.55 1.51 1.49 1.42 1.50 1.51 1.57 1.58 1.64 1.31 1.49 1.68 2.03 2.08 2.32

1999 80.41 1.55 1.63 1.61 1.70 1.64 1.60 1.59 1.54 1.63 1.65 1.71 1.73 1.80 1.55 1.73 1.94 2.27 2.38 2.65

2000 82.46 1.60 1.68 1.65 1.75 1.69 1.66 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

2001 84.27 1.63 1.70 1.68 1.77 1.72 1.69 1.69 1.65 1.73 1.76 1.82 1.85 1.92 1.73 1.89 2.06 2.30 2.38 2.51

2002 86.86 1.69 1.76 1.75 1.84 1.79 1.77 1.77 1.74 1.82 1.85 1.92 1.95 2.02 1.86 2.02 2.19 2.41 2.49 2.62

2003 89.80 1.76 1.83 1.82 1.91 1.87 1.85 1.86 1.83 1.92 1.95 2.02 2.06 2.13 2.00 2.16 2.32 2.53 2.62 2.75

2004 92.17 1.80 1.87 1.86 1.95 1.91 1.89 1.90 1.88 1.96 1.99 2.06 2.10 2.17 2.06 2.20 2.35 2.55 2.62 2.73

2005 94.04 1.80 1.87 1.86 1.95 1.91 1.90 1.91 1.88 1.96 2.00 2.06 2.10 2.16 2.05 2.19 2.32 2.49 2.55 2.64

2006 94.95 1.77 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 2.39 2.46

2007 95.95 1.75 1.81 1.80 1.87 1.84 1.82 1.82 1.80 1.87 1.89 1.94 1.97 2.02 1.91 2.02 2.12 2.24 2.27 2.31

2008 96.97 1.72 1.78 1.77 1.84 1.80 1.79 1.79 1.77 1.83 1.85 1.90 1.92 1.96 1.86 1.95 2.04 2.15 2.17 2.20

2009 100.00 1.77 1.83 1.82 1.89 1.86 1.84 1.85 1.83 1.89 1.91 1.96 1.98 2.03 1.93 2.03 2.12 2.22 2.24 2.28

2010 102.59 1.80 1.85 1.85 1.91 1.88 1.87 1.88 1.86 1.92 1.94 1.99 2.01 2.06 1.97 2.06 2.15 2.25 2.27 2.30

2011 102.64 1.74 1.79 1.78 1.85 1.82 1.80 1.81 1.78 1.84 1.86 1.90 1.92 1.95 1.87 1.95 2.02 2.11 2.12 2.14

2012 103.13 1.70 1.75 1.74 1.80 1.77 1.76 1.76 1.73 1.79 1.80 1.84 1.85 1.88 1.80 1.87 1.93 2.01 2.02 2.03

2013 103.75 1.67 1.72 1.71 1.76 1.73 1.72 1.71 1.69 1.74 1.75 1.79 1.80 1.82 1.74 1.81 1.86 1.93 1.93 1.94

2014 104.34 1.64 1.68 1.67 1.73 1.69 1.68 1.67 1.65 1.70 1.71 1.74 1.75 1.77 1.69 1.75 1.80 1.86 1.86 1.86

2015 105.13 1.61 1.66 1.64 1.70 1.66 1.65 1.64 1.62 1.66 1.67 1.70 1.71 1.73 1.65 1.70 1.75 1.80 1.80 1.79

2016 105.39 1.58 1.62 1.60 1.65 1.62 1.60 1.60 1.57 1.61 1.62 1.64 1.65 1.67 1.59 1.64 1.68 1.73 1.72 1.71

2017 106.30 1.56 1.60 1.58 1.63 1.60 1.58 1.58 1.55 1.59 1.59 1.62 1.62 1.64 1.56 1.60 1.64 1.69 1.68 1.67

From

To Variable 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1997 76.32

1998 78.09 2.32

1999 80.41 2.65 2.98

2000 82.46 2.61 2.76 2.55

2001 84.27 2.51 2.57 2.37 2.19

2002 86.86 2.62 2.70 2.60 2.63 3.07

2003 89.80 2.75 2.83 2.80 2.88 3.23 3.39

2004 92.17 2.73 2.80 2.77 2.82 3.03 3.01 2.64

2005 94.04 2.64 2.69 2.64 2.66 2.78 2.68 2.33 2.02

2006 94.95 2.46 2.47 2.40 2.38 2.41 2.25 1.88 1.49 0.97

2007 95.95 2.31 2.31 2.23 2.19 2.19 2.01 1.67 1.35 1.01 1.05

2008 96.97 2.20 2.19 2.10 2.05 2.03 1.85 1.55 1.28 1.03 1.06 1.07

2009 100.00 2.28 2.27 2.20 2.17 2.16 2.03 1.81 1.64 1.55 1.74 2.09 3.12

2010 102.59 2.30 2.30 2.24 2.21 2.21 2.10 1.92 1.80 1.76 1.96 2.26 2.86 2.59

2011 102.64 2.14 2.12 2.05 2.01 1.99 1.87 1.68 1.55 1.47 1.57 1.70 1.91 1.31 0.04

2012 103.13 2.03 2.01 1.93 1.88 1.85 1.73 1.55 1.41 1.33 1.39 1.46 1.55 1.03 0.26 0.48

2013 103.75 1.94 1.91 1.84 1.78 1.75 1.63 1.46 1.32 1.24 1.28 1.31 1.36 0.93 0.38 0.54 0.60

2014 104.34 1.86 1.83 1.75 1.69 1.66 1.54 1.37 1.25 1.16 1.19 1.20 1.23 0.85 0.42 0.55 0.58 0.56

2015 105.13 1.79 1.76 1.69 1.63 1.59 1.48 1.32 1.20 1.12 1.14 1.15 1.16 0.84 0.49 0.60 0.64 0.66 0.76

2016 105.39 1.71 1.68 1.60 1.55 1.50 1.39 1.24 1.12 1.04 1.05 1.05 1.05 0.75 0.45 0.53 0.54 0.52 0.50 0.25

2017 106.30 1.67 1.64 1.56 1.50 1.46 1.36 1.21 1.10 1.03 1.03 1.03 1.03 0.77 0.51 0.59 0.61 0.61 0.62 0.55 0.86
Productivity, Page 15 Table 1.5: Nonfarm Business Productivity: Compound Annual Rates of Growth (%) Base Year = 2009

From

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

1961 34.15

1962 35.71 4.56

1963 36.93 3.98 3.41

1964 38.00 3.62 3.16 2.90

1965 39.21 3.51 3.17 3.05 3.19

1966 40.63 3.54 3.28 3.24 3.41 3.62

1967 41.40 3.26 3.00 2.90 2.90 2.75 1.89

1968 42.85 3.29 3.08 3.02 3.05 3.00 2.69 3.50

1969 42.93 2.90 2.67 2.54 2.47 2.29 1.85 1.83 0.19

1970 43.57 2.74 2.52 2.39 2.31 2.13 1.76 1.72 0.84 1.48

1971 45.28 2.86 2.67 2.58 2.53 2.43 2.19 2.26 1.85 2.69 3.92

1972 46.81 2.91 2.74 2.67 2.64 2.56 2.39 2.49 2.24 2.93 3.66 3.40

1973 48.26 2.92 2.78 2.71 2.69 2.63 2.49 2.59 2.41 2.97 3.47 3.24 3.09

1974 47.47 2.56 2.40 2.31 2.25 2.14 1.96 1.97 1.72 2.03 2.17 1.59 0.69 -1.65

1975 48.77 2.58 2.43 2.34 2.29 2.20 2.05 2.07 1.87 2.15 2.28 1.88 1.37 0.52 2.75

1976 50.47 2.64 2.50 2.43 2.39 2.32 2.19 2.23 2.07 2.34 2.48 2.20 1.90 1.50 3.12 3.49

1977 51.34 2.58 2.45 2.38 2.34 2.27 2.15 2.18 2.03 2.26 2.37 2.12 1.86 1.56 2.65 2.61 1.72

1978 52.05 2.51 2.38 2.31 2.27 2.20 2.09 2.10 1.96 2.16 2.25 2.01 1.78 1.52 2.33 2.19 1.55 1.38

1979 51.97 2.36 2.23 2.16 2.11 2.03 1.91 1.91 1.77 1.93 1.98 1.74 1.50 1.24 1.83 1.60 0.98 0.61 -0.16

1980 51.94 2.23 2.10 2.03 1.97 1.89 1.77 1.76 1.62 1.75 1.77 1.54 1.31 1.06 1.51 1.27 0.72 0.39 -0.10 -0.05

1981 52.75 2.20 2.07 2.00 1.95 1.87 1.76 1.75 1.61 1.73 1.75 1.54 1.34 1.12 1.52 1.32 0.89 0.68 0.45 0.75

1982 52.28 2.05 1.92 1.85 1.79 1.71 1.59 1.57 1.43 1.53 1.53 1.32 1.11 0.89 1.22 1.00 0.59 0.36 0.11 0.20

1983 54.45 2.14 2.03 1.96 1.91 1.84 1.74 1.73 1.61 1.71 1.73 1.55 1.38 1.21 1.54 1.39 1.09 0.98 0.90 1.17

1984 55.67 2.15 2.04 1.97 1.93 1.86 1.77 1.76 1.65 1.75 1.77 1.60 1.45 1.31 1.61 1.48 1.23 1.16 1.13 1.39

1985 56.63 2.13 2.03 1.96 1.92 1.85 1.76 1.76 1.65 1.75 1.76 1.61 1.48 1.34 1.62 1.51 1.29 1.23 1.21 1.44

1986 58.32 2.16 2.07 2.01 1.97 1.91 1.82 1.82 1.73 1.82 1.84 1.70 1.58 1.47 1.73 1.64 1.46 1.43 1.43 1.66

1987 58.66 2.10 2.01 1.95 1.91 1.85 1.76 1.76 1.67 1.75 1.77 1.63 1.52 1.40 1.64 1.55 1.38 1.34 1.34 1.53

1988 59.63 2.09 1.99 1.93 1.89 1.84 1.76 1.75 1.67 1.74 1.76 1.63 1.52 1.42 1.64 1.56 1.40 1.37 1.37 1.54

1989 60.17 2.04 1.95 1.90 1.86 1.80 1.72 1.71 1.63 1.70 1.71 1.59 1.49 1.39 1.59 1.51 1.36 1.33 1.33 1.48

1990 61.18 2.03 1.94 1.89 1.85 1.79 1.72 1.71 1.63 1.70 1.71 1.60 1.50 1.40 1.60 1.52 1.38 1.36 1.36 1.49

1991 62.18 2.02 1.93 1.88 1.84 1.79 1.72 1.71 1.63 1.70 1.71 1.60 1.51 1.42 1.60 1.53 1.40 1.38 1.38 1.51

1992 64.96 2.10 2.01 1.97 1.93 1.89 1.82 1.82 1.75 1.82 1.83 1.73 1.65 1.58 1.76 1.70 1.59 1.58 1.59 1.73

1993 65.03 2.03 1.95 1.90 1.87 1.82 1.76 1.75 1.68 1.75 1.76 1.66 1.58 1.50 1.67 1.61 1.50 1.49 1.50 1.61

1994 65.49 1.99 1.91 1.87 1.83 1.78 1.72 1.71 1.64 1.70 1.71 1.62 1.54 1.46 1.62 1.56 1.46 1.44 1.45 1.55

1995 66.21 1.97 1.89 1.84 1.81 1.76 1.70 1.69 1.62 1.68 1.69 1.60 1.52 1.45 1.60 1.54 1.44 1.42 1.43 1.53

1996 67.61 1.97 1.90 1.85 1.82 1.77 1.71 1.71 1.64 1.70 1.70 1.62 1.54 1.48 1.62 1.57 1.47 1.46 1.46 1.56

1997 68.92 1.97 1.90 1.85 1.82 1.78 1.72 1.71 1.65 1.70 1.71 1.63 1.56 1.50 1.63 1.58 1.49 1.48 1.49 1.58

1998 71.02 2.00 1.93 1.89 1.86 1.82 1.76 1.76 1.70 1.75 1.76 1.68 1.62 1.56 1.69 1.65 1.56 1.56 1.57 1.66

1999 73.73 2.05 1.98 1.94 1.91 1.87 1.82 1.82 1.77 1.82 1.83 1.76 1.70 1.64 1.78 1.74 1.66 1.66 1.67 1.76

2000 76.20 2.08 2.01 1.98 1.95 1.92 1.87 1.87 1.82 1.87 1.88 1.81 1.75 1.71 1.84 1.80 1.73 1.73 1.75 1.84

2001 78.28 2.10 2.03 2.00 1.97 1.94 1.89 1.89 1.84 1.89 1.91 1.84 1.79 1.74 1.87 1.84 1.77 1.77 1.79 1.88

2002 81.65 2.15 2.09 2.06 2.03 2.00 1.96 1.96 1.91 1.97 1.98 1.92 1.87 1.83 1.96 1.93 1.87 1.87 1.89 1.98

2003 84.76 2.19 2.13 2.10 2.08 2.05 2.01 2.01 1.97 2.02 2.04 1.98 1.93 1.89 2.02 1.99 1.94 1.95 1.97 2.06

2004 87.19 2.20 2.15 2.12 2.10 2.07 2.03 2.03 1.99 2.04 2.06 2.01 1.96 1.93 2.05 2.02 1.97 1.98 2.00 2.09

2005 89.11 2.20 2.15 2.12 2.10 2.07 2.03 2.04 2.00 2.05 2.07 2.01 1.97 1.93 2.05 2.03 1.98 1.99 2.01 2.10

2006 90.09 2.18 2.13 2.10 2.08 2.05 2.01 2.01 1.97 2.02 2.04 1.99 1.94 1.91 2.02 2.00 1.95 1.96 1.98 2.06

2007 91.66 2.17 2.12 2.09 2.07 2.04 2.00 2.01 1.97 2.02 2.03 1.98 1.94 1.90 2.01 1.99 1.94 1.95 1.97 2.05

2008 92.64 2.15 2.09 2.06 2.05 2.02 1.98 1.98 1.95 1.99 2.01 1.95 1.91 1.88 1.99 1.96 1.92 1.92 1.94 2.01

2009 95.94 2.18 2.12 2.10 2.08 2.05 2.02 2.02 1.99 2.03 2.04 2.00 1.96 1.93 2.03 2.01 1.97 1.97 1.99 2.06

2010 99.16 2.20 2.15 2.12 2.11 2.08 2.05 2.05 2.02 2.06 2.08 2.03 1.99 1.97 2.07 2.05 2.01 2.01 2.03 2.11

2011 99.13 2.15 2.11 2.08 2.06 2.04 2.00 2.00 1.97 2.01 2.03 1.98 1.94 1.91 2.01 1.99 1.95 1.95 1.97 2.04

2012 100.00 2.13 2.08 2.05 2.04 2.01 1.98 1.98 1.94 1.99 2.00 1.95 1.92 1.89 1.98 1.96 1.92 1.92 1.94 2.00

2013 100.51 2.10 2.05 2.02 2.00 1.98 1.95 1.95 1.91 1.95 1.96 1.92 1.88 1.85 1.94 1.92 1.88 1.88 1.90 1.96

2014 101.32 2.07 2.03 2.00 1.98 1.96 1.92 1.92 1.89 1.93 1.94 1.89 1.86 1.83 1.91 1.89 1.85 1.85 1.87 1.93

2015 102.63 2.06 2.01 1.99 1.97 1.94 1.91 1.91 1.88 1.91 1.92 1.88 1.84 1.81 1.90 1.88 1.84 1.84 1.85 1.91

2016 102.77 2.02 1.98 1.95 1.93 1.91 1.87 1.87 1.84 1.87 1.88 1.84 1.80 1.77 1.86 1.83 1.79 1.80 1.81 1.86

2017 103.93 2.01 1.96 1.93 1.92 1.89 1.86 1.86 1.82 1.86 1.87 1.82 1.79 1.76 1.84 1.82 1.78 1.78 1.79 1.84
Productivity, Page 16

