1 in 4 Americans are jobless or earning poverty-level wages, new study finds
Official government figures show that unemployment around the U.S. has fallen sharply since peaking at nearly 15% in April as the coronavirus was shuttering businesses left and right. Yet the jobless rate as depicted in headlines offers a skewed picture of employment today, failing to capture the real financial pressure bearing down on millions of Americans, according to a new study.
In October, more than 1 in 4 workers were either unemployed or working for poverty-level wages, according to an analysis of government data from the Ludwig Institute for Shared Economic Prosperity (LISEP). By comparison, the October jobless rate stood at 6.9%, down from 14.7% in April as workers regained jobs or gave up searching for work.
Gene Ludwig, who heads the nonprofit think tank and is also founder and CEO of IBM's Promontory Financial Group, said he developed what he calls the "true rate of unemployment" to underscore economic ailments that aren't visible in official government statistics. His figure incorporates both jobless workers — people who were actively searching for work in the past month — as well as adults who are earning below $20,000 a year, or below the poverty line.
Such low wages are incompatible with supporting a family or achieving the American Dream of moving up the economic ladder, he said. "It was shocking even to me," Ludwig, an expert in fiscal policy, told CBS MoneyWatch. "In terms of what do most people think of as employed, they think of someone who wants a full-time job [and] they can earn enough to put food on the table for themselves and their family — that it's more than a poverty wage."
While the financial and job woes facing many Americans have deepened during the pandemic, the phenomenon is nothing new, he said. In January, when the job market was at a 50-year low, Ludwig's "true rate of unemployment" was 23.5% — or about seven times higher than the Labor Department's official jobless rate at the time of 3.6%.
Approaching unemployment through this lens is "super interesting," said Heidi Shierholz, a labor economist at the left-leaning Economic Policy Institute. Examining the job market by looking at different buckets of people — like those who are unable to find a new job versus those struggling to earn above a poverty wage — can help policymakers develop approaches geared to each group.
At the same time, the labor market "just isn't delivering" for many workers, she said, adding, "It's good to have an idea of the scope of that.
A decline in well-being
Ludwig said he grew interested in developing an alternate measure of what he calls "functional employment" when he revisited his hometown of York, Pennsylvania. Birthplace of the York Peppermint Pattie, the central Pennsylvania town had been hit by a decline in manufacturing as well as President Donald Trump's tariff war with China and other countries.
"I grew up in central Pennsylvania, and in my days, when I was growing up, at least in my own mind, it was kind of an idyllic time," Ludwig said. "When I've been back more recently, I've seen a marked decline in the well-being of those central Pennsylvania communities."
To be sure, the increase in low-wage work isn't something new: the economic expansion after the Great Recession was marked by a surge in jobs like home health aides and food workers. At the same time, middle-wage jobs — or those that pay between $14.26 and $23.23 an hour — had been declining, according to a 2017 study from CareerBuilder.
But the economic recovery now faces headwinds from a resurgent coronavirus pandemic. About 742,000 people filed for first-time unemployment benefits in the week ended November 14, the Labor Department said Thursday. That was the first time in five weeks that claims had risen, a sign that growth is slowing.
"The data released this morning comes before many restrictions put in place to staunch the latest wave of the pandemic, and the trend may worsen," Andrew Stettner, senior fellow at The Century Foundation and an expert on unemployment insurance, said by email.
"An urgent problem"
The lack of employment and quality jobs is an "urgent problem," Ludwig said. It's especially problematic among people of color and women, with his research finding that Black workers had a true unemployment rate of roughly 31% in October; the rate for women topped 30%.
"This problem has been going on for a time, getting worse," he noted. Unless it is addressed, "We are going to inherit not only a population that can't compete globally, [but] an economy that will be headed down as a general rule for everybody."
Fixing the problem will require investing in workers, especially through infrastructure projects that can provide workers with higher wages, offer education and training opportunities, and stimulate the economy, Ludwig said.
"It doesn't have to be college — it can be real trade opportunities for folks. God knows we need 'em," he said. "This isn't like a problem that we can basically say, 'Oh, that's kind of interesting, let's see what happens next month, next year.' This problem has been going on for a time [and is] getting worse."