Living-Wage Employment Continues to Exceed Pre-Pandemic Levels

But with ‘functional unemployment’ near 24%, much work remains, says LISEP chair

June 17, 2021

For Immediate Release

WASHINGTON, D.C. — More Americans are finding living-wage jobs than prior to the pandemic, signaling an ongoing economic recovery, according to an analysis by the Ludwig Institute for Shared Economic Prosperity (LISEP). Yet the percentage of “functionally unemployed” individuals remains alarmingly high and indicates the need for ongoing policy efforts if the recovery is to continue, said LISEP’s chair.

“While we can appreciate the encouragement indicated by the May True Rate of Unemployment (TRU), it is merely an indication that we are not regressing,” said Ludwig, former Comptroller of the Currency. “The federal COVID relief package and other proactive measures helped get us to where we are today, but these numbers indicate an additional push is needed if we are to continue down the road of economic recovery.”

LISEP’s TRU report — a measure of the “functionally unemployed,” defined as the percentage of Americans who are unable to find a full-time job that pays above the federal poverty level — stands at 23.7% for May. This is a 0.6 percentage point increase over the April rate of 23.1%, a change which may be due in part to seasonal factors, according to LISEP.

Ludwig notes that this is the third consecutive month the TRU has remained below 25%, and is nearly a full 7 percentage points below the May 2020 rate of 30.6%. The May 2021 rate is also lower than the pre-pandemic rate of 24% posted in February 2020.

“Returning to pre-pandemic levels is great, but it’s not good enough,” Ludwig said. “Most American families were struggling before the pandemic, and they will continue to struggle without aggressive policy measures. This should be a clear signal to Congress to get an infrastructure package passed sooner rather than later to facilitate the creation of dependable, living-wage jobs.”

The TRU was virtually unchanged across all demographics, with a substantial gap remaining between Black workers (28.4%) and White workers (21.8%). The rate for Hispanics showed a slight improvement, and stands at 26.8%. A significant gender gap remains, with women posting a 28.1% TRU, versus 19.5% for men.

The Bureau of Labor Statistics (BLS) reported a 5.8% unemployment rate for May, a decline of 0.3 percentage points from April.

“We continue to see significant racial inequality, gender inequality, and an overall wealth gap, all issues that must be addressed if we are to experience a healthy, sustainable economic recovery,” Ludwig said.

Living-Wage Employment Continues to Exceed Pre-Pandemic Levels

But with ‘functional unemployment’ near 24%, much work remains, says LISEP chair

‍Jim Gardner

June 17, 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.

The Bureau of Labor Statistics (BLS) reported a 5.8% unemployment rate for May, a decline of 0.3 percentage points from April.

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.