December 'Functional Unemployment' Improves, But Low-Income Workers Lose Ground in Q4, Says Ludwig Institute

Wages up overall, but not for those who need it the most

WASHINGTON, Jan. 22, 2025 /PRNewswire/ -- While the overall economic picture might suggest modest improvement—with median wages up 1.6% in Q4 2024 and 1.3% year-over-year, and a 0.2 percentage point improvement in December's "functional unemployment" rate—a new report from the Ludwig Institute for Shared Economic Prosperity (LISEP) paints a starkly different picture for lower-wage workers, with wages for the lowest earners falling 0.7% in Q4 2024.

LISEP issued its monthly True Rate of Unemployment (TRU) for December in conjunction with the Q4 2024 True Weekly Earnings (TWE) report. TRU is a measure of the "functionally unemployed" —defined as the jobless plus those seeking, but unable to find, full-time employment paying above poverty wages ($25,000 a year in 2024 dollars). TWE is a measure of median weekly earnings (adjusted for inflation) for all members of the workforce, including part-time workers and the unemployed seeking work. By comparison, the Bureau of Labor Statistics headline numbers only include those employed at full-time jobs.

The TWE rose by 1.6% in Q4, reaching $1,005 (up from $989). However, this gain masked a loss for those below the median: weekly wages for workers in the 25th percentile decreased by 0.7% (from $617 to $613). The 75th percentile saw a 0.3% improvement, from $1,648 to $1,652, but those at the top (90th percentile) experienced a 2.1% drop, from $2,633 to $2,577.

Median wages for White workers increased by 1.6% to $1,127, while Hispanic workers saw near-stagnant wages, dropping 0.1% to $795. Black workers, however, experienced a notable 4.9% increase in median weekly wages (from $829 to $870) last quarter and 3.1% year-over-year. This quarterly increase is likely influenced by a combination of factors, including potential seasonality (e.g. increase demand in transportation and warehousing, where Black workers are overrepresented) and a decline in labor force participation.

Men's wages grew at a faster pace than women's (2.9% vs. 1%), resulting in median weekly earnings of $1,147 for men and $892 for women. This translates to women earning just 78 cents on the dollar relative to men. Black workers earned 77 cents on the dollar and Hispanic workers made 71 cents on the dollar compared to White workers.

"While some may point to modest growth at the median, the reality is that low- and middle-income workers continue to struggle just to keep from losing ground—and, as our data show, those most in need are losing the battle," said LISEP Chairman Gene Ludwig. "Reaching that first rung on the economic ladder requires opportunity and that begins with a good-paying job. For far too many, that remains elusive."

The functional unemployment rate improved in December, with the TRU dropping from 23.9% to 23.7%—although the impact is mixed across demographic groups. White workers saw a 0.3 percentage point improvement, dropping from 22.4% to 22.1%, improving for the fourth consecutive month. Hispanic workers saw a 1.0 percentage point increase, from 27% to 28%. Black workers posted a 1.8 percentage point improvement (from 27.5% to 25.7%).

"The only thing for certain in these year-end numbers is the uncertainty, and that uncertainty casts a long shadow over low- and middle-income Americans," Ludwig said. "While positive indicators—such as an overall increase in median wages and a decline in functional unemployment—offer a glimmer of hope, they shouldn't obscure the harsh reality that many households continue to struggle."

About TRU
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 2020. 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 https://www.lisep.org/tru.

About TWE
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 https://www.lisep.org/twe.

About LISEP
The Ludwig Institute for Shared Economic Prosperity (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. LISEP's original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics.

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 founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. 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. On X (formerly Twitter): @geneludwig.

SOURCE Ludwig Institute for Shared Economic Prosperity