In this paper, a new method of estimating a wage index is proposed and implemented. We
construct a wage index by controlling for quantity, as well as quality of labor. Our approach
uses a set of year dummies as the basis for calculation of a wage index. The March Current
Population Survey Supplement (1983-2000) is employed, and empirical wage equation
models are estimated in this paper. The estimation results of the proposed wage index suggest
that the existing Employment Cost Index perhaps overestimates the increases in wages
adjusted for quality.