what is the national average wage index nawi 
the national average wage index nawi is a measure of u s wage trends calculated annually by the social security administration ssa the nawi is dependent on income subject to federal income taxes and contributions to deferred compensation plans 1the ssa primarily uses the national average wage index to index retirement and insurance benefits in the united states it is also used to update several factors in the operation of the old age survivors and disability insurance oasdi program 1understanding the national average wage index nawi the national average wage index provides insight into the direction of wage trends and may alert policymakers to wage inflation which might impact the federal reserve s decision to raise interest rates raising interest rates typically has a negative effect on bond and equity markets and slows inflation alternately if wage inflation is decreasing the federal reserve may lower rates which helps stimulate the economy and labor market 3so called wage push inflation is an overall rise in the cost of goods that results from a rise in wages to maintain corporate profits after an increase in wages employers must increase the prices they charge for the goods and services they provide the overall increased cost of goods and services has a circular effect on the wage increase eventually as goods and services in the market overall increase higher wages will be needed to compensate for the increased prices of consumer goods example of a national average wage index calculationthe 2021 national average wage index is calculated by multiplying the previous year s nawi by the change in average wages from the previous two years based on the ssa s average wage data for example the 2021 nawi would be calculated by multiplying the 2020 nawi by the change in the average wage from 2020 to 2021 the ssa website lists the nawi levels between 1951 and the current year 4the national average wage index for 2021 8 89 higher than it was in 2020 4national average wage index and wage indexingwage indexing is used by social security to adjust an individual s earning history to inflation an individual is first eligible for retirement benefits at age 62 however earnings are indexed to the average wage level of the year the individual turned 60 therefore a 62 year old individual would have their earnings indexed to the average wage level two years prior to eligibility or age 60 from age 60 the indexing factor equals one to calculate the indexing factor of a specific year before an individual turns 60 divide the average wage for the year they turn 60 by the average wage of the specific year 5for example suppose an individual s 1990 earnings were 30 000 in 2020 the individual turned 62 and the nawi for 2018 age 60 was 52 145 80 the 2018 nawi is divided by the 1990 nawi 52 145 80 21 027 98 to give an index factor of 2 48 the individual s 1990 earnings are then multiplied by the profit factor providing that year s inflation adjusted earnings of 74 400 30 000 x 2 48 2as wage indexing uses the nawi an individual cannot work out the exact amount of social security they are going to receive until they turn 62 they could estimate the nawi by taking average wage inflation into account the bottom linecalculated yearly by the social security administration ssa the national average wage index nawi tracks u s wage growth and trends social security uses the nawi to calculate benefits and policymakers use the index to help make monetary decisions such as increasing or decreasing rates correction feb 5 2023 this article previously misstated the age at which earnings are indexed and how the index factor is calculated 