Table 1.5 (continued). Nonfarm Business Productivity: Compound Annual Rates of Growth (%) Base Year = 2009 From

To Variable 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

1979 51.97

1980 51.94 -0.05

1981 52.75 0.75 1.56

1982 52.28 0.20 0.33 -0.89

1983 54.45 1.17 1.58 1.59 4.14

1984 55.67 1.39 1.75 1.81 3.19 2.25

1985 56.63 1.44 1.74 1.79 2.70 1.99 1.72

1986 58.32 1.66 1.95 2.03 2.77 2.32 2.35 2.99

1987 58.66 1.53 1.75 1.79 2.33 1.88 1.76 1.78 0.58

1988 59.63 1.54 1.74 1.77 2.21 1.83 1.73 1.73 1.11 1.64

1989 60.17 1.48 1.65 1.66 2.03 1.68 1.56 1.52 1.04 1.27 0.90

1990 61.18 1.49 1.65 1.66 1.98 1.68 1.58 1.56 1.20 1.41 1.29 1.68

1991 62.18 1.51 1.65 1.66 1.95 1.67 1.59 1.57 1.29 1.47 1.41 1.66 1.65

1992 64.96 1.73 1.88 1.91 2.19 1.98 1.95 1.98 1.81 2.06 2.16 2.59 3.04 4.46

1993 65.03 1.61 1.74 1.76 2.00 1.79 1.74 1.74 1.57 1.73 1.75 1.96 2.06 2.27 0.12

1994 65.49 1.55 1.67 1.68 1.89 1.69 1.64 1.63 1.46 1.59 1.58 1.71 1.72 1.74 0.41 0.70

1995 66.21 1.53 1.63 1.64 1.83 1.64 1.59 1.57 1.42 1.52 1.51 1.61 1.59 1.58 0.64 0.90 1.10

1996 67.61 1.56 1.66 1.67 1.85 1.68 1.63 1.62 1.49 1.59 1.58 1.68 1.68 1.69 1.01 1.30 1.60 2.11

1997 68.92 1.58 1.68 1.68 1.86 1.70 1.65 1.65 1.53 1.62 1.62 1.71 1.72 1.73 1.19 1.46 1.71 2.02 1.93

1998 71.02 1.66 1.75 1.76 1.93 1.79 1.75 1.76 1.66 1.75 1.76 1.86 1.88 1.92 1.50 1.78 2.05 2.37 2.50 3.06

1999 73.73 1.76 1.86 1.88 2.04 1.91 1.89 1.90 1.82 1.92 1.95 2.05 2.10 2.15 1.83 2.11 2.40 2.73 2.93 3.44

2000 76.20 1.84 1.93 1.95 2.11 2.00 1.98 2.00 1.93 2.03 2.06 2.17 2.22 2.28 2.01 2.29 2.56 2.85 3.03 3.40

2001 78.28 1.88 1.97 1.99 2.15 2.04 2.03 2.04 1.98 2.08 2.12 2.22 2.27 2.33 2.10 2.35 2.58 2.83 2.98 3.24

2002 81.65 1.98 2.08 2.10 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

2003 84.76 2.06 2.15 2.18 2.33 2.24 2.24 2.27 2.22 2.33 2.37 2.48 2.54 2.61 2.45 2.68 2.91 3.14 3.28 3.51

2004 87.19 2.09 2.18 2.21 2.35 2.27 2.27 2.30 2.26 2.36 2.40 2.50 2.56 2.63 2.48 2.70 2.90 3.11 3.23 3.42

2005 89.11 2.10 2.18 2.21 2.35 2.26 2.26 2.29 2.26 2.35 2.39 2.48 2.54 2.60 2.46 2.66 2.84 3.01 3.12 3.26

2006 90.09 2.06 2.14 2.16 2.29 2.21 2.21 2.24 2.20 2.28 2.32 2.40 2.45 2.50 2.36 2.54 2.69 2.84 2.91 3.02

2007 91.66 2.05 2.13 2.15 2.27 2.19 2.19 2.21 2.18 2.26 2.29 2.37 2.41 2.45 2.32 2.48 2.62 2.75 2.81 2.89

2008 92.64 2.01 2.09 2.11 2.22 2.15 2.14 2.16 2.13 2.20 2.23 2.30 2.33 2.37 2.24 2.39 2.51 2.62 2.66 2.73

2009 95.94 2.06 2.14 2.16 2.27 2.20 2.20 2.22 2.19 2.26 2.29 2.36 2.40 2.44 2.32 2.46 2.58 2.68 2.73 2.80

2010 99.16 2.11 2.18 2.20 2.31 2.25 2.24 2.27 2.24 2.31 2.34 2.41 2.44 2.49 2.38 2.51 2.63 2.73 2.77 2.84

2011 99.13 2.04 2.11 2.13 2.23 2.16 2.16 2.18 2.14 2.21 2.23 2.30 2.33 2.36 2.25 2.37 2.47 2.55 2.58 2.63

2012 100.00 2.00 2.07 2.08 2.19 2.12 2.11 2.13 2.10 2.16 2.18 2.23 2.26 2.29 2.18 2.29 2.38 2.46 2.48 2.51

2013 100.51 1.96 2.02 2.03 2.13 2.06 2.06 2.07 2.04 2.09 2.11 2.16 2.18 2.21 2.10 2.20 2.28 2.35 2.36 2.39

2014 101.32 1.93 1.98 2.00 2.09 2.02 2.02 2.03 1.99 2.04 2.06 2.11 2.12 2.15 2.04 2.13 2.21 2.26 2.27 2.29

2015 102.63 1.91 1.96 1.98 2.06 2.00 1.99 2.00 1.97 2.02 2.03 2.08 2.09 2.11 2.01 2.10 2.16 2.22 2.22 2.24

2016 102.77 1.86 1.91 1.92 2.01 1.94 1.93 1.94 1.91 1.95 1.96 2.00 2.02 2.03 1.93 2.01 2.07 2.12 2.12 2.13

2017 103.93 1.84 1.89 1.90 1.98 1.92 1.91 1.92 1.88 1.92 1.93 1.97 1.98 2.00 1.90 1.97 2.03 2.07 2.07 2.08

From

To Variable 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1997 68.92

1998 71.02 3.06

1999 73.73 3.44 3.81

2000 76.20 3.40 3.58 3.34

2001 78.28 3.24 3.30 3.04 2.74

2002 81.65 3.45 3.55 3.46 3.52 4.30

2003 84.76 3.51 3.60 3.54 3.61 4.05 3.80

2004 87.19 3.42 3.48 3.41 3.43 3.66 3.34 2.87

2005 89.11 3.26 3.29 3.21 3.18 3.29 2.96 2.53 2.20

2006 90.09 3.02 3.02 2.90 2.83 2.85 2.49 2.06 1.65 1.10

2007 91.66 2.89 2.87 2.76 2.67 2.66 2.34 1.98 1.68 1.42 1.74

2008 92.64 2.73 2.69 2.57 2.47 2.43 2.13 1.79 1.53 1.30 1.41 1.07

2009 95.94 2.80 2.77 2.67 2.59 2.57 2.33 2.09 1.93 1.86 2.12 2.31 3.56

2010 99.16 2.84 2.82 2.73 2.67 2.66 2.46 2.27 2.17 2.16 2.43 2.66 3.46 3.36

2011 99.13 2.63 2.60 2.50 2.42 2.39 2.18 1.98 1.85 1.79 1.93 1.98 2.28 1.65 -0.03

2012 100.00 2.51 2.47 2.37 2.29 2.25 2.05 1.85 1.73 1.66 1.75 1.76 1.93 1.39 0.42 0.87

2013 100.51 2.39 2.34 2.24 2.15 2.10 1.91 1.72 1.59 1.52 1.58 1.55 1.64 1.17 0.45 0.69 0.50

2014 101.32 2.29 2.25 2.14 2.06 2.00 1.81 1.64 1.51 1.44 1.48 1.44 1.50 1.10 0.54 0.73 0.66 0.81

2015 102.63 2.24 2.19 2.09 2.01 1.95 1.77 1.61 1.49 1.42 1.46 1.42 1.47 1.13 0.69 0.87 0.87 1.05 1.29

2016 102.77 2.13 2.07 1.97 1.89 1.83 1.66 1.49 1.38 1.31 1.33 1.28 1.31 0.99 0.60 0.72 0.69 0.75 0.71 0.14

2017 103.93 2.08 2.02 1.93 1.84 1.79 1.62 1.47 1.36 1.29 1.31 1.26 1.29 1.01 0.67 0.79 0.77 0.84 0.85 0.63 1.13
Productivity, Page 17

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 long-range 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 2019 TRUSTEES REPORT

OFFICE OF THE CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

TABLE OF CONTENTS PAGE

OVERVIEW.................................................................................................................................. 1

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 .......................................................................................3

2.2.3 BEA Comprehensive Revisions..............................................................................................................3

2.2.4 OCACT Adjustments to the Published PGDP........................................................................................4

2.3 CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS (CPI-W) .........................5

2.3.1 Historical Growth in the Adjusted CPI-W .............................................................................................5

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

2.4 GROSS DOMESTIC PRODUCT IMPLICIT PRICE DEFLATOR (PGDP)..................................................................7

2.4.1 Historical Behavior of the Adjusted PGDP ...........................................................................................7

2.4.1.1 Adjusted Deflator for Personal Consumption Expenditures (PGDP_C) ............................................................ 9

2.4.1.2 Deflator for Investment Expenditures (PGDP_I)............................................................................................. 11

2.4.1.3 Deflator for Government Expenditures (PGDP_G) ......................................................................................... 14

2.4.1.4 Ultimate Assumption for the GDP Deflator..................................................................................................... 16

2.5 PRICE DIFFERENTIAL....................................................................................................................................16

2.6 PROJECTIONS FROM OTHER SOURCES...........................................................................................................16

2.7 APPENDIX.....................................................................................................................................................22

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.....6

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) .....................................................................................................................................8

TABLE 2.4: CPI-U VS. C-CPI-U GROWTH RATES..........................................................................................................10

TABLE 2.5: ADJUSTED CPI W: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 1982-1984 ....................18

TABLE 2.6:ADJUSTED GDP DEFLATOR: COMPOUND ANNUAL RATES OF GROWTH (%) BASE YEAR = 2012 ...............20
Price Inflation, Page 2

2 Price Inflation

2.1 Summary

For the 2019 Trustees Report, the assumed ultimate annual rates of increase in the CPI-W are

3.20 percent, 2.60 percent, and 2.00 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 2.95 percent, 2.25 percent, and 1.55 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 are unchanged from those assumed for the 2018 Report. The assumed differences

between the ultimate annual rates of increase for the PGDP and CPI-W are 0.05 percentage point 

higher than those assumed for the 2018 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 2011-2012 to 2013-2014 period, effective January 2016.

28 Since 2000, BLS has been 

updating the weights every two years, and plans to continue on that schedule, instead of the 

 

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 http://www.bls.gov/opub/hom/pdf/homch17.pdf. The new weights are 

in http://www.bls.gov/cpi/usri_2015.txt, and the weights they replaced are in http://www.bls.gov/cpi/usri11-

12_2015.pdf. In January 2018, BLS again updated the weights going forward but annual 2018 data was not available 

when this analysis was completed.

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 Trustees Report

I II III I II III I II III

 CPI-W 3.20 2.60 2.00 3.20 2.60 2.00 0.00 0.00 0.00

 PGDP 2.95 2.25 1.55 2.90 2.20 1.50 0.05 0.05 0.05

 Price Differential

 (PGDP less CPI-W) -0.25 -0.35 -0.45 -0.30 -0.40 -0.50 0.05 0.05 0.05
Price Inflation, Page 3

pre-2000 historical average of about once per decade. BLS believes that more frequent updates 

of the consumption-expenditure weights will have little or no effect on the average future growth 

rate in the CPI over long periods.29 Recent data support this view for relatively short periods. 

When BLS switched from using 1999-2000 to 2001-2002 weights beginning in January 2004, it 

published monthly values for the CPI-W (and CPI-U) for January through June 2004 based on 

the 1999-2000 expenditure weights.30 The values in June 2004 for the CPI-W (and CPI-U) based 

on the old and new weights were identical. However, the data may also vary over short periods. 

When BLS switched from using 2001-2002 to 2003-2004 weights beginning in January 2006, it 

published monthly values for the CPI-W (and CPI-U) for January through June 2006 based on 

the 2001-2002 expenditure weights.31 The data indicate that the growth rate in the CPI-W (and 

CPI-U) over this period was about 0.2 percentage point lower using the newer weights. 32

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 

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 the 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. 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 Comprehensive Revisions

 

29 Future Schedule for Expenditure Weight Updates in the Consumer Price Index, BLS, 

http://stats.bls.gov/cpi/cpiupdt.htm.

30 News Release for Consumer Price Index, January through June 2004, BLS, Table 1(OW) and Table 

2(OW), http://stats.bls.gov/schedule/archives/cpi_nr.htm.

31 News Release for Consumer Price Index, January through June 2006, BLS, Table 1(OW) and Table 

2(OW), http://stats.bls.gov/schedule/archives/cpi_nr.htm.

32 This was partly due to the fact that, compared to the old 2001-2002 weight, the new 2003-2004 weight 

for gasoline fell by about 0.2 percentage point while the price of gasoline rose by about 25.0 percent from January to 

June 2006.
Price Inflation, Page 4

On July 27, 2018, BEA released a comprehensive revision to the NIPA data, including GDP, 

PGDP, and their components potentially for the entire history.

33 In a comprehensive revision, 

which is typically performed every five years, BEA integrates updated statistics from its 

quinquennial benchmark input-output accounts, and takes an opportunity to introduce 

improvements to methods and data, such as statistical changes to introduce new and improved 

methodologies, changes in definitions to more accurately portray the evolving U.S. economy, 

and changes in presentations to reflect the definitional and statistical changes.

The 2018 comprehensive revision also included a change in the base year used to compute the 

real (inflation-adjusted) measures. The new base year is 2012, while prior to the revision the base 

year was 2009. The change in the base year slightly alters the entire history of the growth rates of 

all price measures, including PGDP and its components, as well as the history of growth rates of 

real (inflation-adjusted) measures. 

With the comprehensive revision and the change in the base year, the growth rate of PGDP has 

changed in most years, starting in 1947. The changes are small—less than 0.2 percentage point in 

any given year. The change in the average price growth over the entire 1947–2017 period, 

however, is much smaller, with the average increase in PGDP over this period being 3.20 percent 

per year both before and after the comprehensive revision. 

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.

 

33 BEA’s data release with the new GDP data reflecting the comprehensive revisions can be found at 

http://www.bea.gov/system/files/2018-08/gdp2q18_adv_4.pdf. The description of changes introduced by the 

comprehensive revision can be found at https://apps.bea.gov/scb/2018/09-september/0918-nipa-update.htm. 
Price Inflation, Page 5

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

2.3.1 Historical Growth in the Adjusted CPI-W34

Over the last forty years (1977 to 2017), the adjusted CPI-W grew at an average annual rate of 

3.25 percent, or about 0.65 percentage point higher than the assumed ultimate rate of increase of 

2.6 percent in the 2018 Trustees Report alternative II. Over the last five complete economic 

cycles (1969 to 2007), the adjusted CPI-W grew at an average annual rate of 4.22 percent. The 

growth rates by cycle were 4.44, 7.59, 5.0, 2.45, and 2.64 percent for the 1966-73, 1973-79, 

1979-90, 1990-2001, and 2001-07 periods, respectively. The relatively higher inflation rates 

experienced from the mid-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.”

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 US economy on oil has 

decreased since the 1970s. The economic output of developing nations with relatively low labor 

costs (for example, China and India) increased substantially, as did the share of US 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 

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.

