Analysis Reveals Risk of Stalled Economic Recovery Among Black Workers

Immediate COVID relief needed to address inequality issues, says LISEP chair

February 18, 2021

For Immediate Release

WASHINGTON, D.C. — While American workers as a whole, particularly women, saw incremental growth in living-wage job opportunities in January, Black workers lost ground, according to an analysis by the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP’s January True Rate of Unemployment (TRU) report found that the rate of Black workers who are “functionally unemployed” increased from 30.2% to 30.7%. This paints a different picture than the Bureau of Labor Statistics (BLS) report, which presented an improving unemployment picture for Blacks in the workforce.

“While we are encouraged that the overall percentage of functionally unemployed Americans is slightly better, we remain concerned that the racial inequality gap is growing,” said LISEP Chair Gene Ludwig. “There are still far too many American families suffering due to the inability to find a living-wage job, particularly among Americans of color.”

Each month, LISEP issues the TRU report, which measures the percentage of American workers who are “functionally unemployed” – defined as those who are jobless, or who are seeking full-time work but unable to secure a position that earns above poverty-level wages. The TRU for January, at 24.4%, is a 0.7% improvement over the December report and the lowest since the 23.8% TRU in March 2020. By contrast, BLS reported an unemployment rate of 6.3% for January, an improvement over the 6.7% December rate.

The good news in the January TRU report includes gains for women in the workforce, who saw the biggest improvement, dropping from 30.4% in December to 28.5% in January. Hispanic workers also saw some improvement, from 31.6% to 29.9%, and White workers saw marginal improvement, from 22.7% to 22.3%. But Black workers were worse off, with TRU rising to 30.7% from 30.2%, while the BLS report presented an improving unemployment picture for Blacks in the workforce, dropping from 9.9% in December to 9.2% in January.

This, Ludwig said, is an indication that while more Black workers are finding jobs, they are largely low-wage positions that fail to lift workers above the poverty level.

“While we are inching closer to pre-pandemic employment levels, this simply is not good enough – Americans need jobs that can support a family,” said Ludwig. “The pending COVID relief package is not only a necessity to relieve suffering among families across the nation, but it is an opportunity. It’s an opportunity to begin closing the income inequality gap, address racial inequalities, and to build back an economy where everyone can participate, equally.”

Meanwhile, some gradual reopening of the service industry seems to have aided in improving the TRU levels for workers with lower educational attainment levels. For those with less than a high-school diploma, the TRU improved by 2.6 percentage points, although it still remains exceedingly high, at 46.7%. For those with only a high-school diploma, the rate improved to 29.8%, compared to 30.5% in December.

Analysis Reveals Risk of Stalled Economic Recovery Among Black Workers

Immediate COVID relief needed to address inequality issues, says LISEP chair

‍Jim Gardner

February 18, 2021

For Immediate Release

Additional Resources

Historically, systemic barriers have disproportionately hampered Black farmers’ ability to retain land ownership.

Despite this tragic history, there is still time and economic incentive to set some of the inequities right.

In 2021, working mothers with children under 18 earned just 61.7 cents for every dollar a father made. Much wider than the overall gender wage gap, this difference highlights both the motherhood penalty and the fatherhood premium.

Female-dominated, low-paying, part-time occupations are overrepresented among informal workers who also have a formal job.

We need to create an economic environment where companies can hire these workers as employees and pay them a living wage. There are steps policymakers can take to change the gig economy dynamic.

Dependency on tips over base pay is growing because of actions taken by gig companies to institute tipping.

Even for those lucky enough to be making what amounts in many states to the poverty wage of $15 per hour, many will get nothing but a week’s notice before being out on the street.

One study shows that consistent involvement in extracurricular activities increased a child’s likelihood of attending college by a whopping 400% compared to not being involved at all.

Studies have found that both men and women are paid less if they work in “nurturant” occupations.

Since 2015, the correlation between LISEP’s functional employment to population ratio and the inflation rate was more than four times as strong as the BLS’s employment to population ratio, which is depicted in the graph below.

The employment to population ratio settles the discrepancy between what we see around us and what the data says.

The NBER paper defines employment using the traditional BLS U-3 rate. However, the often-used U-3 number fails to capture the quality of jobs.

Among states with stricter COVID-19 policies, reducing unemployment benefits had little to no effect. The average effect of increased employment seems to have occurred only in those states with looser COVID protocols.

This, Ludwig said, is an indication that while more Black workers are finding jobs, they are largely low-wage positions that fail to lift workers above the poverty level.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU Summary

TRU White Paper

TRU & TWE Methodology

TRU & TWE Source Data

About TRU

LISEP issued the white paper Measuring Better: Development of “True Rate of Unemployment” Data as the Basis for Social and Economic Policy upon announcing the new statistical measure in October 2020. The paper and methodology can be viewed here. LISEP issues TRU one to two weeks following the release of the BLS unemployment report, which occurs on the first Friday of each month. The TRU rate and supporting data are available on the LISEP website at lisep.org/tru.

About LISEP

The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Gene Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP’s original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics. On X: @LISEP_org.

About Gene Ludwig

In addition to his role as LISEP chair, Gene Ludwig is founder of the Promontory family of companies and Canapi LLC, a financial technology venture fund. He is the founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. Ludwig is the former vice chairman and senior control officer of Bankers Trust New York Corp. and served as the U.S. Comptroller of the Currency from 1993 to 1998. He is also author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. On Twitter: @geneludwig.

Please Note:

The Ludwig Institute for Shared Economic Prosperity continuously revises and updates its data. As a result, data presented in this release may no longer reflect the latest estimates. Find the most current data at lisep.org.