Weekly Earnings Up for Low-Income Workers, According to Ludwig Institute

‘Functional unemployment’ at all-time low, but rate for Black workers spikes

July 19, 2023

For Immediate Release

WASHINGTON, D.C. — While overall inflation-adjusted wages for the median American worker remained flat, low-wage workers saw a notable increase in the second quarter of 2023, with the rate of “functional unemployment” in the U.S. at an all-time low, according to a report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

But even in the midst of overall good news, LISEP noted there was one concerning observation: the True Rate of Unemployment (TRU) for Black workers jumped 1.5 percentage points — now at its highest rate since the beginning of the year and erasing several months of gains.

“Overall, the news is good — Americans are holding their own in the face of inflation, and low-income workers are actually gaining ground. But we can’t overlook those segments of the population that continue to struggle,” said LISEP Chairman Gene Ludwig. “The goal of shared economic prosperity is to create an environment where everyone has an opportunity to succeed. This is progress, but we’re still not there yet.”

LISEP issued its monthly TRU for June in conjunction with the second quarter True Weekly Earnings (TWE) report. TRU is a measure of the functionally unemployed — the jobless, plus those seeking but unable to secure full-time employment paying above the poverty line. TWE is a measure of median weekly earnings after adjusting for inflation — and unlike the Bureau of Labor Statistics (BLS) analysis, the entire labor force is considered in LISEP’s number, not just full-time earners.

For Q2 2023, the overall TWE rose from $933 to $935 a week over Q1, a negligible 0.2% increase. Yet low-wage workers (25th percentile) experienced a notable 1.7% increase after adjusting for inflation, from $583 to $593 a week. Meanwhile upper-middle income earners (75th percentile) saw a 1.3% decrease, from $1,561 to $1,541 a week, and the highest wage earners (90th percentile) experienced a 1% decrease, from $2,501 to $2,477.

TWE growth was notably better for ethnic minorities, with Black workers seeing a 1.7% increase in earnings ($771 to $780) and Hispanic earners experiencing a 1.2% gain ($737 to $746). The gain for White workers was 0.5%, from $1,031 to $1,037. But the gender pay gap continues to widen, with women gaining a scant 0.2% ($819 to $821), while men saw a 2.2% gain ($1,030 to $1,053).

The TRU, meanwhile, dropped by 0.7 percentage points, from 22.4% to 21.7% — the lowest functional unemployment rate since January 1995, the earliest LISEP has data. And while Black workers saw a significant 1.5 percentage point spike (from 24% to 25.5%), the composite TRU number was offset by a 1.2 percentage point improvement for Hispanic workers (from 26.1% to 24.9%), and a 0.2 percentage point decrease in the TRU for White workers (20.9% to 20.7%).

Women in the workforce also saw a significant improvement in TRU, dropping 1.1 percentage points, from 27.5% to 26.4%. For men, the rate dropped from 18% to 17.7%, a 0.3 percentage point improvement.

“There are a lot of data this month, and fortunately most of it represents good news,” Ludwig said. “But we can’t ignore the bad news simply because it is inconvenient. This is the time for policymakers to take a closer look at what is working and apply it in a manner that enhances opportunity across the board.”

Weekly Earnings Up for Low-Income Workers, According to Ludwig Institute

‘Functional unemployment’ at all-time low, but rate for Black workers spikes

‍Jim Gardner

July 19, 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.

Women in the workforce also saw a significant improvement in TRU, dropping 1.1 percentage points, from 27.5% to 26.4%. For men, the rate dropped from 18% to 17.7%, a 0.3 percentage point improvement.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU & TWE Summary

TRU White Paper

TWE 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 TWE

LISEP issues the TWE quarterly following the release of the BLS Median Weekly Earnings report. The full white paper, Understanding the Status of American Workers Through Analysis of Current Population Data, can be viewed here. The TWE rate and supporting data are available on the LISEP website at lisep.org/earnings.

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.