35

 34 See section 2.2.4 for a description of the adjusted CPI-W.

35 CPI-W grew at a 2.2 percent annual rate over the 7-year period 1995-2002, 3.1 percent over the 6-year 

period 2002-08, and 1.7 percent over the 8-year period 2008-15. The dollar has appreciated significantly relative to 

the euro and the British pound since 2008, and has been stable relative to the yen and the yuan.
Price Inflation, Page 6

Since the end of the last complete economic cycle (i.e., from 2007 to 2017), the CPI-W grew at 

an average annual rate of about 1.7 percent. This period has been characterized by unusually 

weak aggregate demand for goods and services. 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:

1967-2017 (50 years) 3.69 3.53 -0.16

 1967-1992 (25 years) 5.27 5.18 -0.09

 1992-2017 (25 years) 2.14 1.91 -0.24

Since Most Recent Economic Cycle Peak

2007(peak)-2017 (10 years) 1.67 1.56 -0.12

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

 Last Five Cycles

 1969-2007 4.22 4.01 -0.21

 Last Four Cycles

 1973-2007 4.20 3.90 -0.30

 Last Three Cycles

 1979-2007 3.48 3.15 -0.33

 Last Two Cycles

 1990-2007 2.51 2.22 -0.29

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. 
Price Inflation, Page 7

These include the Vietnam War, oil price shocks, and periods of price controls. Furthermore, 

after a historically unusual departure in the 1970s, monetary policy has returned to a 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 -3.3 percent 

over the 10-year period from 2008 through 2017. Part of this imbalance is due to imports of 

relatively low-priced consumer goods from emerging markets, 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 put further upward 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. 

The 3.48 percent average annual growth rate for the adjusted CPI-W for the last three economic 

cycles from 1979 to 2007 is higher than the most reasonable assumption for the ultimate CPI-W 

annual rate of increase. OCACT believes that the 2.51 percent average annual growth rate for the 

adjusted CPI-W over the last two complete economic cycles (as measured over an 17-year period 

from 1990 to 2007), a period that reflects the current domestic monetary policy environment 

expected to exist in the future, is closer to an expected future trend. However, OCACT believes 

that unexpected inflationary events are likely to contribute to a somewhat higher average rate for 

the future. Thus, the assumed ultimate rate of increase in the CPI-W is 2.60 percent for

alternative II, and 3.20 and 2.00 percent for alternatives I and III, respectively. 

2.4 Gross Domestic Product Implicit Price Deflator (PGDP)

2.4.1 Historical Behavior of the Adjusted PGDP 

Table 2.3 shows historical data on the average annual percentage change for 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), 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 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 2017, the weights for 

personal consumption, investment, and government expenditures were about 0.68, 0.17, 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 0.62, 0.18, and 0.20, 

respectively. These values are consistent with the average values observed in the historical 

period. 
Price Inflation, Page 8

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:

1967-2017 (50 years) 3.53 3.56 2.83 4.27

 1967-1992 (25 years) 5.18 5.31 4.72 5.87

 1992-2017 (25 years) 1.91 1.84 0.97 2.68

Since Most Recent Economic Cycle Peak

2007-2017 1.56 1.50 0.55 1.88

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 4.62 4.95 3.42 4.88

 1990-2001 2.08 2.11 0.68 2.79

 2001-2007 2.59 2.31 2.18 4.04

 Last Five Cycles

 1969-2007 4.01 4.08 3.36 4.83

 Last Four Cycles

 1973-2007 3.90 4.04 3.20 4.52

 Last Three Cycles

 1979-2007 3.15 3.26 2.07 3.88

 Last Two Cycles

 1990-2007 2.22 2.18 1.21 3.23

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 

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.
Price Inflation, Page 9

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 1978 to the present. Over the 28-year period 

from 1979 to 2007, the average annual growth rate for the adjusted PGDP_C was 3.26 percent, 

rounding to 0.23 percentage point below the CPI-W growth rate of 3.48. Over the 17-year 

period from 1990 to 2007, the average annual growth rate for the adjusted PGDP_C was 2.18

percent, or 0.33 percentage point below the CPI-W growth rate of 2.51. Over the most recently 

completed cycle from 2001 to 2007, the average annual growth rate for the adjusted PGDP_C 

was 2.31 percent, or about 0.33 percentage point below the CPI-W growth rate of 2.64. 

From 2007 to 2017, the annual percentage change in PGDP_C was 1.50 percent, or about 0.18 

percentage point below the CPI-W growth rate of 1.68 percent. The smaller difference might be 

due to lower overall inflation during this period, which may result in less room for the 

substitution between items to contribute to a lower the annual rate of change in the PGDP_C. 

Indeed, as the CPI-W rebounded to an annual percentage change of 2.15 percent in 2017, the 

annual percentage change in PGDP_C was 1.76 percent, or 0.39 percentage point less than the 

CPI-W. 

The historical difference in past complete economic cycles between the PGDP_C and the CPI-W 

of between 0.23 and 0.33 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 CPIU. BLS has published initial, interim, and final monthly values for the C-CPI-U for each year 

beginning in January 2000. Final values are now available for 2016. The average annual growth 

rate in the C-CPI-U from the first quarter of 2000 to the fourth quarter of 2016 was 1.86 percent. 

Over the same period, the average annual growth rates in the PGDP_C, CPI-U, and CPI-W were 

approximately 1.81, 2.12, and 2.07 percent, respectively. The data suggest that over this period, 

the contribution of the difference in computational methods was about 0.26 percentage point 

(i.e., 2.12 − 1.86), and that the PGDP_C price differential was -0.26 percentage point 
Price Inflation, Page 10

(i.e., 1.81 − 2.07).36 OCACT believes that the difference of -0.26 is somewhat low due to the 

unusually low inflation rate over the 2008-2016 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

Average 2000-2016 0.31 0.27

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 2.3 percent, equal to the assumed ultimate annual growth rate 

 36 The data also suggest that from the first quarter of 2000 to the fourth quarter of 2016, the average annual 

growth rate in the C-CPI-U (1.86 percent) was a reasonable approximation of the average annual growth rate in the 

PGDP_C (1.81 percent), and that the average annual growth rates in the CPI-U (2.12 percent) and CPI-W (2.07 

percent) were approximately equal over the period, compared to the 0.09 average annual percentage point 

differential (CPI-U minus CPI-W) over the 1979-2017 period. 
Price Inflation, Page 11

for CPI-W (i.e., 2.6 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).37

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 38-year period from 1979 to 2017, the average 

annual growth rate was about -0.16 percent for the PGDP_INE, compared to 2.79 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 11.63 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 2017.

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, 22.2 percent over the 1994 to 1999 period, and 7.0 percent 

over the 1999 to 2017 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. It seems more 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 6 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 2017, the deflator for equipment other than computers grew on 

average at a 1.23 percent annual rate, or 1.56 percentage points less than the 2.79 percent annual 

growth rate for the PGDP_C. Similarly, over the last three complete economic cycles 

(1979-2007), the deflator for other equipment grew slower by 1.48 percentage points per year 

than 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 (e.g., printers, calculators, etc.) 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 1 percent, or 1.3

 

37 This decomposition excludes the change in business inventories, which has averaged roughly 1.7 percent 

of total investment expenditures over the 38-year period from 1979 to 2017. 
Price Inflation, Page 12

percentage points less than the 2.3 percent assumed ultimate average annual growth rate in the 

PGDP_C. 

Using these average annual growth rates and weights, OCACT believes that it is reasonable to 

set the assumed ultimate average annual rate of growth in PGDP_INE in the future to about 0.3

percent (i.e., -6.0 * 0.10 + 1 * 0.90).

Deflator for Intellectual Property (PGDP_INIP) – Over the 38-year period from 1979 to 2017, 

the average annual growth rate was about 1.33 percent for the PGDP_INIP, compared to 2.79

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 1.67 percent, 

and the ratio of nominal investment expenditures for software to all investment expenditures for 

intellectual property rose from about 17 percent to about 36 percent by 2000, and has slowly 

increased to about 41 percent since.

Software prices have been declining slowly, but steadily. They declined over four of the last five 

economic cycles (the only exception being the 1973-79 cycle), and their rate of decline ranged 

from 0.13 percent in the 1966-1973 cycle to 2.46 percent in 1989-2000, according to the revised 

data released with the 2018 comprehensive revision of NIPA. Since the end of the last cycle (a 

10-year period from 2007 to 2017), software prices declined at an average annual rate of 1.48 

percent. It seems reasonable to expect some future price decline, but at a somewhat slower rate 

than the average over the last 38 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 2017, the deflator for intellectual property other than software 

grew on average at a 2.64 percent annual rate, or 0.15 percentage point less than the 2.79 percent 

annual growth rate for the PGDP_C. Over the last three complete economic cycles (1979-2007), 

the deflator for other intellectual property grew at an annual rate of 3.04 percent, slower by 0.22

percentage point per year than the 3.26 percent growth rate in 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 2.1 percent, or 0.2 percentage point

less than the 2.3 percent assumed ultimate average annual growth rate in the PGDP_C. 

Using these average annual growth rates and weights, OCACT believes that it is reasonable to 

set the assumed ultimate average annual rate of growth in PGDP_INIP in the future to about 0.71

percent (i.e., -1 * 0.45 + 2.1 * 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 21-year 

period from 1979 to 2000, the average annual growth rate was about 3.75 percent for the

PGDP_IR, compared to 3.60 percent for the PGDP_C. Thus, the average annual growth rate for 
Price Inflation, Page 13

the PGDP_IR was about 0.15 percentage point (3.75 − 3.60) higher than the average annual 

growth rate in the PGDP_C over the period. However, over the next 7-year period, this 

differential increased substantially. From 2000 to 2007, the average annual growth rate was 

about 4.74 percent for the PGDP_IR and 2.25 percent for the PGDP_C. Thus, the average annual 

growth rate for the PGDP_IR was about 2.49 percentage points (4.74 – 2.25) higher than the 

average annual growth rate in the PGDP_C over the period.

OCACT believes that the 2.49 percent growth rate differential between the PGDP_IR and the 

PGDP_C over the last business cycle 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 2017 are only slightly above the 2006 level, and the number of sales is well 

below the mid-2000s level. For the 2007 to 2017 period, the average annual growth in PGDP_IR 

and PGDP_C was 1.76 and 1.50 percent, respectively, indicating a 0.26 percent (1.76 − 1.50) 

differential between the two deflators. Over the 17-year period from 2000 to 2017, the average 

annual growth rate for the PGDP_IR was about 2.98 percent, or 1.13 percentage points higher 

than the 1.85 percent annual growth rate for the PGDP_C.

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 2.5 percent, or about 0.2 percentage point 

higher than the 2.3 percent assumed ultimate average annual rate of increase in the PGDP_C. 38

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 21-year period from 1979 to 2000, the average annual growth rate for PGDP_INS was 3.62 

percent, or slightly less than the 3.75 percent growth rate in PGDP_IR. However, over the 7-year 

period from 2000 to 2007, the average annual growth rates for PGDP_INS and PGDP_IR were 

7.17 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 20.9 percent. Excluding the effects of petroleum and natural 

gas, the average annual growth rate for PGDP_INS was about 6.4 percent, closer to the 4.7 

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. 

 38 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 14

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 2.5 percent, or 0.2 percentage point 

higher than the 2.3 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 1997 to 2017, the average has 

decreased 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 

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 1.28 percent (i.e., 0.30

* 0.35 + 0.71 * 0.25 + 2.5 * (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 deflator for employee compensation and the adjusted CPI-W 

were about 5.34 and 3.72 percent, respectively. This indicates that over the period, the real 

annual growth rate in average employee compensation was 1.62 percentage points (i.e., 5.34 –

3.72), slightly higher than the 1.27 percent assumed ultimate real annual growth rate in average 

compensation in the 2018 Trustees Report.39

From 2001 to 2007, a 6-year period covering the latest complete economic cycle, the average 

annual growth rate in the deflator for employee compensation and the adjusted CPI-W were 

about 4.61 and 2.64 percent, respectively. This indicates that over the period, the real annual 

growth rate in average employee compensation was 1.97 percentage points (i.e., 4.61 − 2.64), 

 39 For the 2018 Trustees Report alternative II, the Trustees assumed that the ultimate average annual rates 

of increase in the average compensation for all employees and in the CPI were 3.87 and 2.6 percent, respectively.
Price Inflation, Page 15

about 0.7 percentage point higher than the 1.27 percent ultimate real annual growth rate in 

average compensation assumed in the 2018 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 2017, 

the average annual growth rates in the average compensation of state and local, federal civilian, 

and federal military employees were 2.62, 2.62, and 1.54 percent, respectively, and the average 

annual growth rate in the deflator for employee compensation was 2.57 percent, or just 0.90

percentage points higher than the 1.67 percent growth rate in CPI-W over the same period. It is 

reasonable to assume that in the future the average annual growth rate in the average 

compensation for all government employees will be 3.87 percent, the same rate assumed for the 

economy-wide average compensation. Therefore, OCACT believes that the average annual 

growth rate in the deflator for government consumption expenditures on employee compensation 

will be 3.87 percent.

40

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 2.3 percent.

Using rough averages over the 1979 to 2017 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 3.40 percent (i.e., 3.87 * 0.70 + 2.3 * 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 2.5 percent for investment in structures,

0.30 percent for investment in equipment, and 0.71 percent for investment in intellectual 

property.

Using rough averages over the 1979 to 2017 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 1.41 percent (i.e., 2.5 * 0.45 + 0.3 * 0.25 + 

0.71 * 0.30).

 40 For the 2019 report, 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 16

Finally, the historical proportions of government consumption and investment expenditures over 

the 40-year period from 1977 to 2017 averaged about 78 and 22 percent of total government 

expenditures, respectively. Since the mid-1990s, however, the proportion of government 

consumption in total government expenditures consistently has been higher, at or above 79 

percent. OCACT assumes that the future proportions of government consumption and investment 

expenditures will be 79 and 21 percent of total government expenditures, respectively. Hence, 

the assumed ultimate average annual rate of increase in the PGDP_G is 2.98 percent (i.e., 3.4 * 

0.79 + 1.4 * 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 2.25 percent for the intermediate 

assumption. The 2.25 percent is equal to the sum of the PGDP_C component of 2.3 percent 

times its weight of 0.62, the PGDP_I component of 1.28 percent times its weight of 0.18, and the 

PGDP_G component of 2.98 percent and its weight of 0.20. For alternatives I and III the 

assumptions are 2.95 and 1.55, respectively. 

For the alternative II, the assumed GDP deflator is 0.05 percentage point higher than the average 

annual increase of 2.2 percent used in the 2018 report. The change is a result of an updated 

analysis of the data on the PGDP_I and PGDP_G which indicates that a -0.05 percentage point 

difference is more consistent with the long-term corresponding trends than the -0.10 percentage 

point difference assumed in the 2018 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 2019 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 0.05 percentage point 

higher than those used in the 2018 report. The change is a result of an updated analysis of the 

data on the implicit price deflator for investment expenditures which indicates that a -0.05 

percentage point difference is more consistent with the long-term corresponding price trends than 

the -0.10 percentage point difference used in the 2018 report.

2.6 Projections from Other Sources

IHS Markit (formerly Global Insight, Inc.) provides projections through 2048 in its latest 

long-run trend forecast (see The 30-Year Focus, Third Quarter, August 2018). Over the 20-year 

period from 2028 to 2048, IHS Markit projects an average annual rate of increase of 2.19 percent 

for the CPI and 2.36 percent for the PGDP, with a resulting price differential of 0.17 percentage 

point (2.36 − 2.19). The Moody’s Analytics’ September 2018 forecast extends to 2048. Over the 
Price Inflation, Page 17

20-year period from 2028 to 2048, Moody’s Analytics projects an average annual growth rate of 

2.23 percent for the CPI-W and 1.92 percent for the PGDP, for a price differential of -0.31

percentage point (1.92 – 2.23).

The Office of Management and Budget (OMB) Mid-Session Review of the Fiscal Year 2019

Budget includes projections through 2028. OMB’s annual growth rates for the PGDP and CPI-W 

(and CPI-U) for 2028 were 2.01 and 2.27 percent, respectively. Thus, OMB projects a price 

differential of -0.26 percentage point (i.e., 2.01 – 2.27). The Congressional Budget Office (CBO) 

June 2018 report, The 2018 Long-Term Budget Outlook, includes projections through 2048. 

