Racial and ethnic income gaps persist amid uneven growth in household incomes

Yesterday’s Census Bureau report on income, poverty, and health insurance coverage in 2018 shows that while there was a slowdown in overall median household income growth relative to 2017, income growth was uneven by race and ethnicity. Real median income increased 4.6% among Asian households (from $83,376 to $87,194), 1.8% among African American households (from $40,963 to $41,692), 1.1% among non-Hispanic white households (from $69,851 to $70,642), and only 0.1% among Hispanic households (from $51,390 to $51,450), as seen in Figure A. The only groups for which income growth was statistically significant were Asian and Hispanic households.

In 2018, the median black household earned just 59 cents for every dollar of income the median white household earned (unchanged from 2017), while the median Hispanic household earned just 73 cents (down from 74 cents).

Figure A

Real median household income, by race and ethnicity, 2000–2018

Year White  Black  Hispanic  Asian  White-imputed   Black-imputed  Hispanic-imputed  Asian-imputed  White  Black  Hispanic  Asian  White  Black  Hispanic  Asian 
2000 $66,712  $43,380  $48,500  $69,069 $44,614 $46,989
2001 $65,835 $41,899 $47,721 $68,161 $43,091 $46,234
2002 $65,646 $40,839 $46,334 $73,660 $67,965 $42,001 $44,890 $79,501
2003 $65,388 $40,633 $45,160 $76,231 $67,698 $41,789 $43,753 $82,276
2004 $65,178 $40,292 $45,670 $76,631 $67,481 $41,438 $44,247 $82,708
2005 $65,458 $39,898  $46,360  $76,873 $67,771  $41,033 $43,846 $84,991 
2006 $65,449 $40,116 $47,169 $78,291 $67,762 $41,257 $45,699 $86,560
2007 $66,676 $41,388 $46,958 $78,343 $69,032 $42,565 $45,495 $86,616
2008 $64,923 $40,154 $44,326 $74,913 $67,217 $41,296 $42,945 $82,824
2009 $63,895 $38,423 $44,628 $74,982 $66,153 $39,516 $43,238 $82,901
2010 $62,857 $37,114 $43,433 $72,402 $65,078 $38,170 $42,080 $80,048
2011 $62,001 $36,215 $43,217 $71,139 $64,192 $37,245 $41,870 $78,653
2012 $62,465 $36,945 $42,738 $73,415 $64,672 $37,996 $41,406 $81,169
2013 $62,915 $37,547 $44,228 $70,687 $65,138 $38,615 $42,850 $78,153 $65,138 $38,615 $42,850 $78,153
2014 $63,976 $37,854 $45,114 $78,883 $63,976 $37,854 $45,114 $78,883
2015 $66,721 $39,440 $47,852 $81,788 $66,721 $39,440 $47,852 $81,788
2016 $68,059 $41,924 $49,887 $85,210 $68,059 $41,924 $49,887 $85,210
2017 $69,806 $41,584 $51,717 $83,314 $69,806 $41,584 $51,717 $83,314 $69,851 $40,963 $51,390 $83,376
2018 $70,642  $41,692  $51,450  $87,194 

 

ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Because of a redesign in the CPS ASEC income questions in 2013, we imputed the historical series using the ratio of the old and new method in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. The break in the series in 2017 represents data from both the legacy CPS ASEC processing system and the updated CPS ASEC processing system. White refers to non-Hispanic whites, black refers to blacks alone or in combination, Asian refers to Asians alone, and Hispanic refers to Hispanics of any race. Comparable data are not available prior to 2002 for Asians. Shaded areas denote recessions.

Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table H-5 and H-9)

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Based on EPI’s imputed historical income values (see the note under Figure A for an explanation), 11 years after the start of the Great Recession in 2007, only African American households remained below their pre-recession median income. Compared with household incomes in 2007, median household incomes in 2018 were down 2.1 percent for African American households, but up 0.7% for Asian households, 2.3% for non-Hispanic white households, and 13.1% for Hispanic households. Asian households continued to have the highest median income, despite large income losses in the wake of the recession.

The 2018 poverty rates also reflect the patterns of income growth between 2017 and 2018. As seen in Figure B, poverty rates for all groups were down slightly or unchanged, but remained highest among African Americans (20.7%, down 1.0 percentage point), followed by Hispanics (17.6%, down 0.7 percentage points), Asians (10.1%, up 0.4 percentage points), and whites (8.1%, down 0.4 percentage points). African American and Hispanic children continued to face the highest poverty rates—28.5% of African Americans and 23.7% of Hispanics under age 18 lived below the poverty level in 2018. African American children were more than three times as likely to be in poverty as white children (8.9%).Read more

Government programs kept tens of millions out of poverty in 2018

**Correction: The SSI number in Figure B was corrected to 2,949,000 from 3,949,000.**

From 2017 to 2018, the official poverty rate fell by 0.5 percentage points, as household incomes rose modestly, albeit at a slower pace than the previous three years. This was the fourth year in a row that poverty declined, but the poverty rate remains half a percentage point higher than the low of 11.3% it reached in 2000.

