Living-Wage Job Market Improves in May, Says Ludwig Institute

‘Functional unemployment’ drops for all demographics, men and women

June 14, 2023

For Immediate Release

WASHINGTON, D.C. — The percentage of Americans with living-wage jobs improved significantly from April to May, with “functional unemployment” dropping to its lowest level in months for all major demographic groups, according to the monthly True Rate of Unemployment (TRU) report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

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 — dropped 0.7 percentage points for the month of May, improving to 22.4%. By contrast, the U.S. Bureau of Labor Statistics (BLS) reported an increase in the official jobless rate, from 3.4% to 3.7%. This is primarily due to the loss of low-wage part-time workers, counted as “employed” by the BLS — but classified as “functionally unemployed” by LISEP in previous monthly reports.

“This month is a perfect example of the shortcomings of government headline statistics in assessing the status of the economy,” said LISEP Chairman Gene Ludwig. "The loss of low-wage, part-time jobs should come as no surprise, and in fact, jobs incapable of lifting workers out of poverty should not even be considered employment for the purpose of setting economic policy.”

In addition to the improvement of the overall TRU by 0.7 percentage points (dropping from 23.1% to 22.4%), all major demographics posted improvement in their respective functional unemployment rates. Black workers saw a 0.5 percentage point improvement (24.5% to 24%), while the rate for Hispanic workers improved by 0.1 percentage points, from 26.2% to 26.1%. The TRU for White workers improved by 1.1 percentage points, from 22% to 20.9%, with the TRU for male workers improving by 0.9 percentage points (18.9% to 18%), and improved by 0.4 percentage points for women (27.9% to 27.5%).

According to LISEP, a cooling of inflation combined with wage gains for low-income earners helped increase the availability of living-wage jobs across all demographics.

“This month’s TRU report provides the basis for some real optimism, as we can now see gains across the board, with a stable workforce that is slowly moving toward living-wage employment,” Ludwig said. “That said, this optimism must be tempered with reality: there are key demographic groups that still have functional unemployment rates in excess of 25%. While progress is to be applauded, the key to shared prosperity is to sustain that progress. This should be top priority for policymakers.”

Living-Wage Job Market Improves in May, Says Ludwig Institute

‘Functional unemployment’ drops for all demographics, men and women

‍Jim Gardner

June 14, 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.

According to LISEP, a cooling of inflation combined with wage gains for low-income earners helped increase the availability of living-wage jobs across all demographics.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

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.