CBO’s annual growth rates for the PGDP and CPI-W (and CPI-U) for 2028-48 were 2.0 and 2.4

percent, respectively. Thus, CBO projects an average annual price differential of -0.4 percentage 

point (i.e., 2.0 − 2.4) for the period. The Social Security Advisory Board’s 2015 Technical Panel 

on Assumptions and Methods recommended assuming an ultimate (i.e., long-range average) 

annual rate of increase in the CPI-W of 2.5 percent for alternative II, and a price differential 

of -0.4 percentage point.
Price Inflation, Page 18

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

1961 35.39

1962 35.67 0.80

1963 36.07 0.96 1.12

1964 36.46 1.00 1.11 1.10

1965 36.98 1.10 1.21 1.25 1.40

1966 37.95 1.41 1.56 1.71 2.02 2.64

1967 39.04 1.65 1.82 2.00 2.30 2.75 2.87

1968 40.40 1.91 2.10 2.29 2.59 2.99 3.17 3.48

1969 42.11 2.20 2.40 2.61 2.92 3.30 3.53 3.86 4.24

1970 44.05 2.46 2.67 2.90 3.20 3.56 3.80 4.11 4.42 4.61

1971 45.85 2.62 2.83 3.04 3.33 3.65 3.85 4.10 4.31 4.34 4.08

1972 47.28 2.67 2.86 3.05 3.30 3.58 3.73 3.91 4.01 3.94 3.60 3.13

1973 50.11 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 55.06 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 59.41 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 62.68 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 66.52 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 70.93 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 77.72 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 86.28 4.80 5.03 5.26 5.53 5.81 6.04 6.29 6.53 6.74 6.95 7.28 7.81 8.07 7.77 7.75 8.32 9.06 10.29 11.02

1981 94.51 5.03 5.26 5.50 5.76 6.04 6.27 6.52 6.76 6.97 7.19 7.50 8.00 8.25 8.03 8.05 8.56 9.18 10.04 10.28

1982 100.08 5.08 5.29 5.52 5.77 6.03 6.25 6.48 6.69 6.89 7.08 7.35 7.79 7.99 7.76 7.74 8.11 8.51 8.99 8.80

1983 104.19 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

1984 108.49 4.99 5.19 5.38 5.60 5.83 6.01 6.20 6.37 6.51 6.65 6.85 7.17 7.27 7.02 6.92 7.10 7.24 7.34 6.90

1985 112.06 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

1986 113.85 4.79 4.95 5.12 5.31 5.50 5.65 5.79 5.93 6.03 6.11 6.25 6.48 6.52 6.24 6.09 6.15 6.15 6.09 5.61

1987 117.56 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

1988 121.72 4.68 4.83 4.99 5.15 5.32 5.44 5.56 5.67 5.75 5.81 5.91 6.09 6.10 5.83 5.67 5.69 5.65 5.55 5.11

1989 126.93 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

1990 132.96 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

1991 137.66 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

1992 140.94 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

1993 144.25 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

1994 147.12 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

1995 150.74 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

1996 154.63 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

1997 157.94 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

1998 159.79 4.16 4.25 4.34 4.44 4.53 4.59 4.65 4.69 4.71 4.71 4.73 4.79 4.75 4.54 4.40 4.35 4.26 4.14 3.87

1999 163.09 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

2000 168.84 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

2001 173.38 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 4.15 4.07 3.96 3.71

2002 175.83 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

2003 179.78 3.95 4.02 4.10 4.18 4.25 4.29 4.33 4.36 4.36 4.35 4.36 4.40 4.35 4.17 4.03 3.98 3.90 3.79 3.56

2004 184.48 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

2005 190.98 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

2006 197.05 3.89 3.96 4.03 4.10 4.17 4.20 4.24 4.26 4.26 4.25 4.25 4.29 4.24 4.07 3.94 3.89 3.82 3.72 3.51

2007 202.76 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

2008 210.98 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

2009 209.64 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

2010 214.00 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

2011 221.53 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 3.83 3.72 3.67 3.60 3.51 3.33

2012 226.22 3.70 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

2013 229.29 3.66 3.72 3.77 3.82 3.87 3.90 3.92 3.93 3.93 3.91 3.91 3.93 3.88 3.73 3.62 3.57 3.50 3.41 3.23

2014 232.77 3.62 3.67 3.72 3.78 3.83 3.85 3.87 3.88 3.87 3.86 3.85 3.87 3.82 3.67 3.56 3.51 3.44 3.36 3.18

2015 231.81 3.54 3.59 3.64 3.69 3.74 3.76 3.78 3.79 3.78 3.76 3.75 3.77 3.71 3.57 3.46 3.41 3.34 3.25 3.08

2016 234.08 3.49 3.55 3.59 3.64 3.68 3.71 3.72 3.73 3.72 3.70 3.69 3.70 3.65 3.51 3.40 3.35 3.28 3.19 3.02

2017 239.05 3.47 3.52 3.56 3.61 3.65 3.67 3.69 3.70 3.68 3.66 3.66 3.67 3.61 3.47 3.37 3.32 3.25 3.16 3.00
Price Inflation, Page 19

Table 2.5 (continued): Adjusted CPI W: Compound Annual Rates of Growth (%) Base Year = 1982-1984

From

To Variable 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

1979 77.72

1980 86.28 11.02

1981 94.51 10.28 9.54

1982 100.08 8.80 7.70 5.89

1983 104.19 7.60 6.49 4.99 4.10

1984 108.49 6.90 5.89 4.70 4.11 4.13

1985 112.06 6.29 5.37 4.35 3.84 3.71 3.29

1986 113.85 5.61 4.73 3.79 3.28 3.00 2.44 1.60

1987 117.56 5.31 4.52 3.70 3.27 3.07 2.71 2.43 3.26

1988 121.72 5.11 4.40 3.68 3.32 3.16 2.92 2.79 3.40 3.53

1989 126.93 5.03 4.38 3.75 3.45 3.35 3.19 3.16 3.69 3.91 4.28

1990 132.96 5.00 4.42 3.86 3.61 3.54 3.45 3.48 3.95 4.19 4.51 4.75

1991 137.66 4.88 4.34 3.83 3.61 3.54 3.46 3.49 3.87 4.02 4.19 4.14 3.54

1992 140.94 4.69 4.17 3.70 3.48 3.41 3.33 3.33 3.62 3.69 3.73 3.55 2.96 2.38

1993 144.25 4.52 4.03 3.59 3.38 3.31 3.22 3.21 3.44 3.47 3.46 3.25 2.75 2.37 2.35

1994 147.12 4.35 3.89 3.46 3.26 3.19 3.09 3.07 3.26 3.26 3.21 3.00 2.56 2.24 2.17 1.99

1995 150.74 4.23 3.79 3.39 3.20 3.13 3.04 3.01 3.17 3.16 3.10 2.91 2.54 2.29 2.27 2.22 2.46

1996 154.63 4.13 3.71 3.34 3.16 3.08 3.00 2.97 3.11 3.09 3.04 2.86 2.55 2.35 2.35 2.34 2.52 2.58

1997 157.94 4.02 3.62 3.26 3.09 3.02 2.93 2.90 3.02 3.00 2.94 2.77 2.49 2.32 2.30 2.29 2.39 2.36 2.14

1998 159.79 3.87 3.48 3.14 2.97 2.89 2.80 2.77 2.86 2.83 2.76 2.59 2.32 2.15 2.11 2.07 2.09 1.96 1.65 1.17

1999 163.09 3.78 3.41 3.08 2.91 2.84 2.76 2.72 2.80 2.77 2.70 2.54 2.30 2.14 2.11 2.07 2.08 1.99 1.79 1.62

2000 168.84 3.76 3.41 3.10 2.95 2.88 2.80 2.77 2.85 2.82 2.76 2.63 2.42 2.29 2.28 2.27 2.32 2.29 2.22 2.25

2001 173.38 3.71 3.38 3.08 2.93 2.87 2.80 2.77 2.84 2.81 2.76 2.63 2.44 2.33 2.33 2.33 2.37 2.36 2.32 2.36

2002 175.83 3.61 3.29 3.00 2.86 2.79 2.72 2.69 2.75 2.72 2.66 2.54 2.36 2.25 2.24 2.22 2.25 2.22 2.16 2.17

2003 179.78 3.56 3.24 2.97 2.83 2.77 2.69 2.66 2.72 2.69 2.63 2.52 2.35 2.25 2.24 2.23 2.25 2.23 2.18 2.18

2004 184.48 3.52 3.22 2.95 2.82 2.76 2.69 2.66 2.72 2.69 2.63 2.52 2.37 2.28 2.27 2.26 2.29 2.27 2.23 2.24

2005 190.98 3.52 3.23 2.97 2.85 2.79 2.73 2.70 2.76 2.73 2.69 2.59 2.44 2.37 2.37 2.37 2.40 2.39 2.37 2.40

2006 197.05 3.51 3.23 2.98 2.86 2.81 2.75 2.72 2.78 2.76 2.71 2.62 2.49 2.42 2.42 2.43 2.46 2.47 2.45 2.49

2007 202.76 3.48 3.22 2.98 2.86 2.81 2.76 2.73 2.79 2.76 2.72 2.64 2.51 2.45 2.45 2.46 2.50 2.50 2.49 2.53

2008 210.98 3.50 3.24 3.02 2.91 2.86 2.81 2.79 2.84 2.82 2.79 2.71 2.60 2.54 2.55 2.57 2.61 2.62 2.62 2.67

2009 209.64 3.36 3.11 2.89 2.78 2.73 2.67 2.64 2.69 2.66 2.62 2.54 2.43 2.36 2.36 2.36 2.39 2.38 2.37 2.39

2010 214.00 3.32 3.07 2.86 2.75 2.70 2.65 2.62 2.66 2.64 2.60 2.52 2.41 2.35 2.35 2.35 2.37 2.36 2.35 2.36

2011 221.53 3.33 3.09 2.88 2.78 2.73 2.68 2.66 2.70 2.68 2.64 2.56 2.46 2.41 2.41 2.41 2.44 2.44 2.43 2.45

2012 226.22 3.29 3.06 2.86 2.76 2.71 2.66 2.64 2.68 2.65 2.62 2.54 2.45 2.39 2.39 2.40 2.42 2.42 2.41 2.42

2013 229.29 3.23 3.01 2.81 2.71 2.66 2.61 2.59 2.63 2.60 2.57 2.49 2.40 2.35 2.34 2.34 2.36 2.36 2.34 2.36

2014 232.77 3.18 2.96 2.77 2.67 2.63 2.58 2.55 2.59 2.56 2.53 2.46 2.36 2.31 2.31 2.30 2.32 2.31 2.30 2.31

2015 231.81 3.08 2.86 2.67 2.58 2.53 2.48 2.45 2.48 2.45 2.41 2.34 2.25 2.20 2.19 2.18 2.19 2.18 2.15 2.15

2016 234.08 3.02 2.81 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 2.13 2.12 2.09 2.09

2017 239.05 3.00 2.79 2.61 2.52 2.47 2.42 2.40 2.42 2.39 2.35 2.29 2.20 2.15 2.14 2.13 2.13 2.12 2.10 2.09

From

To Variable 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1997 157.94

1998 159.79 1.17

1999 163.09 1.62 2.07

2000 168.84 2.25 2.79 3.52

2001 173.38 2.36 2.76 3.10 2.69

2002 175.83 2.17 2.42 2.54 2.05 1.42

2003 179.78 2.18 2.39 2.47 2.12 1.83 2.25

2004 184.48 2.24 2.42 2.50 2.24 2.09 2.43 2.61

2005 190.98 2.40 2.58 2.67 2.50 2.45 2.79 3.07 3.52

2006 197.05 2.49 2.65 2.74 2.61 2.59 2.89 3.10 3.35 3.17

2007 202.76 2.53 2.68 2.76 2.65 2.64 2.89 3.05 3.20 3.04 2.90

2008 210.98 2.67 2.82 2.90 2.82 2.84 3.08 3.25 3.41 3.37 3.47 4.06

2009 209.64 2.39 2.50 2.54 2.43 2.40 2.54 2.59 2.59 2.36 2.09 1.68 -0.63

2010 214.00 2.36 2.46 2.50 2.40 2.37 2.49 2.52 2.50 2.30 2.08 1.81 0.71 2.08

2011 221.53 2.45 2.55 2.58 2.50 2.48 2.60 2.64 2.65 2.50 2.37 2.24 1.64 2.80 3.52

2012 226.22 2.42 2.51 2.55 2.47 2.45 2.55 2.59 2.58 2.45 2.33 2.21 1.76 2.57 2.82 2.12

2013 229.29 2.36 2.44 2.46 2.38 2.36 2.44 2.46 2.45 2.31 2.19 2.07 1.68 2.27 2.33 1.74 1.36

2014 232.77 2.31 2.38 2.40 2.32 2.29 2.37 2.38 2.35 2.22 2.10 1.99 1.65 2.12 2.12 1.66 1.44 1.52

2015 231.81 2.15 2.21 2.22 2.14 2.10 2.15 2.14 2.10 1.96 1.82 1.69 1.35 1.69 1.61 1.14 0.82 0.55 -0.41

2016 234.08 2.09 2.14 2.15 2.06 2.02 2.06 2.05 2.00 1.87 1.74 1.61 1.31 1.59 1.51 1.11 0.86 0.69 0.28 0.98

2017 239.05 2.09 2.14 2.15 2.07 2.03 2.07 2.06 2.01 1.89 1.77 1.66 1.40 1.65 1.59 1.28 1.11 1.05 0.89 1.55 2.13
Price Inflation, Page 20

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2014 103.69 3.46 3.50 3.55 3.60 3.63 3.65 3.67 3.66 3.64 3.60 3.57 3.56 3.51 3.38 3.24 3.18 3.10 3.00 2.85

2015 104.76 3.41 3.46 3.50 3.55 3.58 3.60 3.62 3.61 3.58 3.54 3.51 3.50 3.45 3.32 3.18 3.12 3.05 2.94 2.80

2016 105.90 3.37 3.41 3.46 3.50 3.53 3.55 3.56 3.55 3.53 3.49 3.46 3.44 3.40 3.27 3.13 3.07 3.00 2.90 2.75

2017 107.93 3.34 3.38 3.43 3.47 3.50 3.52 3.53 3.52 3.49 3.46 3.42 3.41 3.36 3.24 3.10 3.05 2.97 2.87 2.73
Price Inflation, Page 21

Table 2.6 (continued). Adjusted GDP Deflator: Compound Annual Rates of Growth (%) Base Year = 2012

To Variable From

1979 38.77 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2014 103.69 2.67 2.48 2.36 2.31 2.27 2.24 2.25 2.24 2.19 2.12 2.05 2.00 1.98 1.96 1.96 1.95 1.95 1.97 2.02

2015 104.76 2.63 2.43 2.32 2.27 2.23 2.20 2.20 2.19 2.15 2.08 2.01 1.96 1.94 1.92 1.91 1.90 1.91 1.92 1.96

2016 105.90 2.58 2.39 2.28 2.24 2.19 2.16 2.17 2.16 2.11 2.04 1.98 1.92 1.91 1.89 1.87 1.86 1.87 1.87 1.92

2017 107.93 2.57 2.38 2.27 2.23 2.18 2.15 2.16 2.15 2.10 2.04 1.97 1.92 1.91 1.89 1.88 1.87 1.87 1.87 1.92