Since 2010, the U.S. Census Bureau has also released an alternative to the official poverty measure known as the Supplemental Poverty Measure (SPM).

The SPM corrects many deficiencies in the official rate. For one, it constructs a more comprehensive threshold for incomes families need to live free of poverty, and adjusts that threshold for regional price differences. For another, it accounts for the resources available to poor families that are not included in the official rate, such as food stamps and other in-kind government benefits.

As shown in Figure A, a larger proportion of Americans are in poverty as measured by the SPM than as measured by the official measure. (Importantly, however, researchers who constructed a longer historical version of the SPM found that it shows greater long-term progress in reducing poverty than the official measure.) In 2018, the SPM increased by 0.1 percentage points to 13.1%. Under the SPM, 42.5 million Americans were in poverty last year, compared with 38.1 million Americans under the “official” poverty measure.Read more

Slowdown in household income growth continues in 2018

Today’s report from the Census Bureau shows a marked slowdown in median household income growth relative to previous years. Median household incomes rose only 0.9%, after rising 1.8% in 2017 and following impressive gains in the two years prior: a 5.1% gain in 2015 and a 3.1% gain in 2016. Median nonelderly household income saw a similar rise of 1.0% this year after gaining 2.5%, 4.6%, and 3.6% in the prior three years, respectively.

After falling for both men and women by 1.1% each in 2017, inflation-adjusted full-time annual earnings for both men and women rose in 2018, by 3.4% and 3.3%, respectively. Men’s earnings are finally above both their 2007 and 2000 levels.

While the gains in household income are markedly slower than in previous years, they nonetheless represent another small step toward reclaiming the lost decade of income growth caused by the Great Recession. Part of the slowdown in income growth in 2017 and 2018 relative to 2015 and 2016 is driven by increases in the pace of inflation. However, as discussed below, this year’s report reminds us that the vast majority of household incomes (when corrected for a break in the data series in 2013) have still not fully recovered from the deep losses suffered in the Great Recession.

Nonelderly household incomes improve

The Census data show that from 2017 to 2018, inflation-adjusted median household income for nonelderly households (those with a householder, or head of household, younger than 65 years old) increased 1.0%, from $70,944 to $71,659, as shown in Figure A. Median nonelderly household income is an important measure of an improving economy, as those households depend on labor market income for the vast majority of their income. This continued, albeit much slower, increase after larger gains in the prior three years is better than nothing. Median household income for nonelderly households, which finally recovered to its pre-recession level in 2017, was 1.2%, or $876 above its 2007 level in 2018. It’s important to note that the Great Recession and its aftermath came on the heels of a weak labor market from 2000 to 2007, during which the median income of nonelderly households fell significantly, from $73,322 to $70,783—the first time in the post–World War II period that incomes failed to grow over a business cycle. Altogether, from 2000 to 2018, the median income for nonelderly households fell from $73,322 to $71,659, a decline of $1,663, or 2.3%. In short, the last four years should not make us forget that incomes for the majority of Americans have experienced a lost 18 years of growth.Read more

By the Numbers: Income and Poverty, 2018

Jump to statistics on:

Earnings
Incomes
Poverty
Policy / SPM

This fact sheet provides key numbers from today’s new Census reports, Income and Poverty in the United States: 2018 and The Supplemental Poverty Measure: 2018. Each section has headline statistics from the reports for 2018, as well as comparisons to the previous year, to 2007 (the final year of the economic expansion that preceded the Great Recession), and to 2000 (the historical high point for many of the statistics in these reports). All dollar values are adjusted for inflation (2018 dollars). Because of a redesign in the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) income questions in 2013, we imputed the historical series using the ratio of the old and new method in 2013. All percentage changes from before 2013 are based on this imputed series. We do not adjust for the break in the series in 2017 due to differences in the legacy CPS ASEC processing system and the updated CPS ASEC processing system, but these differences are small and statistically insignificant in most cases.

Earnings

Median annual earnings for men working full time grew 3.4 percent, to $55,291, in 2018. Men’s earnings are up 1.0 percent since 2007, and are 1.5 percent higher than they were in 2000.

Median annual earnings for women working full time grew 3.3 percent, to $45,097, in 2018. Women’s earnings are up 5.8 percent since 2007, and are 12.3 percent higher than they were in 2000.

