Wages Keeping Pace With Inflation, Living-Wage Jobs Grow, According to Ludwig Institute

‘Functional unemployment’ drops to lowest level in more than 25 years

July 19, 2022

For Immediate Release

WASHINGTON, D.C. — Inflation-adjusted earnings remained steady for the second quarter of 2022 while the percentage of the American workforce finding full-time, living-wage jobs is at the highest level in 25 years, according to an analysis by the Ludwig Institute for Shared Economic Prosperity (LISEP).

“It is encouraging to see that even in the face of inflationary pressures, earnings for working families are holding steady with some modest gains, and meanwhile more Americans are moving into full-time, living-wage jobs,” said LISEP Chair Gene Ludwig. “We are hopeful that this trend will continue beyond the current inflationary cycle, ultimately lifting LMI families out of poverty and into a better quality of life.”

LISEP issued its monthly True Rate of Unemployment (TRU) for June in conjunction with the quarterly True Weekly Earnings (TWE) report for the second quarter of 2022. TRU is a measure of the functionally unemployed — the jobless, plus those seeking but unable to secure full-time employment paying above the poverty line. TWE is a measure of real median weekly earnings after adjusting for inflation, and differs from the data issued by the Bureau of Labor Statistics (BLS) through inclusion of all members of the workforce, including part-time workers and those actively seeking employment.

In LISEP’s latest TWE report, overall median weekly earnings remained unchanged over the first quarter of 2022 at $895 after adjusting for inflation. (These numbers, and all earnings numbers in this report, are recorded in inflation-adjusted 2022 Q2 dollars). Meanwhile, the percentage of workers seeking but unable to find a full-time, living-wage job — the “functionally unemployed,” as defined by TRU — plummeted nearly a full percentage point, from 23.0% to 22.1% — the lowest level since January 1995, the first year for which LISEP has calculated TRU.

By comparison, the BLS reported a drop in median earnings, from $1,063 to $1,041, and a steady official unemployment rate for June, holding at 3.6% for the fourth consecutive month.

The encouraging TRU report is tempered somewhat by the TRU Out of Population (TRU OOP) data, defined as the percentage of the total adult population (age 16 and older) who do not hold a full-time job, works part-time but desires full-time, and does not earn a wage paying above the poverty level. The TRU OOP only decreased by 0.5 percentage points, with the labor participation rate dropping by 0.1 percentage points, indicating that a small percentage of workers have dropped out of the labor force.

“This is a movement in the right direction,” Ludwig said. “We are cautiously optimistic that when inflationary pressures cool, this could spell some real gains for middle- and lower-income workers if this trend continues.”

Living-wage employment improved for most every major demographic, with the exception of Black workers, who saw a slight increase in functional unemployment, from 25.2% to 25.5%. Hispanic workers saw the biggest improvement at 1.9 percentage points, dropping from 27.1% to 25.2%, while White workers improved 0.4 percentage points, dropping from 21.1% to 20.7%. Both male and female workers saw improvement, down 1.5 percentage points to 17.7% and 0.5 percentage points to 26.9%, respectively.

Q2 weekly median wages as reported by TWE, while completely flat compared to Q1 at $895, saw some notable gains for lower income workers. The lowest quartile of earners was up $18 a week (3.3%), from $552 to $570. The upper decile of earners was also up, from $2,364 to $2,381, a 0.7% increase. However, this was offset by a decline in inflation-adjusted earnings for the third quartile of earners — representing the middle and upper-middle class — by 1.3%, dropping from $1,500 to $1,479.

Ludwig noted that while the overall report for both earnings and employment is encouraging, there remains room for improvement.

“This report represents some important improvement in terms of earnings and living-wage employment for lower-income workers, a trend that must be sustained if we are to continue along the path of an equitable economic recovery,” Ludwig said. “Of course the rising costs for necessities will continue to be a factor in maintaining this trend, so we can only hope that policymakers will take measures to blunt inflation without killing jobs and wages.”

Wages Keeping Pace With Inflation, Living-Wage Jobs Grow, According to Ludwig Institute

‘Functional unemployment’ drops to lowest level in more than 25 years

‍Jim Gardner

July 19, 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.

By comparison, the BLS reported a drop in median earnings, from $1,063 to $1,041, and a steady official unemployment rate for June, holding at 3.6% for the fourth consecutive month.

Ludwig noted that while the overall report for both earnings and employment is encouraging, there remains room for improvement.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

TRU & TWE Summary

TRU White Paper

TWE 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 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 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.