Yellen wage gauges blurred by boomer-millennial shift

"Employees often strive for different things in that phase of their career," she said. "Flexibility is important, probably more important than anything else."

Just starting

Hargett, meantime, started a job last week at EY, the consulting firm formerly known as Ernst & Young LLP, after graduating from the University of North Carolina at Chapel Hill in May.

"A lot of it is simply the number of years you are with the firm, and you're expected to progress at a certain rate," said Hargett, who grew up in East Bend, North Carolina. "I get a slight increase in salary depending on my end of year review."

Hourly earnings for production workers have increased 2.1 percent year-over-year on average since the recession ended in June 2009, compared with 3.1 percent in the previous expansion. Last month, earnings were up 2.3 percent from a year ago.

Yellen referred to the "slow pace of growth" in measures of hourly compensation in remarks to a Senate committee last week as a sign of "significant slack" in labor markets.

Stone, a former a researcher at the Federal Reserve Bank of New York and chief financial economist at Merrill Lynch, said his favorite pay measure is buried at the end of the monthly jobs report, table B-9. It's an index that takes into account average hourly earnings, the length of the workweek and employment.

Other gauge

The measure increased 4.6 percent in the 12 months through June, exceeding the 2.9 percent average in the current expansion and the 3.8 percent gain in the prior one.

"The average hourly earnings only tells part of the story, and this tells a more robust story," said Stone, who has testified before Congress on the conduct of monetary policy, and has served as an adviser to the U.S. Department of Commerce on improving economic statistics. He said Yellen probably looks at multiple wage indicators and this should be at the top of the list because it "helps to skirt" the demographic issue.

"If you only had to look at one number, this may be the number to look at," he said. "That's not the way the world sees it, but the world — people — haven't gotten as far as table 9."

Future boost

The demographic changes should transform into an earnings booster in the future, said the Urban Institute's Nichols.

"There's currently this downward pressure on median wages, but it's rapidly going to turn into upward pressure," Nichols said. As millennials move toward their prime-earning years it should drive averages up, he said, though the next five to 10 years might be "kind of rough."

The impact of the demographic shift could be lessened — or even eliminated — if boomer retirements lead to shortages. Such labor-market tightening would force companies to pay up, said Gad Levanon, director of macroeconomic research at the Conference Board in New York.

"As the baby boomers retire, younger people will be promoted faster," Levanon said, adding that it's difficult to tell when wage pressures might develop. "Managers in a particular occupation were 50 years old, and now they will be 47 years old on average."

Delaying retirement

Nonetheless, Americans are delaying retirement, which could prolong wage drag in the short run because older workers earn less. Half of workers will wait until after age 65 to retire, up from 34 percent in 2011, according to a 2013 Towers Watson & Co. survey of more than 4,000 retirement-plan participants working full-time. Almost a quarter planned to retire after 70, up from 10 percent in 2011.

"This modern trend that we're seeing of partial retirements reflects that a lot of workers are choosing to move into lower-stress occupations," said Shane Bartling, a senior consultant for the professional services company in San Francisco. "With that would come a voluntary reduction in wages."