Wages Rebound, but Not for Black Workers, According to Ludwig Institute Analysis
Black-White wage gap grows to highest level since the pandemic began
WASHINGTON, D.C. — While wages for many Americans have rebounded to pre-pandemic levels, earnings for Black workers declined in the first quarter of 2021, with the wage gap between Black and White workers growing to its highest level since before the pandemic, according to an analysis of earnings data by the Ludwig Institute for Shared Economic Prosperity (LISEP).
In its quarterly True Weekly Earnings (TWE) report, LISEP’s analysis shows that overall, real median earnings have increased by 1.0% for the first quarter of 2021, driven in large part by a 1.6% increase in real earnings by Hispanic workers, while real earnings for White workers remained virtually unchanged. Wages for white earners have fully recovered to pre-pandemic levels and are currently 0.3% higher in real terms than in December 2019.
Meanwhile, Black workers saw their real earnings decrease by 1.4% since the fourth quarter of 2020, and a decline of 3.5% since the beginning of the pandemic. Black workers are now earning 70% as much as their White counterparts, the largest racial wage gap since the pandemic began and 6 percentage points higher than at the turn of the century, according to LISEP.
“The simple fact that an improving economy has failed to bring improving wages for a large swath of the workforce is an indication that the jobs being created are not the type of long-term, living-wage jobs necessary to sustain an economic recovery,” said LISEP Chairman Gene Ludwig. “An equitable recovery must lift all segments, otherwise the post-COVID economy will look a lot like the pre-COVID economy: with those at the top racing ahead and everyone else getting left behind.”
LISEP’s TWE report 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 the unemployed and part-time workers – to arrive at a more realistic measure of worker median earnings and their growth over time.
LISEP’s analysis of the first quarter of 2021 earnings data also shows that lower-income earners have been much slower to recover than those at the top of the income scale, with those at the 90th percentile of wage earners seeing a real 2.0% increase in the last quarter, and those at the 25th percentile seeing a gain in real terms of just 0.4%. Meanwhile, wages for those at the 90th percentile have fully recovered and are 2.5% higher since the beginning of the pandemic, while those at the 25th percentile have seen a 4.3% real earnings loss.
LISEP also found unequal growth in terms of educational attainment, with notable decreases for those with less than a high school diploma; with only a high school diploma; and for those with some college, but less than a bachelor’s degree. But among those with bachelor’s degrees or advanced degrees, earnings are up and have regained pre-pandemic levels.
“For our health and well-being as a society, it is critical for every citizen to have an opportunity to earn a living wage, as this has implications well beyond economics,” Ludwig said. “Our focus should not be to get back to where we were pre-pandemic – we have to do better.”
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 www.lisep.org.
This is the second revised economic indicator LISEP has launched in the past year. In October 2020, LISEP announced its first True Rate of Unemployment (TRU) report to measure the nation’s percentage of functionally unemployed, defined as those seeking full-time work but unable to secure a position that pays above the federal 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, 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. 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 bookThe Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. It was released in September 2020 by Disruption Books.