More Americans in Living Wage Jobs for Third Straight Month, Says Ludwig Institute

‘Functional unemployment’ drops to lowest level in 18 months

May 20, 2021

For Immediate Release

WASHINGTON, D.C. — More American workers continue to move into living-wage jobs, with the percentage of Americans classified as “functionally unemployed” dropping to the lowest level since December 2019, according to the Ludwig Institute for Shared Economic Prosperity (LISEP).

In its April True Rate of Unemployment (TRU) report, LISEP’s analysis indicates that the percentage of Americans classified as functionally unemployed – defined as seeking, but unable to find, full-time employment that lifts them over the federal poverty line – has dropped for the third consecutive month and now stands at 23.1%. This is a 1.6 percentage point improvement over March, the largest percentage drop since 1995 (when TRU began to be calculated). This is the lowest TRU since 22.7% in December 2019.

The decrease in the TRU is in contrast to the April unemployment report issued by the Bureau of Labor Statistics (BLS), which showed an uptick in the jobless rate, from 6.0% to 6.1%. According to LISEP Chairman Gene Ludwig, this is an indication that more part-time employees are seeing an increase in hours worked and as the economy reopens, employers are boosting wages.

“Three months of wage and employment growth is encouraging, and certainly signals a recovering economy. But we’re far from out of the woods,” Ludwig said. “We still have nearly a quarter of the workforce without a full-time living wage job, which is all the more reason to keep our foot on the gas with aggressive policy initiatives designed to create dependable, good-paying jobs. And it will still take some time for families to recover from the Covid recession – now is not the time to stop unemployment benefits for Americans in need.”

The TRU improved across all demographics, with Black workers posting the biggest improvement, from 31.8% to 27.6% -- dropping below 30% for the first time in more than a year. Hispanic workers saw a 1.3 percentage point drop, from 28.5% to 27.2%, while White workers improved from 22.8% to 21.6%. The TRU for men dropped a full percentage point, from 20.3% to 19.3%, thus dropping below 20% for the first time since March 2020. The rate for women also improved, from 29.3% to 27.4%.

Ludwig notes that contrary to analysts and pundits lamenting a “bad” BLS jobs report, he finds the news encouraging, with a larger swath of the workforce moving out of poverty and into living-wage employment.

“April’s job numbers, far from being an indictment, point to a much brighter future,” Ludwig said. “And while we shouldn’t read too much into month-over-month numbers, they are certainly going in the right direction.

“This is a good sign that our economy is rebounding to where it was before the pandemic, but we cannot forget that the pre-pandemic economy was marred by severe inequality, with nearly a quarter of all workers lacking a living-wage job. That’s why we need to take advantage of this generational opportunity to build back better.”

More Americans in Living Wage Jobs for Third Straight Month, Says Ludwig Institute

‘Functional unemployment’ drops to lowest level in 18 months

‍Jim Gardner

May 20, 2021

For Immediate Release

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.

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.

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.