Functional Employment Increases for July as Wage Growth Stalls
Modest gains in earnings have been eroded, according to LISEP
WASHINGTON, D.C. — A higher percentage of Americans joined the ranks of the functionally unemployed for the month of July in spite of modest wage gains in the second quarter of 2021 by low- and middle-income workers, according to data released by the Ludwig Institute of Shared Economic Prosperity (LISEP).
In its monthly True Rate of Unemployment (TRU) report — a measure of the “functionally unemployed,” defined as the percentage of Americans unable to find full-time jobs paying above the poverty level — LISEP concluded that the percentage of workers unable to find living-wage jobs increased by 0.3 percentage points, from 23.1% to 23.4%. This increase is contrary to numbers released by the U.S. Bureau of Labor Statistics (BLS), which reported an improvement in the jobless rate, dropping from 5.9% to 5.4%. These data indicate that while workers are finding some form of employment, overall they are losing ground in their ability to provide for a family, which is compounded by pandemic-related price spikes on essential goods and services.
“While the economy is showing some promising signs of recovery and we are encouraged to see improvement in wages for low-income workers, it appears the labor market has stalled in terms of the maintenance and creation of living-wage jobs,” said LISEP Chair Gene Ludwig, noting LISEP’s True Weekly Earnings (TWE) report for Q2 2021 showed a 3.1% increase in earnings for the bottom 25%. “The solution is to keep the economic momentum going, which can only be accomplished through the creation of good paying, sustainable employment opportunities. This will drive the type of consumer spending critical to long-term economic growth.”
Functional unemployment increased across all demographics for the month of July, with the exception of the Hispanic population, which saw a significant improvement, dropping 1.6 percentage points (27.0% to 25.4%). The White population saw a 0.3 percentage point increase (21.3% to 21.6%) and the TRU for the Black population was up 0.6 percentage points (29.2% to 29.8%). Overall, both males and females saw an increase in functional unemployment: men were up 0.7 percentage points (18.5% to 19.2%), while women were up 0.5 percentage points, 27.8% to 28.3%.
Among educational groups, only those who ended their education with a high school diploma saw improvement, with a TRU dropping from 28.1% to 26.6%, a 1.5 percentage point decrease. Those with some college but less than a bachelor’s degree took the biggest hit, with TRU climbing 5.6 percentage points (20.6% to 26.2%). Those with no high school diploma have the highest TRU among all demographics at 46.0%, up 1.8 percentage points over June.
Overall job creation is key to improving these numbers, Ludwig said, adding that recent progress with the Biden Administration’s infrastructure and jobs bill is a step in the right direction.
“The bipartisan infrastructure bill addresses a wealth of public works and societal challenges, beginning with the creation of skilled jobs capable of supporting a family. Negotiators from both sides of the aisle are to be commended for working in the best interests of working families,” said Ludwig. “The progress is encouraging. Let’s keep the momentum going.”
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 http://www.lisep.org.
LISEP was created in 2019 by 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, and seeks to advance the dialogue around policy solutions to improve the well-being of all Americans.
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 CEO of Promontory MortgagePath, a technology-based mortgage fulfillment and solutions company, and chairman of Promontory Financial Group, now an IBM Company. 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. It was released in September 2020 by Disruption Books.