Headlines say that unemployment is way down. Commentators buzz about a labor shortage and what’s being called “the great resignation,” a wave of people leaving jobs, especially low paying ones with few benefits. Workers are on strike across the country, a classic indication of labor’s power.
But for huge numbers of people in need of work or better-paying jobs, this picture is only half the story, because the standard measures of employment and adequate income just don’t accurately reflect reality.
Many years of anti-union and anti-labor laws, little increase in minimum wages, and rising living costs add up to declining living standards for ordinary people. It’s so serious that at least half the U.S. working class can’t make a decent living.
A new idea: functional unemployment. Eugene Ludwig, an economist who served in the Clinton administration, advocates “shared economic prosperity” for lower and middle-income Americans.
He argues that the most often quoted unemployment figure obscures the desperate situation many people live in. This “headline” statistic only includes the totally unemployed who have looked for work in the previous four weeks.
Ludwig combines three things to come up with a more realistic picture of the state of the U.S. workforce: the government’s own measures of unemployment, underemployment and poverty. He calls his calculation the True Rate of Unemployment (TRU). It combines those actively looking for work, part-time workers who want full-time work, and employees who live in poverty even if they have a full-time job.
While he’s no socialist, Ludwig is on to something. The September 2021 headline unemployment rate determined by the Bureau of Labor Statistics (BLS) was just 4.8%. But Ludwig’s TRU rate of the functionally unemployed was a whopping 23.9%.
For those who think the second figure is stretching a point, consider the fact that someone is categorized as “employed” if they work a single hour in a week. That’s why the expanded statistic includes involuntary part-time workers. Then the TRU also includes all workers who make less than $20,000 a year, a conservative measure of poverty.
Even this 23.9% figure doesn’t reflect the enormous number of people who have given up hope of finding a job and stopped looking, even though they want work. The BLS excludes these people from the labor force entirely.
Ludwig makes a separate calculation to include them. He counts the unemployed, underemployed and inadequately paid across the whole working-age population. He calls it functional unemployment over the total population. In September, that rate was 53%. That’s right. Over half of the working-age population.
The details of his method can be found at the website for his Ludwig Institute for Shared Economic Prosperity.
Some pundits have taken these unemployment measures with a grain of salt, but other hard facts back them up.
Poverty American-style. The official poverty rate for 2019, before the pandemic, was 10.5%. This is appalling in the richest country in the world. It has the third highest poverty rate among developed countries.
But destitution in America is much higher than government statistics indicate. Ludwig picked $20,000 a year for functional unemployment because that is the government’s own measure of poverty for a family of three across the country. It doesn’t take into account that the cost of living is much higher in many areas.
For instance, the National Low Income Housing Coalition found that in 2021 full-time minimum wage workers can’t afford a two-bedroom apartment in any state. In 93% of counties across the country, they can’t even afford a one-bedroom apartment (affordable housing costs 30% or less of a person/family’s income).
A 2018 survey by the Federal Reserve found that about 4 in 10 Americans would struggle to cover a $400 emergency expense. It found that 17% of adults were unable to pay all their monthly bills. A quarter skipped necessary medical care because they couldn’t afford it. These people are poor.
The federal formula measuring poverty hasn’t changed since the 1960s. Meanwhile, the cost of housing has gone up 800%. Healthcare and childcare costs have also ballooned.
According to a survey by the website Care.com, 57% of families spent more than $10,000 on childcare in 2020. According to the Peterson Center on Healthcare, on a per capita basis, health spending in the U.S. has increased by over 31 times in the last four decades.
In 2020, more than 1 in 10 households were “food insecure” at some time during the year, which in less sanitized language means people who are hungry. Over 5 million people had very low food security.
Beyond the high cost of living and depressed wages for most workers is the issue of inequity in who faces the worst of these ruinous conditions.
Injustice by race and sex. There is no such thing as a level playing field. Some 24.3% of female-headed households are poor by federal standards. So are 25.4% of Native Americans, 20.8% of African Americans and 17.6% of Latinx people. White and Asian poverty stands at 10.1% each.
According to an October 2021 poll conducted by NPR and others, 44% of households with children under age 18 were having serious financial problems. For Black families it was 63% and for Latinx households 59%.
Official unemployment for Blacks is double the rate for whites — and has been for as long as it’s been tracked. Ludwig’s functional unemployment figure for white workers is 22%, but for African Americans it’s 27.9%, and for Latinx people 28.6%. The rate for women is 28.7%, while for men it’s 19.9%.
So yes, inadequate employment is the rule. Wages are the pits, too! It comes from years of legislation that obstructs the ability of unions to organize and win decent contracts, anti-immigrant policies that leave non-citizens at the mercy of employers, Congressional stonewalling of increases to minimum wages and labor protections, and judicial undermining of anti-discrimination laws. All add up to the stacked deck of massive income inequality, with a tiny minority at the top.
The huge dissatisfaction of working people is well founded. Insisting that the government stop lying by omission about the reality will raise consciousness of the problem. And the power of workers can be bolstered by unified organizing efforts that fight for those who are the most left out. Now is a good time to turn things around.