Functional Employment Increases for July as Wage Growth Stalls

Modest gains in earnings have been eroded, according to LISEP

August 19, 2021

For Immediate Release

WASHINGTON, D.C. — A higher percentage of Americans joined the ranks of the functionally unemployed for the month of July in spite of modest wage gains in the second quarter of 2021 by low- and middle-income workers, according to data released by the Ludwig Institute of Shared Economic Prosperity (LISEP).

In its monthly True Rate of Unemployment (TRU) report — a measure of the “functionally unemployed,” defined as the percentage of Americans unable to find full-time jobs paying above the poverty level — LISEP concluded that the percentage of workers unable to find living-wage jobs increased by 0.3 percentage points, from 23.1% to 23.4%. This increase is contrary to numbers released by the U.S. Bureau of Labor Statistics (BLS), which reported an improvement in the jobless rate, dropping from 5.9% to 5.4%. These data indicate that while workers are finding some form of employment, overall they are losing ground in their ability to provide for a family, which is compounded by pandemic-related price spikes on essential goods and services.

“While the economy is showing some promising signs of recovery and we are encouraged to see improvement in wages for low-income workers, it appears the labor market has stalled in terms of the maintenance and creation of living-wage jobs,” said LISEP Chair Gene Ludwig, noting LISEP’s True Weekly Earnings (TWE) report for Q2 2021 showed a 3.1% increase in earnings for the bottom 25%. “The solution is to keep the economic momentum going, which can only be accomplished through the creation of good paying, sustainable employment opportunities. This will drive the type of consumer spending critical to long-term economic growth.”

Functional unemployment increased across all demographics for the month of July, with the exception of the Hispanic population, which saw a significant improvement, dropping 1.6 percentage points (27.0% to 25.4%). The White population saw a 0.3 percentage point increase (21.3% to 21.6%) and the TRU for the Black population was up 0.6 percentage points (29.2% to 29.8%). Overall, both males and females saw an increase in functional unemployment: men were up 0.7 percentage points (18.5% to 19.2%), while women were up 0.5 percentage points, 27.8% to 28.3%.

Among educational groups, only those who ended their education with a high school diploma saw improvement, with a TRU dropping from 28.1% to 26.6%, a 1.5 percentage point decrease. Those with some college but less than a bachelor’s degree took the biggest hit, with TRU climbing 5.6 percentage points (20.6% to 26.2%). Those with no high school diploma have the highest TRU among all demographics at 46.0%, up 1.8 percentage points over June.

Overall job creation is key to improving these numbers, Ludwig said, adding that recent progress with the Biden Administration’s infrastructure and jobs bill is a step in the right direction.

“The bipartisan infrastructure bill addresses a wealth of public works and societal challenges, beginning with the creation of skilled jobs capable of supporting a family. Negotiators from both sides of the aisle are to be commended for working in the best interests of working families,” said Ludwig. “The progress is encouraging. Let’s keep the momentum going.”

Functional Employment Increases for July as Wage Growth Stalls

Modest gains in earnings have been eroded, according to LISEP

‍Jim Gardner

August 19, 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.

Overall job creation is key to improving these numbers, Ludwig said, adding that recent progress with the Biden Administration’s infrastructure and jobs bill is a step in the right direction.

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.