Wage Inequality Grows With Low-Income Workers Losing Ground, Says Ludwig Institute

Earnings for high-income earners climb; ‘functional unemployment’ gender gap widens

April 16, 2025

For Immediate Release

WASHINGTON, D.C. — Lower-income workers experienced worsening conditions both quarter-over-quarter and year-over-year, while the gender gap for jobs earning above poverty wages continues to widen, according to a new report from the Ludwig Institute for Shared Economic Prosperity (LISEP).

LISEP issued its monthly True Rate of Unemployment (TRU) for March in conjunction with the Q1 2025 True Weekly Earnings (TWE) report. TRU is a measure of the “functionally unemployed” — defined as the jobless plus those seeking, but unable to find, full-time employment paying above poverty wages ($25,000 a year in 2024 dollars). TWE is a measure of median weekly earnings (adjusted for inflation) for all members of the workforce, including part-time workers and the unemployed seeking work. By comparison, the Bureau of Labor Statistics (BLS) headline numbers only include those employed at full-time jobs.

Despite an annual increase of 2.4%, the first quarter saw TWE decline by 1.4%, from $1,014 to $1,000 a week (in contrast, the BLS median wage for full-time workers fell only 0.8%, from $1,203 to $1,194). However, the picture is starkly different when analyzed by income distribution. The top earners saw gains in Q1, with the 75th percentile up 0.5% ($8/week to $1,676) and the 90th percentile rising significantly by 2.8% ($73 to $2,675). In contrast, the 25th percentile experienced a 1.5% drop, falling from $619 to $610 per week.

This divergence is further emphasized year-over-year: The lowest earners (25th percentile) saw a 0.3% decline, while the 75th and 90th percentiles enjoyed increases of 2.2% and 3.6%, respectively. This trend marks a continuation of the reversal of wage gains for low-income earners observed after the tighter labor market of 2022.

By demographic, Black workers saw a 2.2% decline in Q1, to $859 a week, while Hispanic workers saw a 0.7% decline, to $797. White workers saw a decline of 1.4%, to $1,121, with Asian workers seeing a 4% increase, to $1,276. Men saw a 2.5% drop in weekly earnings, to $1,129, while women saw a 0.7% decline, to $894. Median wages for all demographic groups increased year-over-year.

“Despite a modest annual wage increase, growing income inequality remains a serious concern — particularly as wage growth continues to lag behind the rising cost of living,” said LISEP Chair Gene Ludwig. “This widening gap not only signals limited improvement for lower-income earners, but also threatens the stability of the middle class, whose economic position is increasingly at risk.”

LISEP's March TRU report shows functional unemployment improving by 0.6 percentage points to 24%, a partial recovery from the 1.3 percentage point spike in February. The TRU for Black workers fell 0.7 percentage points to 25.3%, although a drop in workforce participation contributed to the decrease. The rate for Hispanic workers remained unchanged at 28.1%, while the rate for White workers fell 0.1 percentage points, to 23.1%.

The TRU for men rebounded from February, improving 1.4 percentage points to 18.8%, while the rate for women rose 0.2 percentage points, to 29.5%. Consequently, the three-month average gender gap now stands at 9.6 percentage points — up 1 percentage point from December.

“Even when top-line metrics look positive, a closer look at the data reveal ongoing challenges for many Americans,” said Ludwig. “Significant segments of the population are still being left behind, and in some cases, losing ground. These numbers should serve as a call for thoughtful, inclusive policymaking that ensures economic progress is broadly shared.”

Wage Inequality Grows With Low-Income Workers Losing Ground, Says Ludwig Institute

Earnings for high-income earners climb; ‘functional unemployment’ gender gap widens

‍Jim Gardner

April 16, 2025

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:

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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 the 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 the author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. His forthcoming book, The Mismeasurement of America, will be published in September 2025 and is available for pre-order wherever books are sold. On X: @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.