New Analysis Reveals 20 Years of Stagnant Wage Growth for American Workers
Ludwig Institute’s new True Weekly Earnings indicator shows significant racial disparity compared to government-reported wage data
WASHINGTON, D.C. — American workers have seen their real earnings grow by less than 10% over the last two decades, with a growing racial gap where gains by Black workers are half that of their White counterparts, according to new earnings data released by the Ludwig Institute for Shared Economic Prosperity (LISEP).
LISEP today launched a new measure of economic performance called the True Weekly Earnings (TWE) report, which is designed to provide a clearer picture of worker earnings than the Median Weekly Earnings Report released quarterly by the Bureau of Labor Statistics (BLS). Unlike the BLS report, LISEP includes all members of the workforce — including unemployed and part-time workers — to arrive at a more realistic measure of worker median earnings and their growth over time.
“While the Bureau of Labor Statistics does an excellent job of collecting accurate and reliable data, the presentation of its headline number was designed for an era long passed, not for the service-driven, gig-based employment of today,” said LISEP Chairman Gene Ludwig. “By bringing the analysis of earnings data into the 21st century, we hope to provide policymakers with a more realistic picture of the status of the American worker.”
Ludwig added that because the BLS uses the median weekly earnings of only full-time wage earners, the BLS report is biased upward during recessionary times, when low- and moderate-income earners lose their jobs or have their hours reduced. LISEP’s TWE report for the fourth quarter of 2020 shows a median weekly wage of $797, or $41,444 annually. This is about 20% lower than the BLS reported rate of $984 a week ($51,168 annualized).
In addition, the LISEP analysis revealed that the BLS report overstates labor earnings over time, particularly during economic downturns. In the last 20 years, the BLS report has overstated the growth of earnings by more than one-third compared to the LISEP data, 13% versus 9%. During the 2008 and 2020 recessions, BLS actually reported increases in median earnings of about 5% and 7%, respectively. In contrast, LISEP’s TWE shows declines of 2% for both time periods — a more accurate reflection of what workers were experiencing at the time.
Some of the widest disparities, though, between the LISEP and BLS data are reflected in the demographic analysis. The BLS reports that since 2000, Black workers have seen their earnings grow roughly equivalent to that of White workers, but the LISEP analysis shows that White earnings have grown more than twice that of Black workers — 16.2% versus 7.9%. In 2000, Black workers earned 77% of their White counterparts; in 2020 that has fallen to 72%,according to LISEP.
Meanwhile, LISEP reports that earnings growth has failed to keep up with other common measures of economic growth. Since 2000, GDP (inflation adjusted) has increased by 45.3% — five times faster than the LISEP median earnings measure. Since 2001 (earliest year reported by the Bureau of Economic Analysis), corporate profits of domestic corporations (inflation adjusted) have increased by 119% — versus a 9% increase in median earnings, as per LISEP’s measure.
“These data all point to an economic situation that is unsustainable,” Ludwig said. “A workforce that is continually marginalized through meager increases in compensation, even while contributing to overall economic growth through increased productivity, will eventually become disaffected.
“This, coupled with growing racial and gender inequality, can eventually give rise to societal issues beyond economics. It is our hope that policymakers will take a look at this new way of analyzing traditional data, and apply it to effect positive change throughout the national economy.”
The full white paper, “Understanding the Status of American Workers Through Analysis of Current Population Data,” can be viewed here. LISEP will continue to issue the TWE quarterly following the release of the BLS Median Weekly Earnings report, and will make the TWE rate, along with supporting data and demographic analysis, available on the LISEP website.
This is the second revised economic indicator LISEP has launched in the past year. In October 2020, LISEP launched its first monthly True Rate of Unemployment (TRU) report to measure the nation’s percentage of functionally unemployed, defined as those seeking full-time work but are unable to secure a position that pays above the poverty level. The full TRU report is also available at 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, the nation’s largest financial technology venture fund. He is the chairman and CEO of Promontory MortgagePath, a technology-based mortgage fulfillment and solutions company, and is the chairman of Promontory Financial Group. 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.