From

To Variable 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1997 74.45

1998 75.27 1.10

1999 76.35 1.27 1.43

2000 78.07 1.60 1.84 2.26

2001 79.82 1.76 1.98 2.25 2.25

2002 81.04 1.71 1.86 2.01 1.88 1.52

2003 82.57 1.74 1.87 1.98 1.88 1.70 1.89

2004 84.78 1.87 2.00 2.12 2.08 2.03 2.28 2.68

2005 87.41 2.03 2.16 2.28 2.29 2.30 2.55 2.89 3.10

2006 90.07 2.14 2.27 2.39 2.41 2.45 2.68 2.94 3.08 3.05

2007 92.50 2.19 2.32 2.43 2.45 2.49 2.68 2.88 2.95 2.87 2.69

2008 94.26 2.17 2.28 2.37 2.38 2.40 2.55 2.69 2.69 2.55 2.30 1.91

2009 95.00 2.05 2.14 2.21 2.20 2.20 2.30 2.37 2.30 2.10 1.79 1.34 0.78

2010 96.11 1.98 2.06 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 1.99 2.06 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 1.99 2.05 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 1.97 2.03 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 103.69 1.97 2.02 2.06 2.05 2.03 2.07 2.09 2.03 1.92 1.77 1.64 1.60 1.77 1.92 1.86 1.83 1.88

2015 104.76 1.92 1.96 2.00 1.98 1.96 1.99 2.00 1.94 1.83 1.69 1.57 1.52 1.64 1.74 1.65 1.56 1.46 1.03

2016 105.90 1.87 1.92 1.94 1.92 1.90 1.93 1.93 1.87 1.76 1.63 1.51 1.47 1.56 1.63 1.54 1.44 1.33 1.06 1.09

2017 107.93 1.87 1.92 1.94 1.92 1.90 1.93 1.93 1.87 1.77 1.66 1.56 1.52 1.61 1.67 1.60 1.54 1.48 1.35 1.50 1.92
Price Inflation, Page 22

2.7 Appendix

OCACT adjustments to the published CPI-W annual growth rates. Between 1978 and 2017, 

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 

http://stats.bls.gov/cpi/cpiurs.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 2019 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 AVERAGE REAL ECONOMY-WIDE EARNINGS GROWTH .................................................................................3

3.3.1 Productivity............................................................................................................................................5

3.3.2 Other Components: Links between Real Earnings and Productivity.....................................................5

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...................................................................................................................................... 8

3.3.2.4 Price Differential (Expressed as Ratio of PGDP to CPI-W) .............................................................................. 9

3.3.2.5 Total Links....................................................................................................................................................... 10

3.4 PROJECTIONS FROM OTHER SOURCES...........................................................................................................10

3.5 APPENDIX A .................................................................................................................................................13

3.6 APPENDIX B .................................................................................................................................................17

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 ............................................................................................................................4

TABLE 3.3: AVERAGE ANNUAL REAL PERCENTAGE CHANGE IN AVERAGE EARNINGS: TOTAL U.S. ECONOMY AND ITS 

COMPONENTS .........................................................................................................................................................6

TABLE 3.4: AVERAGE HOURS WORKED PER WEEK, TOTAL U.S.: COMPOUND ANNUAL RATES OF CHANGE (%).........11
Average Real Wage Differential, Page 2

3 Average Real Wage Differential

3.1 Summary

For the 2019 Trustees Report, over the 65-year period from 2028 to 2093, the average annual 

growth rate in the OASDI covered wage is assumed to be 5.03 percent, 3.81 percent, and 2.59

percent for alternatives I, II, and III, respectively (Table 3.1). 41,42 Also for the 2019 Trustees 

Report, the assumed ultimate annual rates of increase in the CPI-W are 3.20 percent, 2.60

percent, and 2.00 percent for alternatives I, II, and III, respectively (Table 2.1). Thus, for the 

2019 Trustees Report, the average real wage differential, over the 65-year period from 2028 to 

2093, is assumed to be 1.83 percent (5.03 less 3.20), 1.21 percent (3.81 less 2.60), and 0.59

percent (2.59 less 2.00) for alternatives I, II, and III, respectively.43 These average real wage 

differentials for alternatives I, II, and III are 0.01 percentage point higher than in the 2018

Trustees Report.

Table 3.1: Assumed Average Real Wage Differential

Average Annual Percent Change

(2028 to 2093)

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 Trustees Report

I II III I II III I II III

Average Nominal Wage 5.03 3.81 2.59 5.02 3.80 2.58 0.01 0.01 0.01

Less: CPI-W 3.20 2.60 2.00 3.20 2.60 2.00 0.00 0.00 0.00

Equals: 

Average Real Wage Differential

1.83 1.21 0.59 1.82 1.20 0.58 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 annual real wage 

 

41 The 65-year period begins with the last year of the 10-year (2018 to 2028) “short-range” projection 

period and ends with the last year of the 75-year (2018 to 2093) “long-range” projection period. 

42 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. 

43 The real wage differential is defined as the annual percentage change in the average OASDI covered 

wage minus the annual percentage change in the CPI.
Average Real Wage Differential, Page 3

differential is defined as the annual percentage change in the average OASDI covered wage 

minus the annual percentage change in the CPI. The average real wage differential over the 

65-year period from 2028 to 2093 is the average of annual real wage differentials over the 

period.

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 approximately 

equal.

For the 2019 Trustees Report, the average annual rate of increase in average real U.S. earnings, 

over the 65-year period from 2028 to 2093, is assumed to be 1.77 percent, 1.18 percent, and 0.60 

percent for alternatives I, II, and III, respectively. These values are 0.01 percentage point higher 

than in the 2018 Trustees Report. 

3.3 Average Real Economy-Wide Earnings Growth 

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 weekly earnings in the total U.S. economy increased at an average annual rate of 

0.99 percent over the last 40 years (1977-2017), 1.22 percent over the last 30 years (1987-2017), 

1.15 percent over the last 20 years (1997-2017), and 0.76 percent over the last 10 years 

(2007-2017). The average real earnings of OASDI covered workers (which differs from average 

real weekly earnings in the total economy partly because of changes in the types of workers 

covered by the OASDI program) increased at an average annual rate of 0.97 percent over the last 

40 years, 0.96 percent over the last 30 years, 0.93 percent over the last 20 years, and 0.49 percent 

over the last 10 years (see Table 3.2 below). Note that these periods do not cover complete 

economic cycles and thus may not be the best indicators of true trend growth rates. 

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. This 
Average Real Wage Differential, Page 4

suggests that it is reasonable to evaluate the 1.18 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. 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), -0.45 percent 

from 1973 to 1979 (6 years), 0.47 percent from 1979 to 1990 (11 years), 2.12 percent from 1990

to 2001 (11 years), and 0.53 percent from 2001 to 2007 (6 years).44 The 1.18 percent assumed 

average future annual real growth rate in average economy-wide earnings is close to the 1.13

percent historical average annual real growth rate over the last three complete cycles (28-year 

period from 1979 to 2007).

Table 3.2: Average Annual Real Percentage Change in Average Earnings: Comparison of the U.S. Economy to 

OASDI Covered

 

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

1980-81, which are not counted as separate cycles.

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:

 1967-1977 1.02 -0.14 -0.05 -0.09 0.88

 1977-1987 0.31 0.71 0.30 0.41 1.02

 1987-1997 1.35 -0.34 -0.16 -0.18 1.01

 1997-2007 1.55 -0.18 -0.11 -0.07 1.37

 2007-2017 0.76 -0.26 -0.02 -0.24 0.49

 1967-2017 1.00 -0.04 -0.01 -0.03 0.95

 1977-2017 0.99 -0.02 0.00 -0.02 0.97

 1987-2017 1.22 -0.26 -0.10 -0.16 0.96

 1997-2017 1.15 -0.22 -0.06 -0.16 0.93

 2007-2017 0.76 -0.26 -0.02 -0.24 0.49

 By Complete Economic Cycle (Peak-to-Peak):

 Individual Cycle

 1969-1973 1.93 -0.32 -0.23 -0.10 1.60

 1973-1979 -0.45 1.01 0.47 0.53 0.56

 1979-1990 0.47 0.11 0.09 0.02 0.58

 1990-2001 2.12 -0.49 -0.23 -0.26 1.62

 2001-2007 0.53 0.26 0.08 0.18 0.79

 Last Two Cycles

 1990-2007 1.56 -0.23 -0.12 -0.11 1.33

 Last Three Cycles

 1979-2007 1.13 -0.09 -0.04 -0.06 1.03

 Last Four Cycles

 1973-2007 0.85 0.10 0.05 0.05 0.95

 Last Five Cycles

 1969-2007 0.96 0.06 0.02 0.03 1.02
Average Real Wage Differential, Page 5

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 complete economic cycle from 1990 to 2001

may reflect 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 three complete economic cycles seems 

appropriate. This approach allows us to average out the effects of past demographic trends, 

which initially depressed and later boosted average earnings growth. 

Additional circumstances 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 2019 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 four economic cycles (1973-2007), average real 

earnings increased at an average annual rate of only 0.85 percent per year, while productivity for 

the total U.S. economy increased at 1.64 percent per year. The approximate difference of -0.78

percent per year (1.0085 / 1.0164; 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 five economic cycles for each of those factors.45

 

45 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 2.6 Appendix. Adjustments to 
Average Real Wage Differential, Page 6

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.

 

employment are described in Section 3.5 Appendix A. 

Total Links Compensation Earnings to Hours per Price Average

Period Productivity Links to GDP Compensation Week Differential Residual Real Earnings

Historical: (1) (2) (3) (4) (5) (6) (7) (8)

 By Decade:

 1967-1977 2.06 -1.02 -0.18 -0.40 -0.75 0.32 0.00 1.02

 1977-1987 1.28 -0.96 -0.15 -0.28 -0.17 -0.37 0.00 0.31

 1987-1997 1.42 -0.07 -0.04 -0.03 0.29 -0.29 0.00 1.35

 1997-2007 2.31 -0.75 -0.05 -0.12 -0.25 -0.33 0.00 1.55

 2007-2017 1.03 -0.27 -0.05 0.04 -0.16 -0.10 0.00 0.76

 1967-2017 1.62 -0.61 -0.10 -0.16 -0.21 -0.15 0.00 1.00

 1977-2017 1.51 -0.51 -0.07 -0.10 -0.07 -0.27 0.00 0.99

 1987-2017 1.59 -0.36 -0.05 -0.04 -0.04 -0.24 0.00 1.22

 1997-2017 1.67 -0.51 -0.05 -0.04 -0.21 -0.22 0.00 1.15

 2007-2017 1.03 -0.27 -0.05 0.04 -0.16 -0.10 0.00 0.76

 By Complete Economic Cycle (Peak-to-Peak):

 Individual Cycle

 1969-1973 2.75 -0.80 -0.04 -0.34 -0.88 0.46 0.00 1.93

 1973-1979 1.15 -1.59 -0.48 -0.43 -0.55 -0.13 0.00 -0.45

 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 2.12

 2001-2007 2.19 -1.63 -0.93 -0.18 -0.37 -0.15 0.00 0.53

 Last Two Cycles

 1990-2007 1.97 -0.40 -0.05 -0.03 -0.03 -0.29 0.00 1.56

 Last Three Cycles

 1979-2007 1.75 -0.61 -0.10 -0.13 -0.06 -0.32 0.00 1.13

 Last Four Cycles

 1973-2007 1.64 -0.78 -0.16 -0.19 -0.15 -0.28 0.00 0.85

 Last Five Cycles

 1969-2007 1.76 -0.78 -0.15 -0.20 -0.23 -0.21 0.00 0.96

 I 1.93 -0.17 0.00 0.02 0.05 -0.24 0.00 1.77

 II 1.63 -0.45 0.00 -0.07 -0.05 -0.34 0.00 1.18

 III 1.33 -0.74 0.00 -0.15 -0.15 -0.44 0.00 0.60

Future Average Annual Rates of Increase for the 2019 Trustees Report (2028-2093)

Table 3.3: Average Annual Real Percentage Change in Average Earnings: Total U.S. Economy and Its 

Components
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 2019 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 towards 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, insurance premiums, and government social insurance programs. 

Using NIPA definitions, total worker earnings are the sum of total wage and 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 -0.20 percent from 1969 to 2007, a 38-year 

period that covers the last five peak-to-peak 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.

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 workforce 

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 funds 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 are expected to 

be significantly affected by the Affordable Care Act enacted in 2010. This expectation led to a 

significant change in the assumed future path of the ratio of earnings to compensation between 
Average Real Wage Differential, Page 8

the 2009 and subsequent Trustees Reports.46 For the 2019 Trustees Report, the annual rates of 

change in the ratio of wages to employee compensation are assumed to be consistent with the 

most recent projections of ESI from the Center for Medicare and Medicaid Services (CMS). In 

September 2018, CMS revised its projections of ESI for the period 2019-93. The average growth 

rate of ESI in the revised CMS projections is slightly lower than in their 2017 projections. The 

assumed path for the annual rates of change in the ratio of wages to employee compensation over 

the last 65 years of the projection horizon (2028 to 2093) is consistent with the annual rates of 

change from the revised CMS projections and the National Health Expenditure projections for 

2017-26 released in February 2018.

47 This will result in an average annual rate of growth in the 

ratio of wages to employee compensation of about -0.06 percent for alternative II over the last 65 

years of the 75-year projection period. This is a slightly slower decline than the -0.08 percent in 

the 2018 report.

Hence, for the 2019 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 (2028 to 2093) is 

assumed to be 0.04, -0.06, and -0.16 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 (2028 to 2093) is 0.03, -0.06, 

and -0.15 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, computed on an average weekly basis, is the sum of civilian 

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 2019 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 

2018 Trustees Report.

The average annual rate of change in AHW was -0.23 percent over the last five economic cycles, 

a 38-year period from 1969 to 2007. Looking at individual cycles, the average annual rate of 

change in AHW was -0.88 percent, -0.55 percent, -0.11 percent, 0.16 percent, and -0.37 percent, 

over the 1969-1973, 1973-1979, 1979-1990, 1990-2001, and 2001-2007 periods, respectively. 

 46 For details, see Section 3.6 Appendix B.

47 https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/proj2017.pdf
Average Real Wage Differential, Page 9

The historical pattern of AHW, as defined in this section, 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.48 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 in the last decade of the 20th century and declining in the first decade of the 21st century. 

The average annual rate of change in the average weekly hours implicit in the BLS calculation of 

total hours worked was –0.57 percent, –0.49 percent, –0.11 percent, –0.04 percent, and –0.12

percent, over the 1969-1973, 1973-1979, 1979-1990, 1990-2001, and 2001-2007 periods, 

respectively. The average annual rate of change over the last five economic cycles (1969 to 

2007) was –0.20 percent, which is very close to the average rate of change calculated using the 

CPS-based employment measure.

49

The average annual rate of change in AHW was -0.37 percent over the last complete economic 

cycle, a 6-year period from 2001 to 2007, suggesting a return to the steep declines seen over the 

period from 1969 to 1979. However, the magnitude of this drop may be due to differences in 

employment estimates described above, as the average annual rate of change implicit in the BLS 

estimates of total hours worked is –0.12 percent. Regardless, the return to declines in the rate of 

change in AHW since 2001 was substantial. 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 last three 

economic cycles, a 28-year period from 1979 to 2007.

50

 

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 

2019 Trustees Report the assumed ultimate annual rate of change in AHW is -0.05 percent for 

alternative II.

3.3.2.4 Price Differential (Expressed as Ratio of PGDP to CPI-W)

 48 http://www.bls.gov/lpc/special_requests/us_total_hrs_emp.xlsx.

49 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 

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.

50 The corresponding value implicit in the BLS estimate of total hours worked is -0.08 percent.
Average Real Wage Differential, Page 10

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. For the 2019 Trustees Report, the assumed ultimate 

price differential (expressed as the PGDP less CPI-W average annual rates of increase) 

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 2.3). 

These assumed values for the coverage component and the total are 0.05 percentage point higher

those assumed in the 2018 Trustees Report.

3.3.2.5 Total Links

The average annual change in the total links was -0.61 percent over the last three economic 

cycles and -0.78 percent over the last four cycles. For the 2019 Trustees Report, the assumed 

average annual changes in the total links are approximately -0.16 percentage point, -0.45

percentage point, and -0.74 percentage point for alternatives I, II, and III, respectively.

3.4 Projections from Other Sources

IHS Markit (formerly Global Insight, Inc.) provides projections through 2048 in its latest 

long-run trend forecast (see The 30-Year Focus, Third Quarter, August 2018). IHS Markit

projects that the average annual real growth rate for average U.S. earnings be 1.87 percent over 

the 20-year period from 2028 to 2048. Moody’s Analytics’ September 2018 forecast extends to 

2048. Over the 20-year period from 2028 to 2048, Moody’s Analytics projects that the annual 

real growth rate for average U.S. earnings will average 1.34 percent.

