More Americans Joining Workforce, But Many Are Unable to Find Living-Wage Jobs
‘Functional unemployment’ climbs for Black workers
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.”
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 https://www.lisep.org/tru.
The Ludwig Institute for Shared Economic Prosperity (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. 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 Regulatory Group (LRG), which advises 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.