‘Functional Unemployment’ Drops for Black Workers in April, Says Ludwig Institute

Racial gap narrows to one-year low

May 16, 2024

For Immediate Release

WASHINGTON, D.C. — While the national “functional unemployment” rate remained unchanged from March to April, the share of Black workers in poverty-wage jobs declined, narrowing the racial employment gap, according to the monthly True Rate of Unemployment (TRU) report by the Ludwig Institute for Shared Economic Prosperity (LISEP).

The TRU measures the “functionally unemployed,” defined as the jobless plus those seeking, but unable to find, full-time employment paying above poverty wages (pegged at $25,000 a year in 2024 dollars) after adjusting for inflation. While the April TRU remained unchanged at 24.2% — meaning nearly one-fourth of the workforce is either unemployed, working for poverty wages, or involuntarily part-time — Black workers saw substantial gains, with functional unemployment dropping 2.3 percentage points, from 28% to 25.7%.

These gains, when combined with a slight uptick in functional unemployment among White workers (0.2 percentage points, from 22.7% to 22.9%), have narrowed the racial functional employment gap to 2.8 percentage points, the narrowest gap since April 2023 (2.4 percentage points; Black TRU 24.8%; White TRU 22.4%).

“The April report offers some encouraging signs, despite the lack of overall improvement in functional unemployment,” said LISEP Chairman Gene Ludwig. “A level TRU indicates that employment and wages are at least keeping up with inflation. While progress has been made, we must continue working to close the inequality gap.”

The April report presents a complex picture for Hispanic workers. The Hispanic labor force participation rate rose by 0.5 percentage points, indicating more Hispanics are entering the workforce. However, the TRU for Hispanic workers also increased slightly (0.4 percentage points, from 28.3% to 28.7%). This suggests Hispanic workers joining the workforce were largely unsuccessful in finding functional employment or displaced other functionally-employed workers within the demographic.

The TRU for men showed positive signs, decreasing by a full percentage point, from 20.1% to 19.1%, while the TRU for women rose 0.6 percentage points, from 28.8% to 29.5%. This increase, when combined with the decline for men, further contributed to a widening gender gap — currently at 10.4 percentage points.

“The persistence of a high functional unemployment rate and the stagnant progress toward a more equitable economy is alarming, particularly for certain demographics,” Ludwig said. “If we are to close the inequality gap for middle- and low-income families, we must prioritize opportunity creation and work toward shared prosperity.”

‘Functional Unemployment’ Drops for Black Workers in April, Says Ludwig Institute

Racial gap narrows to one-year low

‍Jim Gardner

May 16, 2024

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.