The Office of Management and Budget (OMB) Mid-Session Review of the Fiscal Year 2019

Budget includes projections through 2028. OMB projects that the annual growth real rate for 

average U.S. earnings will be about 2.33 percent for 2028. The Congressional Budget Office 

(CBO) June 2018 report, The 2018 Long-Term Budget Outlook, includes projections through 

2048. CBO projects that the annual real growth rate for average U.S. wages will average about 

1.1 percent over the period 2028 to 2048. The Social Security Advisory Board’s 2015 Technical 

Panel on Assumptions and Methods recommended no changes to the assumed ultimate (i.e., 

long-range average) annual real rate of increase in the average wage of 1.17 percent in the 2015 

Trustees Report, alternative II. The Technical Panel on Assumptions and Methods also endorsed 

OCACT’s approach to estimating the effect of health insurance cost on wages.
Differential, Page 

Average Real Wage 

11

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

1961 37.56

1962 37.83 0.73

1963 37.60 0.06 -0.60

1964 37.75 0.17 -0.11 0.38

1965 38.00 0.29 0.15 0.53 0.67

1966 38.19 0.33 0.23 0.51 0.58 0.49

1967 37.71 0.07 -0.07 0.07 -0.04 -0.39 -1.26

1968 37.59 0.01 -0.10 0.00 -0.10 -0.36 -0.78 -0.29

1969 37.59 0.01 -0.09 -0.01 -0.09 -0.27 -0.53 -0.16 -0.02

1970 36.71 -0.25 -0.38 -0.34 -0.47 -0.69 -0.98 -0.89 -1.19 -2.34

1971 36.40 -0.31 -0.43 -0.41 -0.52 -0.72 -0.95 -0.88 -1.07 -1.59 -0.84

1972 36.33 -0.30 -0.40 -0.38 -0.48 -0.64 -0.83 -0.74 -0.85 -1.13 -0.52 -0.20

1973 36.28 -0.29 -0.38 -0.36 -0.44 -0.58 -0.73 -0.64 -0.71 -0.88 -0.39 -0.16 -0.13

1974 35.73 -0.38 -0.47 -0.46 -0.55 -0.68 -0.83 -0.76 -0.84 -1.01 -0.67 -0.61 -0.82 -1.51

1975 35.11 -0.48 -0.57 -0.57 -0.66 -0.79 -0.93 -0.89 -0.97 -1.13 -0.89 -0.90 -1.13 -1.63 -1.75

1976 34.98 -0.47 -0.56 -0.55 -0.63 -0.75 -0.87 -0.83 -0.90 -1.02 -0.80 -0.79 -0.94 -1.20 -1.05 -0.35

1977 34.95 -0.45 -0.53 -0.52 -0.59 -0.69 -0.80 -0.75 -0.81 -0.90 -0.70 -0.67 -0.77 -0.93 -0.73 -0.22 -0.09

1978 35.06 -0.40 -0.47 -0.47 -0.53 -0.62 -0.71 -0.66 -0.70 -0.77 -0.57 -0.53 -0.59 -0.68 -0.48 -0.05 0.10 0.29

1979 35.09 -0.38 -0.44 -0.43 -0.49 -0.57 -0.65 -0.60 -0.62 -0.68 -0.50 -0.46 -0.49 -0.55 -0.36 -0.01 0.10 0.20 0.10

1980 34.79 -0.40 -0.46 -0.46 -0.51 -0.59 -0.66 -0.62 -0.64 -0.70 -0.54 -0.50 -0.54 -0.60 -0.45 -0.18 -0.14 -0.16 -0.39 -0.87

1981 34.53 -0.42 -0.48 -0.47 -0.52 -0.60 -0.67 -0.63 -0.65 -0.70 -0.55 -0.52 -0.56 -0.61 -0.49 -0.27 -0.26 -0.30 -0.50 -0.80

1982 34.18 -0.45 -0.51 -0.50 -0.55 -0.62 -0.69 -0.65 -0.68 -0.73 -0.59 -0.57 -0.61 -0.66 -0.55 -0.38 -0.39 -0.45 -0.63 -0.88

1983 34.30 -0.41 -0.46 -0.46 -0.50 -0.57 -0.63 -0.59 -0.61 -0.65 -0.52 -0.49 -0.52 -0.56 -0.45 -0.29 -0.28 -0.31 -0.43 -0.57

1984 34.58 -0.36 -0.41 -0.40 -0.44 -0.50 -0.55 -0.51 -0.52 -0.55 -0.43 -0.39 -0.41 -0.44 -0.33 -0.17 -0.15 -0.15 -0.23 -0.29

1985 34.67 -0.33 -0.38 -0.37 -0.40 -0.46 -0.51 -0.46 -0.48 -0.50 -0.38 -0.35 -0.36 -0.38 -0.27 -0.12 -0.10 -0.10 -0.16 -0.20

1986 34.26 -0.37 -0.41 -0.40 -0.44 -0.49 -0.54 -0.50 -0.52 -0.54 -0.43 -0.40 -0.42 -0.44 -0.35 -0.22 -0.21 -0.22 -0.29 -0.34

1987 34.38 -0.34 -0.38 -0.37 -0.41 -0.45 -0.50 -0.46 -0.47 -0.49 -0.38 -0.36 -0.37 -0.38 -0.30 -0.17 -0.16 -0.17 -0.22 -0.26

1988 34.54 -0.31 -0.35 -0.34 -0.37 -0.41 -0.46 -0.42 -0.42 -0.44 -0.34 -0.31 -0.32 -0.33 -0.24 -0.13 -0.11 -0.11 -0.15 -0.18

1989 34.75 -0.28 -0.31 -0.30 -0.33 -0.37 -0.41 -0.37 -0.37 -0.39 -0.29 -0.26 -0.26 -0.27 -0.19 -0.07 -0.05 -0.05 -0.08 -0.10

1990 34.68 -0.27 -0.31 -0.30 -0.33 -0.36 -0.40 -0.36 -0.37 -0.38 -0.28 -0.25 -0.26 -0.26 -0.19 -0.08 -0.06 -0.06 -0.09 -0.11

1991 34.51 -0.28 -0.32 -0.31 -0.33 -0.37 -0.40 -0.37 -0.37 -0.39 -0.29 -0.27 -0.27 -0.28 -0.20 -0.11 -0.09 -0.09 -0.12 -0.14

1992 34.27 -0.30 -0.33 -0.32 -0.35 -0.38 -0.42 -0.38 -0.39 -0.40 -0.31 -0.29 -0.29 -0.30 -0.23 -0.14 -0.13 -0.13 -0.16 -0.18

1993 34.54 -0.26 -0.29 -0.28 -0.31 -0.34 -0.37 -0.34 -0.34 -0.35 -0.26 -0.24 -0.24 -0.25 -0.18 -0.09 -0.08 -0.07 -0.10 -0.11

1994 35.03 -0.21 -0.24 -0.23 -0.25 -0.28 -0.31 -0.27 -0.27 -0.28 -0.19 -0.17 -0.16 -0.17 -0.10 -0.01 0.01 0.01 0.00 -0.01

1995 35.21 -0.19 -0.22 -0.21 -0.22 -0.25 -0.28 -0.24 -0.24 -0.25 -0.17 -0.14 -0.14 -0.14 -0.07 0.01 0.03 0.04 0.03 0.02

1996 35.31 -0.18 -0.20 -0.19 -0.21 -0.24 -0.26 -0.23 -0.22 -0.23 -0.15 -0.12 -0.12 -0.12 -0.05 0.03 0.05 0.05 0.04 0.04

1997 35.39 -0.16 -0.19 -0.18 -0.19 -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

1998 35.59 -0.15 -0.17 -0.16 -0.17 -0.20 -0.22 -0.19 -0.18 -0.19 -0.11 -0.08 -0.08 -0.08 -0.02 0.06 0.08 0.09 0.08 0.07

1999 35.63 -0.14 -0.16 -0.15 -0.16 -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

2000 35.69 -0.13 -0.15 -0.14 -0.16 -0.18 -0.20 -0.17 -0.16 -0.17 -0.09 -0.07 -0.06 -0.06 0.00 0.07 0.08 0.09 0.08 0.08

2001 35.28 -0.16 -0.18 -0.17 -0.18 -0.21 -0.23 -0.20 -0.19 -0.20 -0.13 -0.10 -0.10 -0.10 -0.05 0.02 0.03 0.04 0.03 0.02

2002 34.95 -0.18 -0.20 -0.19 -0.20 -0.23 -0.25 -0.22 -0.21 -0.22 -0.15 -0.13 -0.13 -0.13 -0.08 -0.02 0.00 0.00 -0.01 -0.02

2003 34.62 -0.19 -0.22 -0.21 -0.22 -0.25 -0.26 -0.24 -0.24 -0.24 -0.18 -0.16 -0.16 -0.16 -0.11 -0.05 -0.04 -0.04 -0.05 -0.06

2004 34.58 -0.19 -0.21 -0.20 -0.22 -0.24 -0.26 -0.23 -0.23 -0.24 -0.18 -0.16 -0.15 -0.15 -0.11 -0.05 -0.04 -0.04 -0.05 -0.06

2005 34.52 -0.19 -0.21 -0.20 -0.22 -0.24 -0.26 -0.23 -0.23 -0.24 -0.18 -0.16 -0.15 -0.16 -0.11 -0.06 -0.05 -0.04 -0.06 -0.06

2006 34.53 -0.19 -0.21 -0.20 -0.21 -0.23 -0.25 -0.23 -0.22 -0.23 -0.17 -0.15 -0.15 -0.15 -0.11 -0.05 -0.04 -0.04 -0.05 -0.06

2007 34.50 -0.18 -0.20 -0.20 -0.21 -0.23 -0.25 -0.22 -0.22 -0.23 -0.17 -0.15 -0.15 -0.15 -0.11 -0.05 -0.04 -0.04 -0.06 -0.06

2008 34.13 -0.20 -0.22 -0.21 -0.23 -0.25 -0.27 -0.24 -0.24 -0.25 -0.19 -0.17 -0.17 -0.17 -0.13 -0.09 -0.08 -0.08 -0.09 -0.10

2009 33.43 -0.24 -0.26 -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

2010 33.54 -0.23 -0.25 -0.24 -0.26 -0.28 -0.29 -0.27 -0.27 -0.28 -0.22 -0.21 -0.21 -0.21 -0.18 -0.13 -0.12 -0.12 -0.14 -0.15

2011 33.72 -0.22 -0.23 -0.23 -0.24 -0.26 -0.28 -0.25 -0.25 -0.26 -0.21 -0.19 -0.19 -0.19 -0.16 -0.11 -0.11 -0.11 -0.12 -0.12

2012 33.73 -0.21 -0.23 -0.22 -0.23 -0.25 -0.27 -0.25 -0.25 -0.25 -0.20 -0.19 -0.19 -0.19 -0.15 -0.11 -0.10 -0.10 -0.11 -0.12

2013 33.82 -0.20 -0.22 -0.21 -0.22 -0.24 -0.26 -0.24 -0.23 -0.24 -0.19 -0.17 -0.17 -0.18 -0.14 -0.10 -0.09 -0.09 -0.10 -0.11

2014 33.90 -0.19 -0.21 -0.20 -0.21 -0.23 -0.25 -0.23 -0.22 -0.23 -0.18 -0.17 -0.16 -0.17 -0.13 -0.09 -0.08 -0.08 -0.09 -0.10

2015 34.11 -0.18 -0.19 -0.19 -0.20 -0.22 -0.23 -0.21 -0.21 -0.21 -0.16 -0.15 -0.15 -0.15 -0.11 -0.07 -0.06 -0.06 -0.07 -0.08

2016 34.03 -0.18 -0.20 -0.19 -0.20 -0.22 -0.23 -0.21 -0.21 -0.21 -0.16 -0.15 -0.15 -0.15 -0.12 -0.08 -0.07 -0.07 -0.08 -0.08

2017 33.95 -0.18 -0.20 -0.19 -0.20 -0.22 -0.23 -0.21 -0.21 -0.21 -0.17 -0.15 -0.15 -0.15 -0.12 -0.08 -0.07 -0.07 -0.08 -0.09
Differential, Page 

Average Real Wage 

12

Table 3.4 (continued). Average Hours Worked per Week, Total U.S.: Compound Annual Rates of change (%)

From

To Variable 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

1979 35.09

1980 34.79 -0.87

1981 34.53 -0.80 -0.72

1982 34.18 -0.88 -0.88 -1.03

1983 34.30 -0.57 -0.46 -0.33 0.37

1984 34.58 -0.29 -0.15 0.04 0.58 0.80

1985 34.67 -0.20 -0.07 0.10 0.48 0.53 0.27

1986 34.26 -0.34 -0.25 -0.16 0.06 -0.04 -0.46 -1.19

1987 34.38 -0.26 -0.17 -0.08 0.12 0.05 -0.19 -0.43 0.35

1988 34.54 -0.18 -0.09 0.00 0.17 0.13 -0.03 -0.13 0.41 0.46

1989 34.75 -0.10 -0.01 0.08 0.24 0.21 0.10 0.05 0.47 0.54 0.61

1990 34.68 -0.11 -0.03 0.05 0.18 0.16 0.05 0.01 0.31 0.30 0.21 -0.18

1991 34.51 -0.14 -0.07 -0.01 0.11 0.08 -0.03 -0.08 0.15 0.10 -0.02 -0.34 -0.50

1992 34.27 -0.18 -0.13 -0.07 0.03 -0.01 -0.11 -0.17 0.00 -0.06 -0.20 -0.46 -0.60 -0.71

1993 34.54 -0.11 -0.06 0.00 0.10 0.07 -0.01 -0.05 0.12 0.08 0.00 -0.15 -0.14 0.04 0.80

1994 35.03 -0.01 0.05 0.11 0.21 0.19 0.13 0.12 0.28 0.27 0.24 0.17 0.25 0.50 1.11 1.43

1995 35.21 0.02 0.08 0.14 0.23 0.22 0.16 0.15 0.30 0.30 0.28 0.22 0.30 0.50 0.91 0.97 0.50

1996 35.31 0.04 0.09 0.15 0.23 0.22 0.18 0.17 0.30 0.30 0.28 0.23 0.30 0.46 0.75 0.74 0.40 0.29

1997 35.39 0.05 0.10 0.15 0.23 0.22 0.18 0.17 0.30 0.29 0.27 0.23 0.29 0.42 0.65 0.61 0.34 0.26 0.23

1998 35.59 0.07 0.13 0.18 0.25 0.25 0.21 0.20 0.32 0.32 0.30 0.27 0.32 0.44 0.63 0.60 0.40 0.36 0.39 0.56

1999 35.63 0.08 0.13 0.17 0.24 0.24 0.20 0.19 0.30 0.30 0.28 0.25 0.30 0.40 0.56 0.52 0.34 0.30 0.30 0.33

2000 35.69 0.08 0.13 0.17 0.24 0.23 0.20 0.19 0.29 0.29 0.28 0.25 0.29 0.38 0.51 0.47 0.31 0.27 0.27 0.28

2001 35.28 0.02 0.07 0.11 0.17 0.16 0.12 0.11 0.20 0.19 0.16 0.13 0.16 0.22 0.33 0.27 0.10 0.04 -0.02 -0.08

2002 34.95 -0.02 0.02 0.06 0.11 0.10 0.06 0.05 0.12 0.11 0.08 0.04 0.06 0.11 0.20 0.13 -0.03 -0.11 -0.17 -0.25

2003 34.62 -0.06 -0.02 0.01 0.06 0.05 0.01 -0.01 0.06 0.04 0.02 -0.03 -0.01 0.03 0.09 0.02 -0.13 -0.21 -0.28 -0.37

2004 34.58 -0.06 -0.02 0.01 0.05 0.04 0.00 -0.01 0.05 0.03 0.01 -0.03 -0.02 0.02 0.08 0.01 -0.13 -0.20 -0.26 -0.33

