More Americans Joining Workforce, But Many Are Unable to Find Living-Wage Jobs

‘Functional unemployment’ climbs for Black workers

September 15, 2022

For Immediate Release

WASHINGTON, D.C. — The American workforce expanded from July to August, but many of those workers found they were unable to secure a full-time job that paid a living wage, according to an analysis by the Ludwig Institute for Shared Economic Prosperity (LISEP).

In its monthly True Rate of Unemployment (TRU) for August, LISEP reported that 22.5% of American workers are now classified as “functionally unemployed,” defined as the jobless, plus those seeking but unable to secure full-time employment, even if they want to work full-time and/or cannot earn above the poverty line after adjusting for inflation. This is an increase of 0.2 percentage points over the July TRU.

TRU’s sister metric, TRU Out of the Population (TRU OOP) — a measure of those who are functionally unemployed out of the entire population, not just active workforce participants — remained unchanged, which, when coupled with a rising TRU, indicates more workers are joining or returning to the labor force.

“It is a net positive that previously discouraged workers are rejoining the workforce, but unfortunately, their return to the workforce is in many cases not a return to full-time, living-wage employment,” said LISEP founder and chair Gene Ludwig. “The challenge for policymakers is to continue to encourage positive growth in employment opportunities, but do so in a manner that provides for growth in living-wage jobs for every American who wants one.”

Demographically, Black workers saw the biggest jump in TRU, increasing by 0.6 percentage points, from 25.8% to 26.4%. This, with the Black TRU OOP climbing by 0.7 percentage points, indicates that a larger percentage of Black workers are classified as functionally unemployed. Hispanic workers saw no change in the TRU, holding steady at 26.3%, with White workers tracking the national average and increasing by 0.2 percentage points, to 20.7%. Male TRU increased a full percentage point, from 17.5% to 18.5%, while women dropped a half percentage point, from 27.5% to 27.0%.

Living-wage job opportunities continue to be an issue for workers with only a high school diploma, with the TRU for this group jumping 2.5 percentage points, from 24.5% to 27.0%. Likewise, those without a high school degree saw their TRU increase, from 47.3% to 47.6%.TRU for workers with some college (but no college degree) dropped, from 25.6% to 23.7%, but an analysis of the TRU OOP for this group indicates the decline is likely due to discouraged workers in this cohort leaving the workforce.

“We know the cost of living continues to be an issue for low- and middle-income Americans, as inflation continues to erode the ability of these workers to maintain even a basic standard of living. So in that respect, I’m somewhat relieved there wasn't a bigger increase in the overall TRU,” Ludwig said. “But at the same time, we are witnessing an alarming decline in the opportunities for some minority workers to earn a living wage, which is undoubtedly a reason for concern. The bottom line: we can do better.”

More Americans Joining Workforce, But Many Are Unable to Find Living-Wage Jobs

‘Functional unemployment’ climbs for Black workers

‍Jim Gardner

September 15, 2022

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.

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.