National Average Wage Index

Updated October 19, 2004

Latest index

The national average wage index for 2003 is $34,064.95

Uses of the index

When we compute a person's benefit, we use the national average wage indexing series to index that person's earnings. As shown next, we also use the series to index several amounts that are important to the operation of Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program.

Amounts subject to automatic increase based on the average wage indexing series

• OASDI contribution and benefit base (also known as the taxable maximum)

• Retirement earnings test exempt amounts

• Formulas for a primary insurance amount and maximum family benefits

• Amount of earnings required for a worker to be credited with a quarter of coverage (a unit of credit)

• "Old-law" contribution and benefit base (as determined under the law as in effect before the 1977 amendments)

• Coverage thresholds for both domestic employees and election workers

• Substantial gainful activity amounts for disabled beneficiaries

Indexing earnings

When indexing an individual's earnings for benefit computation purposes, one must first determine the year of first eligibility for benefits. For retirement, eligibility is at age 62. If a person reaches age 62 in 2005, for example, then 2005 is the person's year of eligibility. An individual's earnings are always indexed to the average wage level two years prior to the year of first eligibility. Thus, for a person retiring at age 62 in 2005, the person's earnings would be indexed to the average wage index for 2003, or $34,064.95. Earnings in a year before 2003 would be multiplied by the ratio of $34,064.95 to the average wage index for that year; earnings in 2003 or later would be taken at face value. (See two examples of indexed earnings.)

Determination of the National Average Wage Index for 2003

To determine the national average wage index for calendar year 2003, we increased the 2002 national average wage index of $33,252.09 by the percentage increase in average wages from 2002 to 2003, as measured by annual wage data tabulated by the Social Security Administration (SSA). The wage data tabulated by SSA are based on wages subject to Federal income taxes and contributions to deferred compensation plans.

The average amounts of wages calculated directly from the SSA data were $31,898.70 and $32,678.48 for 2002 and 2003, respectively. To determine the national average wage index for 2003 at a level that is consistent with the national average wage indexing series for prior years, we multiply the 2002 national average wage index of $33,252.09 by the percentage increase in average wages from 2002 to 2003 (based on SSA-tabulated wage data). In other words, the national average wage index for 2003 is $33,252.09 times $32,678.48 divided by $31,898.70, which equals $34,064.95.

The complete average wage indexing series is shown below.

National average wage indexing series, 1951-2003

Year Index

1951 $2,799.16

1952 2,973.32

1953 3,139.44

1954 3,155.64

1955 3,301.44

1956 3,532.36

1957 3,641.72

1958 3,673.80

1959 3,855.80

1960 4,007.12

1961 4,086.76

1962 4,291.40

1963 4,396.64

1964 4,576.32

1965 4,658.72

1966 4,938.36

1967 5,213.44

1968 5,571.76

1969 5,893.76

1970 6,186.24

Year Index

1971 $6,497.08

1972 7,133.80

1973 7,580.16

1974 8,030.76

1975 8,630.92

1976 9,226.48

1977 9,779.44

1978 10,556.03

1979 11,479.46

1980 12,513.46

1981 13,773.10

1982 14,531.34

1983 15,239.24

1984 16,135.07

1985 16,822.51

1986 17,321.82

1987 18,426.51

1988 19,334.04

1989 20,099.55

1990 21,027.98

Year Index

1991 $21,811.60

1992 22,935.42

1993 23,132.67

1994 23,753.53

1995 24,705.66

1996 25,913.90

1997 27,426.00

1998 28,861.44

1999 30,469.84

2000 32,154.82

2001 32,921.92

2002 33,252.09

2003 34,064.95

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