2005 34.52 -0.06 -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 -0.13 -0.20 -0.25 -0.31

2006 34.53 -0.06 -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

2007 34.50 -0.06 -0.03 0.00 0.04 0.02 -0.01 -0.02 0.03 0.02 -0.01 -0.04 -0.03 0.00 0.05 -0.01 -0.12 -0.17 -0.21 -0.25

2008 34.13 -0.10 -0.07 -0.04 -0.01 -0.02 -0.05 -0.07 -0.02 -0.03 -0.06 -0.09 -0.09 -0.06 -0.02 -0.08 -0.19 -0.24 -0.28 -0.33

2009 33.43 -0.16 -0.14 -0.12 -0.08 -0.10 -0.14 -0.15 -0.11 -0.13 -0.16 -0.19 -0.19 -0.18 -0.15 -0.20 -0.31 -0.37 -0.42 -0.48

2010 33.54 -0.15 -0.12 -0.10 -0.07 -0.08 -0.12 -0.13 -0.09 -0.11 -0.13 -0.17 -0.17 -0.15 -0.12 -0.17 -0.27 -0.32 -0.37 -0.41

2011 33.72 -0.12 -0.10 -0.08 -0.05 -0.06 -0.09 -0.11 -0.06 -0.08 -0.10 -0.14 -0.13 -0.12 -0.08 -0.13 -0.22 -0.27 -0.31 -0.35

2012 33.73 -0.12 -0.10 -0.08 -0.04 -0.06 -0.09 -0.10 -0.06 -0.08 -0.10 -0.13 -0.13 -0.11 -0.08 -0.12 -0.21 -0.25 -0.29 -0.32

2013 33.82 -0.11 -0.09 -0.07 -0.03 -0.05 -0.08 -0.09 -0.05 -0.06 -0.08 -0.11 -0.11 -0.09 -0.06 -0.11 -0.19 -0.22 -0.25 -0.28

2014 33.90 -0.10 -0.08 -0.06 -0.03 -0.04 -0.07 -0.08 -0.04 -0.05 -0.07 -0.10 -0.09 -0.08 -0.05 -0.09 -0.16 -0.20 -0.23 -0.25

2015 34.11 -0.08 -0.06 -0.04 -0.01 -0.02 -0.04 -0.05 -0.01 -0.03 -0.05 -0.07 -0.07 -0.05 -0.02 -0.06 -0.13 -0.16 -0.18 -0.20

2016 34.03 -0.08 -0.06 -0.04 -0.01 -0.02 -0.05 -0.06 -0.02 -0.04 -0.05 -0.08 -0.07 -0.06 -0.03 -0.06 -0.13 -0.16 -0.18 -0.21

2017 33.95 -0.09 -0.07 -0.05 -0.02 -0.03 -0.06 -0.07 -0.03 -0.04 -0.06 -0.08 -0.08 -0.06 -0.04 -0.07 -0.14 -0.16 -0.19 -0.21

From

To Variable 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1997 35.39

1998 35.59 0.56

1999 35.63 0.33 0.11

2000 35.69 0.28 0.15 0.18

2001 35.28 -0.08 -0.29 -0.49 -1.15

2002 34.95 -0.25 -0.45 -0.64 -1.05 -0.95

2003 34.62 -0.37 -0.55 -0.72 -1.02 -0.95 -0.95

2004 34.58 -0.33 -0.48 -0.60 -0.79 -0.67 -0.53 -0.10

2005 34.52 -0.31 -0.44 -0.53 -0.67 -0.55 -0.41 -0.14 -0.18

2006 34.53 -0.27 -0.38 -0.45 -0.55 -0.43 -0.30 -0.08 -0.07 0.04

2007 34.50 -0.25 -0.34 -0.40 -0.48 -0.37 -0.26 -0.08 -0.08 -0.03 -0.09

2008 34.13 -0.33 -0.42 -0.48 -0.56 -0.47 -0.39 -0.28 -0.32 -0.37 -0.58 -1.06

2009 33.43 -0.48 -0.57 -0.64 -0.73 -0.67 -0.63 -0.58 -0.68 -0.80 -1.08 -1.57 -2.08

2010 33.54 -0.41 -0.49 -0.55 -0.62 -0.56 -0.51 -0.45 -0.51 -0.57 -0.72 -0.93 -0.87 0.36

2011 33.72 -0.35 -0.41 -0.46 -0.52 -0.45 -0.40 -0.33 -0.36 -0.39 -0.47 -0.57 -0.41 0.44 0.52

2012 33.73 -0.32 -0.38 -0.42 -0.47 -0.41 -0.35 -0.29 -0.31 -0.33 -0.39 -0.45 -0.30 0.30 0.27 0.02

2013 33.82 -0.28 -0.34 -0.37 -0.41 -0.35 -0.30 -0.23 -0.25 -0.26 -0.30 -0.33 -0.19 0.29 0.27 0.15 0.27

2014 33.90 -0.25 -0.30 -0.33 -0.37 -0.31 -0.25 -0.19 -0.20 -0.20 -0.23 -0.25 -0.11 0.28 0.26 0.18 0.26 0.24

2015 34.11 -0.20 -0.25 -0.27 -0.30 -0.24 -0.19 -0.12 -0.12 -0.12 -0.14 -0.14 -0.01 0.34 0.34 0.29 0.38 0.43 0.62

2016 34.03 -0.21 -0.25 -0.27 -0.30 -0.24 -0.19 -0.13 -0.13 -0.13 -0.15 -0.15 -0.04 0.26 0.24 0.18 0.22 0.21 0.19 -0.25

2017 33.95 -0.21 -0.25 -0.27 -0.29 -0.24 -0.19 -0.14 -0.14 -0.14 -0.15 -0.16 -0.06 0.20 0.17 0.11 0.13 0.10 0.05 -0.23 -0.22
Average Real Wage Differential, Page 13

3.5 Appendix A

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)51 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 

 51 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, we can use their multiplicative employment-population ratio factors to adjust 

the employment levels.
Average Real Wage Differential, Page 14

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 
Average Real Wage Differential, Page 15

methodological changes in the population estimation process. The difference between the 

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 
Average Real Wage Differential, Page 16

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 

318,000 persons. BLS does not update data from December 2017 and earlier. OCACT adjusted 

the employment series back to 2000.
Average Real Wage Differential, Page 17

3.6 Appendix B

For the 2009 Trustees Report, the ratio of wage and salary disbursements (WSD) to employee 

compensation (WSS) was assumed to decline at a fixed “ultimate” annual rate in each of the last 

65 years of the 75-year projection horizon. The assumed ultimate annual rate of change in the 

ratio of WSD to WSS was set to -0.1, -0.2, and -0.3 percentage point for alternative I, II, and III, 

respectively. The assumed average annual rate of change of -0.20 percent for alternative II was 

roughly consistent with the historical record over the last 50 years and the assumed average

annual rate of increase in the ratio of Employer Sponsored Health Insurance (ESI) to WSS over 

the next 75 years. In turn, the assumed average annual rate of increase in the ratio of ESI to WSS 

was mostly based on the Centers for Medicare and Medicaid Services’ (CMS) assumption that 

the average annual growth rate in national health care expenditures will be about 1.0 percentage 

point higher than the average annual growth rate in GDP (and in WSS).

For the 2010 Trustees Report, CMS projected components of national health care expenditures, 

including ESI, under pre-new-law assumptions and post-law assumptions (i.e., before and after 

the Affordable Care Act (ACA) legislation enacted in 2010). The more detailed CMS data 

enabled projection of annual rates of change for the ratio of WSD to WSS. 

For alternative II pre-ACA assumptions, the projected annual rate of change in the ratio of WSD 

to WSS averaged:

• -0.01 percentage point over the first 10 years (i.e., from 2009 to 2019), 

• -0.27 percentage point over the next 30 years (from 2019 to 2049), 

• -0.20 percentage point over the last 35 years (from 2049 to 2084), and 

• -0.20 percentage point over the total 75-year projection horizon (from 2009 to 

2084).

Although the projected 75-year average rate of change in the ratio of WSD to WSS was 

approximately 0.20 percent per year for alternative II in both the 2009 Trustees Report and in the

2010 Trustees Report pre-ACA assumptions, the annual rates of change for each year were 

different. For alternative II, the projected average annual rate of change in the ratio for the 2010 

Trustees Report pre-ACA assumptions, compared to that for the 2009 Trustees Report, was: 

• Higher by 0.19 percentage point (-0.01 less -0.20) over the first 10 years of the 

75-year projection horizon, 

• Lower by 0.07 percentage point (-0.27 less -0.20) over the next 30 years, and 

• About equal at -0.20 percentage point over the last 35 years.

For the alternative II post-ACA assumptions, CMS incorporated the effects of the ACA 

legislation and updated its projection of ESI, which gave a corresponding change in projected 

annual rates of change for the ratio of WSD to WSS. For the alternative II post-ACA

assumptions, the projected annual rate of change in the ratio of WSD to WSS averaged:

• +0.02 percentage point over the first 10 years (i.e., from 2009 to 2019), 
Average Real Wage Differential, Page 18

• -0.11 percentage point over the next 30 years (from 2019 to 2049), 

• -0.15 percentage point over the last 35 years (from 2049 to 2084), and 

• -0.13 percentage point over the total 75-year projection horizon (from 2009 to 

2084).

The projected average annual rate of change in the ratio of WSD to WSS was higher than in the 

pre-ACA assumptions by:

• 0.03 percentage point (+0.02 less -0.01) over the first 10 years of the 75-year 

projection horizon, 

• 0.16 percentage point (-0.11 less -0.27) over the next 30 years, 

• 0.05 percentage point (-0.15 less -0.20) over the last 35 years, and 

• 0.07 percentage point (-0.13 less -0.20) over the total 75-year projection period.
Unemployment Rate, Page 1

4. UNEMPLOYMENT

THE 2019 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 .................................................................................................................................3

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 (%) ......5
Unemployment Rate, Page 2

4 Unemployment Rate

4.1 Summary

For the 2019 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 4.5 percent, 5.5 percent, 

and 6.5 percent for alternatives I, II, and III, respectively (Table 4.1). These assumptions are the 

same as those used for the 2018 Trustees Report.

Table 4.1: Assumed Ultimate Total Civilian Unemployment Rate

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 Trustees Report

I II III I II III I II III

Civilian Unemployment Rate 4.5 5.5 6.5 4.5 5.5 6.5 0.0 0.0 0.0

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 over complete (peak-to-peak) economic cycles. Over the last two (1990-2007), three 

(1979-2007), four (1973-2007), and five (1969-2007) complete economic cycles, the age-sex 

adjusted unemployment rate averaged 5.1, 5.5, 5.5, and 5.2 percent, respectively.52 Table 4.3 

shows annual values for both the adjusted and unadjusted civilian rates. Average rates over 

economic cycles and long periods suggest an ultimate age-sex adjusted unemployment rate in the 

5.1 to 5.5 percent range. 

 

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

1980-81, which are not counted as separate cycles.
Unemployment Rate, Page 3

Table 4.2: Civilian Unemployment Rates over Complete Economic Cycles (Peak-to-Peak)

Total Rate Age-Sex Adjusted Rate

Individual Cycle:

1969-1972 5.0 4.0

1973-1978 6.6 5.5

1979-1989 7.1 6.1

1990-2000 5.6 5.2

2001-2007 5.2 5.0

2008-2017 (Incomplete Cycle) 7.0 7.0

Last Two Cycles

1990-2007 5.4 5.1

Last Three Cycles

1979-2007 6.1 5.5

Last Four Cycles

1973-2007 6.2 5.5

Last Five Cycles

1969-2007 5.9 5.2

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. There are 

several possible explanations for why these higher levels of unemployment occurred during this 

period. Firstly, due to rapid changes in technology and increased global competition, job 

searches and retraining may have become more frequent and lasted for longer periods. Secondly, 

the huge influx of women and baby boomers into the labor market may have increased the 

quantity of labor supplied beyond the quantity demanded in the 1970s and 1980s. Between 1997 

and 2000, rapid economic expansion reduced unemployment rates to unusually low levels. A 

mild recession raised rates above the ultimate assumed level in 2002 and 2003. In addition, the 

most recent recession has resulted in rates that were well above the ultimate assumed level.

Currently, rates are well below the ultimate assumed level. OCACT believes this is a temporary 

effect of the slow movement of discouraged workers back into the labor force after a long period 

of weak demand for labor. As the labor force participation rate (adjusted for age and sex 

composition) approaches a more stable level, OCACT believes the unemployment rate will 

increase somewhat from its current level.

4.3 Future Expectations

It is not clear how the aging baby boomers will affect the unemployment rate into the future. As 

these workers age, the working-age population is expected to grow more slowly, particularly in 

relation to the size of the total population. This demographic shift can be 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 seems likely that the increasing age-dependency ratio could exert 

downward pressure on the age-sex-adjusted unemployment rate.
Unemployment Rate, Page 4

OCACT expects that future age-sex adjusted unemployment rates will be similar to the 5.5

percent rates in the 1973-2007 and 1979-2007 economic cycles. Therefore, the assumed ultimate 

average unemployment rate is 5.5 percent (age-sex adjusted to the 2011 labor force) for 

alternative II.

4.4 Projections from Other Sources

IHS Markit (formerly Global Insight, Inc.) provides projections through 2048 in its latest 

long-run trend forecast (see The 30-Year Focus, Third Quarter, August 2018). IHS Markit

projects the civilian unemployment rate will be 4.6 percent in 2028 and 4.8 percent in 2048. The 

Moody’s Analytics’ September 2018 forecast shows a civilian unemployment rate of 4.7 percent 

in 2028 and 4.6 percent in 2048.

The OMB Mid-Session Review of the 2019 Fiscal Year Budget includes projections through 

2028. OMB projects an aggregate civilian unemployment rate of 4.8 percent for 2027 and later. 

The Congressional Budget Office (CBO) report, 2018 Long-Term Budget Outlook (published in 

June 2018), includes projections through 2048. CBO projects an aggregate civilian 

unemployment rate of 4.8 percent for 2028 and 4.7 percent for 2048. The Social Security 

Advisory Board’s 2015 Technical Panel on Assumptions and Methods recommended assuming 

an ultimate (i.e., long-range average) aggregate civilian unemployment rate of 5.5 percent for 

alternative II.
Unemployment Rate, 

Page 5 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 5.6 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 3.6 4.2 3.0 3.7

1969 3.5 3.8 2.9 3.3

1970 5.0 3.9 4.7 4.2 3.4 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 5.3 6.4 5.3 4.5 4.5

1977 7.1 6.7 5.7 5.4 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 5.9 7.0 6.2 5.4 4.7 5.8 5.1 4.5

1980 7.2 6.8 6.4 5.6 5.6 5.9 5.5 5.3 4.7 4.8

1981 7.6 6.8 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 6.7 6.0 8.3 6.7 6.2 5.5 5.1

1984 7.5 8.3 7.7 6.9 6.1 6.5 7.1 6.4 5.8 5.2

1985 7.2 8.3 7.5 7.1 6.3 6.1 6.3 7.1 6.3 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 6.5 6.3 6.0 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 5.7 5.3 5.2

1991 6.9 5.9 7.0 6.9 6.8 6.3 6.1 6.2 5.2 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 5.5 6.0 6.0 5.9 5.5 5.3

1993 6.9 6.4 6.5 7.0 7.0 6.6 6.2 6.4 5.9 5.9 6.1 6.0 5.7 5.3

1994 6.1 6.6 6.4 7.0 7.0 6.7 6.2 5.7 6.0 5.8 6.2 6.1 5.8 5.4

1995 5.6 6.6 6.2 6.9 6.9 6.7 6.3 6.2 5.2 6.1 5.6 6.1 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 5.5 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 5.2

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 5.2 5.2

2001 4.7 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 4.8 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 5.6 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 7.6 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 5.9 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 5.8 5.8 5.6

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 2019 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.............................................................................................................6

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........................................................................................................................7
Annual Trust Fund Real Interest Rate, Page 2

5 Annual Trust Fund Real Interest Rate

5.1 Summary

For the 2019 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 3.0

percent, 2.5 percent, and 2.0 percent for alternatives I, II, and III, respectively (Table 5.1). These 

assumed rates are 0.2 percentage point lower than the rates used for the 2018 Trustees Report.

