Average Monthly Wage

What Does Average Monthly Wage Mean?

A person’s average monthly wage is the amount of money they earn in a month before taxes are deducted. This figure is used in various insurance calculations, including those related to workers’ compensation, disability insurance, and Social Security. Generally, the higher the wage, the higher the benefit.

For workers’ compensation claims, the average monthly wage figures into how lost-wage benefits are calculated, so two employees with the same injury can receive different payouts based on their pre-injury earnings. You can read more about how this works on our page about workers’ compensation insurance.

Insuranceopedia Explains Average Monthly Wage

Average monthly wage calculations are used by the Social Security Administration to determine how much each person will receive in monthly payouts upon reaching retirement age. Typically, the average monthly wage for the top 35 years of a person’s earnings is considered when calculating benefits.

Average monthly wage also affects how much coverage a person needs from disability insurance, since policies usually pay out a percentage of pre-disability income rather than a fixed dollar amount.