Big Yearly Gains in Living-Wage Jobs, Wages, According to Ludwig Institute

Career Climbers / 24th January 2022

The percentage of Americans defined as “functionally unemployed” took the biggest drop year-over-year in more than 25 years, according to the December 2021 True Rate of Unemployment (TRU), released by the Ludwig Institute for Shared Economic Prosperity (LISEP). And while worker earnings also posted significant gains over the past year, growth stagnated in the latter part of 2021 due to inflationary pressures, LISEP found.

LISEP issued its monthly TRU for December in conjunction with the quarterly True Weekly Earnings (TWE) report for the fourth quarter of 2021. TRU is a measure of the functionally unemployed — the jobless, plus those seeking but unable to secure full-time employment paying above the poverty line. TWE is a measure of real median weekly earnings after adjusting for inflation, and differs from the data issued by the Bureau of Labor Statistics (BLS) through inclusion of all members of the workforce, including part-time workers and the unemployed.

Overall, the TRU for December fell 0.3% to 23.3%, finishing the year with a 2.6% drop since January 2021. This is the largest decrease in any single year since 1995, the first year TRU data are available. The increase in living-wage jobs resulted in an overall increase in median weekly earnings over the past year, with the TWE report climbing from $844 per week in Q4 of 2020 to $862 per week in Q4 of 2021. But after three quarters of significant TWE increases in 2021, Q4 saw inflation eat into worker gains: Q4 median weekly earnings, at $862, was actually a dollar lower than the Q3 report, after adjusting for inflation. 

“It’s fantastic that we are starting the new year in better shape than we started the prior one in terms of earnings and living-wage jobs, but trends are emerging that may threaten gains we have seen for low- and middle-income workers over the past year,” said LISEP Chairman Gene Ludwig. “While inflation has affected everyone, it can’t be ignored that corporate profits are at an all-time high. This is emerging as an inflationary cycle primarily affecting the low- and middle-class – giving rise to inflation inequality.”

From Q4 2020 to Q4 2021, Black workers saw median weekly earnings increase from $691 to $708; Hispanics from $657 to $694. White workers were the only group to see a decrease, from $967 in Q4 2020 to $956 in Q4 2021. From Q3 to Q4 2021, however, Black workers only saw a slight gain, from $706 to $708, while Hispanic workers saw real earnings fall, from $702 to $694 and White workers fell from $965 to $956.

On the employment front, from January 2021 to December 2021 all major demographics saw significant decreases in the number of workers classified as “functionally unemployed” – that is, unable to find full-time, living-wage jobs, as measured by LISEP’s TRU. The TRU for Black workers fell from 31.6% to 27.3% (4.3%); Hispanic workers dropped 30.8% to 27.7% (3.1%); and the White worker TRU rate decreased from 23.8% to 21.6% (2.2%). However, from November to December 2021, changes in TRU were basically flat, with the Black TRU increasing from 26.9% to 27.3% (up 0.4%), Hispanic TRU down, from 28.1% to 27.7% (down 0.4%), and White TRU down, from 21.7% to 21.6% (0.1% decrease).

“While the one-year horizon certainly indicates an economy in recovery, recent inflationary trends pose a threat to the gains realized by low-and middle-income workers over the past year,” Ludwig said. “Policymakers need to recognize that the yardstick used to measure the economy as a whole is not a true indicator of the status of LMI families, and it’s the success of this group that will be critical to a sustainable, long-term economic recovery.”

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