Table 5.1: Assumed Ultimate Real Interest Rates

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 Trustees Report

I II III I II III I II III

Real Interest Rate 3.0 2.5 2.0 3.2 2.7 2.2 -0.2 -0.2 -0.2

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.53 (See 

Section 2.6 Appendix.) 

The average annual real interest rate on trust fund assets over the last five complete economic 

cycles was 3.30 percent (computed as the average annual return for investments in 1969 that

were reinvested annually at the new issue rates for years 1969 through 2007). Annual real 

interest rates for individual years within this period varied substantially from this average of 3.30

percent. Even the average rates of 2.01, -0.12, 5.38, 4.34, and 1.96 percent for each economic 

 

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

1980-81, which are not counted as separate cycles.
Annual Trust Fund Real Interest Rate, Page 3

cycle beginning with the 1969-1973 cycle, respectively, varied substantially from one 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-CPIW)

Period

Average Annual Real Interest Rate 

(percent)

Historical:

 By Decade

 1977-1987 4.50

 1987-1997 4.62

 1997-2007 2.66

 2007-2017 0.91

 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

 Last Two Cycles

 1990-2007 3.49

 Last Three Cycles

 1979-2007 4.23

 Last Four Cycles

 1973-2007 3.45

 Last Five Cycles

 1969-2007 3.30

Alternative

Ultimate Assumptions I II III

2018 Trustees Report 3.2 2.7 2.2

2019 Trustees Report 3.0 2.5 2.0

 

After experiencing negative real yields in the 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 
Annual Trust Fund Real Interest Rate, Page 4

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, 

the 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 0.60 percent in 2008. Since 2008, the annual real interest rate has averaged only 0.94

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

Real interest rates have been unusually low during the 2001-2017 period, and are not expected to 

remain as low in the future. Real interest rates were unusually low during the 2001-2007 as rates 

were distorted by large purchases of safe assets (including Treasury securities) by foreign central 

banks as their foreign exchange reserves accumulated. The low interest rates helped fuel the 

housing bubble, and when the bubble burst in 2007, investors sought a safe haven in Treasury 

securities. The sluggish economic growth in the United States together with financial instability 

abroad contributed to the low real interest rates in the post-2009 period. In addition, during most 

of this period, foreign central banks continued to accumulate foreign exchange reserves, which 

also contributed to the low real interest rates. While foreigners’ holdings of Treasury securities 

have leveled off, the proportion of marketable Treasury securities held by foreigners has declined 

from 55 percent in 2008 to 43 percent in 2017.

Over the near term, yields on Treasury securities can be expected to rise moderately as long as 

the economy continues to improve and the Federal Reserve continues with its interest rate 

normalization process. The Federal Reserve, which ended its asset-purchase program 

(quantitative easing) in October 2014, has raised its Federal funds rate eight times since 

December 2015, and started its balance sheet normalization process in October 2017 by 

gradually reducing its securities holdings. This balance sheet normalization process is expected 

to continue as long as the economy continues to grow as anticipated and should put upward 

pressure on longer-term interest rates. 

Over the longer term, several factors are expected to result in a return to higher yields on 

Treasury securities. First, federal deficits and debt are expected to rise in the future. For 

example, CBO projects that budget deficits will exceed one trillion dollars by 2020. They also 

project the amount of publicly held debt will rise to 96 percent of GDP by 2018, and reach 152 

percent of GDP by 2048. The high level of debt may eventually lead to sharp and sudden 

increases in the yields on Treasury securities. Second, with the passage of the financial 

deregulation bill (Economic Growth, Regulatory Relief and Consumer Protection Act) in 2018, 

banks have less of a need to hold Treasury securities in order to satisfy liquidity requirements as 
Annual Trust Fund Real Interest Rate, Page 5

they may hold investment-grade municipal bonds instead and enjoy the tax advantages of such 

securities. Third, continued growth in the global economy may reduce the demand for safe 

assets such as Treasury securities.

OCACT examined whether estimates of market expectations for future real interest rates might 

be useful for developing the long-range real interest rate assumption. OCACT examined 

historical data from the Department of Treasury on 10-year forward rates for 10-year TIPS, and 

found that market expectations were a poor predictor of the actual experience. Further, a study 

by the Congressional Budget Office (CBO) found that estimates of market expectations have 

been worse predictors of long-term interest rates than the Blue Chip consensus forecasts over the 

past three decades.54 CBO also found that the Blue Chip consensus forecasts, “consistently 

missed the decline in long-term nominal interest rates over the past three decades, estimating rates 

that were higher (and, in some cases, much higher) than what actually occurred.” While methods 

used to estimate market expectations may have value for other purposes, OCACT concluded that 

the 10-year forward rates for 10-year TIPS tend to be more representative of initial market 

conditions, not future rates. Given the changes observed in the historical period and the 

conditions that have contributed to low interest rates, it seems unlikely that the current lowinterest rate environment will persist over a 75-year time horizon.

When determining the assumed ultimate real interest rate for the long-range period, OCACT 

believes it is important to take into consideration the real interest rates experienced over long 

historical periods as well as whether or not the relatively low real interest rates experienced in 

the recent past can continue well into the long-range period. Over the last five economic cycles 

(1969-2007), which included the 2001-2007 cycle during which real interest rates averaged only 

1.96 percent, the real interest rate averaged 3.30 percent. Even if only the post-1987 period 

(through 2017) is considered, the real interest rate averaged 2.72 percent, while the CPI growth 

rate averaged 2.4 percent.

The low real interest rates experienced for trust fund new issues in the 2007-2017 period 

(averaging 0.91 percent) do not make a compelling case for significantly changing the ultimate 

assumption. However, in light of the recent low real interest rate experience and the possibility 

that relatively low real interest rates may persist into the future, the Trustees lowered ultimate

real interest rate assumption by 0.2 percentage point to 3.0 percent, 2.5 percent and 2.0 percent

for alternatives I, II and III, respectively. However, should the government debt in the future 

grow to a level higher than what investors are willing to absorb, then a higher real interest rate 

assumption would be reasonable.

 54 See Gamber, Edward N. 2017. Did Treasury Debt Markets Anticipate the Persistent Decline in Long-Term 

Interest Rates? CBO Working Paper 2017-07. 
Annual Trust Fund Real Interest Rate, Page 6

5.4 Projections from Other Sources

IHS Markit (formerly IHS Global Insight, Inc.) includes projections through 2048 in its August 

2018 30-Year Focus Trend Forecast. They project real yields on 10-year U.S. Treasury notes to 

rise from 0.7 percent for 2018 to 1.5 percent for 2025 and 2026, and then decline gradually to 1.1 

percent for 2047 and 2048. Moody’s Analytics’ September 2018 forecast projects real yields on 

10-year U.S. Treasury notes to rise from 0.6 percent in 2018 to an ultimate rate of 2.2 percent for 

2039 through 2048 (their final projection year). 

The Office of Management and Budget (OMB) Fiscal Year 2019 Budget projects the real yield 

on the trust funds’ special-issue securities to reach 1.4 percent by 2023 and remain at that level 

for the remainder of the projection period (through 2096). The Congressional Budget Office 

(CBO) 2018 Long-Term Budget Outlook (published in June 2018) includes projections through 

2048. CBO projects real yields on 10-year Treasury notes of 2.4 percent in 2048 and later. The 

Social Security Advisory Board’s 2015 Technical Panel on Assumptions and Methods 

recommended lowering the alternative II real interest rate assumption to 2.5 percent. The prior 

technical panel, which met in 2011, recommended lowering the alternative II real interest rate 

assumption to 2.7 percent.
Annual Trust Fund Real Interest Rate, Page 7

Table 5.3: Real Interest Rates for OASDI Trust Fund New Issues and the Compound Average Real Yield over 

Selected Intervals

To RYINDEX 1 5 10 15 20 25 30 35 40 45 50

1961 22.32

1962 23.00 3.03

1963 23.63 2.74

1964 24.29 2.81

1965 24.96 2.74

1966 25.35 1.56 2.58

1967 25.88 2.08 2.39

1968 26.26 1.49 2.14

1969 26.59 1.27 1.83

1970 27.13 2.00 1.68

1971 27.99 3.18 2.00 2.29

1972 28.79 2.85 2.16 2.27

1973 28.80 0.04 1.86 2.00

1974 27.98 -2.84 1.02 1.42

1975 27.91 -0.25 0.57 1.12

1976 28.45 1.92 0.32 1.16 1.63

1977 28.75 1.08 -0.02 1.06 1.50

1978 28.91 0.54 0.08 0.97 1.35

1979 28.59 -1.10 0.43 0.73 1.09

1980 28.16 -1.53 0.17 0.37 0.81

1981 28.61 1.61 0.11 0.22 0.81 1.25

1982 30.74 7.45 1.34 0.66 1.15 1.46

1983 33.42 8.73 2.94 1.50 1.62 1.75

1984 35.74 6.92 4.56 2.48 1.99 1.95

1985 39.02 9.18 6.74 3.41 2.45 2.26

1986 42.65 9.32 8.32 4.13 2.85 2.64 2.62

1987 44.67 4.74 7.76 4.50 2.97 2.77 2.69

1988 46.85 4.87 6.99 4.95 3.30 2.94 2.78

1989 48.98 4.54 6.51 5.53 3.80 3.10 2.84

1990 50.89 3.91 5.46 6.10 4.09 3.20 2.89

1991 53.48 5.09 4.63 6.46 4.30 3.29 3.03 2.96

1992 56.48 5.60 4.80 6.27 4.60 3.43 3.17 3.04

1993 59.16 4.75 4.78 5.88 4.89 3.67 3.30 3.11

1994 61.58 4.08 4.69 5.59 5.25 4.02 3.42 3.15

1995 64.41 4.60 4.82 5.14 5.67 4.27 3.52 3.21

1996 67.18 4.30 4.67 4.65 5.86 4.39 3.56 3.30 3.20

1997 70.18 4.47 4.44 4.62 5.66 4.56 3.63 3.38 3.24

1998 74.02 5.47 4.58 4.68 5.44 4.81 3.85 3.51 3.32

1999 76.66 3.56 4.48 4.58 5.22 5.05 4.11 3.59 3.34

2000 78.45 2.34 4.02 4.42 4.77 5.26 4.22 3.60 3.33

2001 81.24 3.56 3.87 4.27 4.39 5.36 4.29 3.62 3.38 3.28

2002 84.35 3.83 3.75 4.09 4.33 5.18 4.40 3.65 3.43 3.30

2003 86.56 2.62 3.18 3.88 4.18 4.87 4.48 3.74 3.47 3.30

2004 87.82 1.46 2.76 3.61 3.97 4.60 4.59 3.89 3.47 3.27

2005 88.50 0.77 2.44 3.23 3.76 4.18 4.69 3.92 3.44 3.22

2006 89.51 1.15 1.96 2.91 3.49 3.78 4.67 3.90 3.38 3.20 3.13

2007 91.24 1.93 1.58 2.66 3.25 3.63 4.45 3.92 3.35 3.20 3.11

2008 91.81 0.63 1.19 2.18 2.97 3.42 4.12 3.93 3.37 3.18 3.06

2009 95.79 4.33 1.75 2.25 2.99 3.41 4.02 4.11 3.58 3.26 3.10

2010 96.60 0.84 1.77 2.10 2.74 3.26 3.69 4.19 3.61 3.23 3.05

2011 95.90 -0.72 1.39 1.67 2.40 2.96 3.29 4.11 3.53 3.13 3.00 2.96

2012 96.20 0.31 1.06 1.32 2.12 2.70 3.12 3.88 3.51 3.06 2.96 2.90

2013 96.30 0.11 0.96 1.07 1.77 2.47 2.92 3.59 3.50 3.06 2.93 2.85

2014 96.65 0.36 0.18 0.96 1.56 2.28 2.76 3.37 3.54 3.15 2.91 2.80

2015 99.26 2.71 0.55 1.15 1.58 2.19 2.71 3.16 3.67 3.22 2.92 2.80

2016 100.30 1.04 0.90 1.14 1.41 2.02 2.55 2.89 3.65 3.20 2.88 2.79

2017 100.00 -0.30 0.78 0.92 1.14 1.79 2.31 2.72 3.43 3.17 2.81 2.74

Average Annual Percentage Change over the Following Number of Years:

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 2019 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 ULTIMATE TAXABLE EARNINGS RATIOS .....................................................................................2

TABLE 6.2 OASDI TAXABLE RATIO, 1983 TO 2016.......................................................................................................5

TABLE OF FIGURES PAGE

FIGURE 6.1:PERCENTAGE OF OASDI COVERED EARNINGS BELOW THE TAXABLE MAXIMUM: 1983 TO 2017...............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 2019 Trustees Report, the assumed ultimate ratios of OASDI effective taxable payroll to 

covered earnings (taxable ratio) are 84.0 percent, 82.5 percent, and 81.0 percent for alternatives 

I, II and III, respectively (Table 6.1). These assumed ultimate ratios are the same as those used 

for the 2018 Trustees Report. 

Table 6.1: Assumed Ultimate Taxable Earnings Ratios

2019 Trustees Report 

Alternative

2018 Trustees Report 

Alternative

2019 Trustees Report Less 

2018 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 the taxable maximum. For self-employed workers with taxable wages, covered 

self-employment net earnings are taxable up to the excess (if any) of the taxable maximum over

their 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 2017. 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, 

the growth in the use of stock options55 in the pay packages of the very high earners, combined 

 55 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-page-files/tax/pdfs/white-papers-survey-reports-
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 3

with a fast 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 2017, 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 -0.08 percent. This was also a period when there was a rapid growth in cash 

balance plans, which are qualified retirement plans with features of both a traditional defined 

contribution plan and a traditional defined benefit plan. These plans enabled small business 

owners and high-earning service professionals, such as doctors and lawyers, to shift some of 

their earnings out of OASDI covered earnings and into retirement savings.

Figure 6.1:Percentage of OASDI Covered Earnings Below the Taxable Maximum: 1983 to 2017

 

articles/2013/Taxation-of-stock-options-Adkins.ashx.)
Ratio of OASDI Taxable Payroll to Covered Earnings, Page 4

6.3 Future Expectations

In spite of eight 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 2017 (83.1 percent) has not fallen below the lows 

reached in previous economic cycle peaks. In fact, the rate of annual decline in the taxable ratio 

from 1983 to 2001 has reduced by about two-thirds for the period 2001 to 2017. OCACT

expects the taxable ratio will continue the trend of slowing decline in the near future and will 

stabilize to reach its ultimate value of 82.5 percent by the end of 2028 for the alternative II 

assumption. 

6.4 Projections from Other Sources

The Congressional Budget Office also makes projections of the taxable earnings ratio. In The 

2018 Long-Term Budget Outlook published in June 2018, CBO projects the taxable ratio to fall 

to 81 percent by 2028 and to fall below 80 percent by 2048. One year earlier, in The 2017 LongTerm Budget Outlook published in March 2017, CBO projected the taxable ratio to fall from 82 

percent in 2017 to 79 percent in 2017 and remain at that level thereafter (through 2047). Two 

years earlier, in The 2016 Long-Term Budget Outlook, CBO projected the taxable ratio to fall to 

about 77.4 percent in 2027 and remain in the 77.4 to 77.5 percent range thereafter (through 

2090).

The Social Security Advisory Board’s 2015 Technical Panel on Assumptions and Methods 

recommended lowering the alternative II ultimate taxable ratio from 82.5 percent to 82.2 percent. 

For alternatives I and III, the Technical Panel recommended ultimate taxable ratios of 84.0 

percent and 79.0 percent, respectively. The 2011 Technical Panel recommended ultimate taxable 

ratios of 84.3 percent, 82.2 percent, and 80.0 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 2017

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 82.6

2017 83.1