Living-Wage Job Market Takes a Hit; Hispanic Workers Bear the Brunt

‘Functional unemployment’ jumps 12% for Hispanic workers in July

August 16, 2023

For Immediate Release

WASHINGTON, D.C. — Even though inflation has moderated significantly in recent months, it appears to have been at the expense of low-wage workers, with the “functional unemployment” rate jumping by 1.2 percentage points for July, according to the True Rate of Unemployment (TRU) report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

By contrast, the U.S. Bureau of Labor Statistics (BLS) reported a decrease in the official jobless rate, from 3.6% to 3.5%.

LISEP’s TRU, a measure of the “functionally unemployed” — defined as the jobless, plus those seeking, but unable to find, full-time employment paying above the poverty line after adjusting for inflation — jumped from 21.7% to 22.9% from June to July. While White workers saw only a modest increase of 0.4 percentage points (from 20.7% to 21.1%) and Black workers saw a 0.6 percentage point improvement (dropping from 25.5% to 24.9%), Hispanic workers saw a whopping 3 percentage point increase — from 24.9% to 27.9%

“While we can appreciate the efforts put forth by policymakers to get a grip on inflation, it appears the end result has been an erosion of the ability of lower-wage workers to earn a living wage,” said LISEP Chairman Gene Ludwig. “While boosting interest rates has had the intended effect of curbing higher prices, it has had a detrimental impact on those who can least afford it. It’s a situation where the cure may be just as deadly as the ailment.”

Ludwig continued, noting that unlike months when the TRU increased due to individuals entering or returning to the labor force, the participation rate is flat — meaning the inability of more workers to earn a living wage is entirely due to loss of living wage employment, reduction in hours, or loss of buying power due to rising prices.

The gender gap remained relatively unchanged for the month of July, with men seeing a 1.2 percentage point increase in TRU (17.7% to 18.9%), while women saw a 1.3% increase (26.4% to 27.7%).

“When one demographic group continues to be disproportionately affected by current economic conditions, it’s a concerning trend well worth watching,” Ludwig said. “It’s also a sign that perhaps policymakers should be doing something a little bit differently, as the policy toolbox of 50 years ago just doesn’t work as well in today’s economy.”

Living-Wage Job Market Takes a Hit; Hispanic Workers Bear the Brunt

‘Functional unemployment’ jumps 12% for Hispanic workers in July

‍Jim Gardner

August 16, 2023

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.

By contrast, the U.S. Bureau of Labor Statistics (BLS) reported a decrease in the official jobless rate, from 3.6% to 3.5%.

The gender gap remained relatively unchanged for the month of July, with men seeing a 1.2 percentage point increase in TRU (17.7% to 18.9%), while women saw a 1.3% increase (26.4% to 27.7%).

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 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 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 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.