True Rate of Unemployment: One-fourth of American Workers Remain 'Functionally Unemployed' as Racial and Gender Gaps Widen

Addressing income inequality major challenge for new Congress, Administration, says LISEP chair

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Ludwig Institute for Shared Economic Prosperity

Jan 27, 2021, 11:00 ET

WASHINGTON, Jan. 27, 2021 /PRNewswire/ -- More than one-fourth of American workers remain without a job that lifts them above the poverty level, presenting a major challenge for the new Congress and the Biden Administration, according to the latest analysis of the country's unemployment rate released today by the Ludwig Institute for Shared Economic Prosperity (LISEP). At the same time, racial and gender gaps have widened, exacerbating economic inequity.

"For any economic recovery to be sustainable, the rising tide must lift all boats," said Gene Ludwig, LISEP chairman. "While we have seen some improvement in the government-reported unemployment rate since the pandemic began, many of these jobs are not sufficient to support a family. No economic recovery can succeed without the opportunity for all Americans to participate equally."

In its monthly analysis of employment data, LISEP's True Rate of Unemployment (TRU) – a measure of the "functionally unemployed," defined as workers seeking but unable to secure full-time jobs that take them over the poverty level – came in at 25.1 percent for the month of December. This is a marginal improvement over the November TRU of 25.7 percent. The Bureau of Labor Statistics (BLS) unemployment rate for December was unchanged at 6.7 percent.

While the overall TRU showed a slight overall improvement in living wage job growth, the improvements were not equal across all demographics. The slight decrease was fueled primarily by a 1.3 point improvement in the TRU for White Americans (now 22.7 percent), versus a 0.2 point improvement for Black workers, to 30.2 percent. The TRU rate for Hispanic Americans worsened, up 1.5 points to 31.6 percent.

Meanwhile, the TRU among workers with the highest education level (professional or advanced degrees) has fully recovered to pre-pandemic levels at 11.5 percent, a full percentage point lower than in February 2020. Living-wage job prospects worsened, though, for those with only a high school education, increasing from 21.8 percent to 24.1 percent, and for those with less than a high school diploma, with a TRU of 49.3 percent, up 0.8 points since November.

The gender gap among the functionally unemployed continues to widen as well, based on the TRU data. While the TRU for women improved by 0.3 points, the rate for men improved by 0.9, widening an immense gap between men and women – 20.6 versus 30.4 percent, respectively.

Ludwig was cautious regarding the overall TRU improvement, noting that the widening gender and race gaps are reasons for concern. He also noted that recent proactive measures by policymakers represent steps in the right direction.

"We must address inequality on all levels – gender, racial, economic – if we are to succeed as a nation, and that begins with the opportunity to secure a stable, living-wage job," Ludwig said. "These numbers underscore the scale of the economic crisis facing the country, and strengthen the case for bold, decisive action by policymakers."

LISEP issued the white paper "Measuring Better: Development of 'True Rate of Unemployment' Data as the Basis for Social and Economic Policy" upon announcing the new statistical measure in October. The paper and methodology can be viewed here. LISEP issues TRU one to two weeks following the release of the BLS unemployment report, which occurs on the first Friday of each month. The TRU rate and supporting data are available on the LISEP website 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.

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 CEO of Promontory Financial Group and chairman and CEO of Promontory MortgagePath, a technology-based mortgage fulfillment and solutions company. 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 by Disruption Books.

SOURCE Ludwig Institute for Shared Economic Prosperity