Median annual earnings for men working full time in 2018: $55,291

Change over time:

  • 2017–2018: 3.4%
  • 2007–2018: 1.0%
  • 2000–2018: 1.5%

Median annual earnings for women working full time in 2018: $45,097

Change over time:

  • 2017–2018: 3.3%
  • 2007–2018: 5.8%
  • 2000–2018: 12.3%

Read more

What to watch for in the 2018 Census data on earnings, incomes, and poverty

Next Tuesday is the Census Bureau’s release of annual data on earnings, income, poverty, and health insurance coverage for 2018, which will give us a picture of the economic status of working families 11 years into what is now the longest economic expansion in United States history. This data is particularly important because it gives us insight into how evenly (or unevenly) economic growth has been distributed across U.S. households. Other data sources that are released more than once a year too often provide only averages or aggregates— but next week’s Census release gives a much more textured picture of how the U.S. economy is working for typical households. In particular, next week’s release will help us chart the progress made by the typical American household in clawing back nearly two decades of lost income growth—the result of a failure of incomes to return to the business cycle peaks of 2000 during the slow early-2000s recovery and expansion, and the Great Recession. We’ll be paying particular attention to differences in the recovery across racial and ethnic groups.

What happened with incomes in recent years?

After adjusting the series to account for changes to the survey made in 2013, in 2017 real (inflation-adjusted) median incomes for American households rose just 1.8 percent and only managed to return to their pre-Great Recession peaks, even coming off of two years (2015 and 2016) of impressive across-the-board improvements. It is important to note, however, that some of the improvements in inflation-adjusted income we saw in 2015 and 2016 were driven by atypically low inflation—0.1% in 2015, and 1.3% in 2016. We didn’t get a similar boost from low inflation in 2017 (inflation increased 2.2% in 2017), and don’t expect one in 2018 (inflation increased 2.4% in 2018). We anticipate that an additional year of even modest growth will likely bring the broad middle class back to 2000 incomes. But, for non-elderly households, the latest data will be likely still below the peak reached 18 years prior.

Income

Real median household income, all and non-elderly, 1995–2017

All households All households- imputed series All households- new series Non-elderly households Non-elderly households- imputed series Non-elderly households- new series
1995 $54,600 $56,330 $62,727 $64,677
1996 $55,394 $57,150 $63,898 $65,885
1997 $56,533 $58,325 $64,722 $66,734
1998 $58,612 $60,470 $67,372 $69,467
1999 $60,062 $61,966 $69,079 $71,226
2000 $59,938 $61,838 $69,419 $71,577
2001 $58,609 $60,466 $68,324 $70,448
2002 $57,947 $59,784 $67,650 $69,753
2003 $57,875 $59,709 $67,031 $69,115
2004 $57,674 $59,502 $66,246 $68,305
2005 $58,291 $60,138 $65,792 $67,837
2006 $58,746 $60,608 $66,698 $68,772
2007 $59,534 $61,421 $67,015 $69,098
2008 $57,412 $59,232 $64,817 $66,832
2009 $57,010 $58,817 $63,932 $65,920
2010 $55,520 $57,280 $62,280 $64,217
2011 $54,673 $56,406 $60,775 $62,664
2012 $54,569 $56,298 $61,346 $63,254
2013 $54,744 $56,479 $56,479 $61,605 $63,520 $63,520
2014 $55,613 $62,667
2015 $58,476 $65,541
2016 $60,309 $67,917
2017 $61,372  $69,628
ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Because of a redesign in the CPS ASEC income questions in 2013, we imputed the historical series using the ratio of the old and new method in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. Non-elderly households are those in which the head of household is younger than age 65. Shaded areas denote recessions.

Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Tables H-5 and HINC-02)

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What do we expect in this year’s release?

Given the data we’ve seen for 2018 from other sources, it is likely that earnings, income, and poverty in the 2018 Census data will show some improvement over the past year. But it is also likely that this pace of improvement will be significantly slower than the average of the previous three years. As the economy steadily strengthens, we’ve seen progress in key labor market indicators, including participation in the labor market and payroll employment, which should boost household labor earnings. The unemployment rate ticked down another 0.5 percentage points in 2018, similar to the drop between 2016 and 2017. The overall labor force participation rate was unchanged between 2017 and 2018, but the employment-to-population ratio continued to increase, 0.3 percentage points overall and 0.8 percentage points for the prime-age population (25-54 years old). These are similar to the increases found between 2016 and 2017.

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What to Watch on Jobs Day: Wage growth is key to a sustainable recovery

There’s a reason millions of American workers are still feeling left out from what on the surface looks like a fairly strong economy: a distinct absence of consistently strong wage growth.

The unemployment rate has stayed at or below 4.0 percent since March 2018. But, nominal wage growth continues to be weaker than expected and, in fact, appears to be decelerating this year so far. In our nominal wage tracker that measures year-over-year changes, wage growth has flat-lined in recent months and has yet to reach the Federal Reserve’s target zone (given inflation targets and productivity potential). Looking at more-recent trends—wage growth between the first and second quarters of this year—there has actually been a deceleration in wage growth this year. The Employment Cost Index, released last month, also shows a marked deceleration in private sector wage growth.

Last month, the Bureau of Labor Statistics (BLS) also released preliminary benchmark revisions to payroll employment for April 2018 through March 2019. Each year, the BLS benchmarks total nonfarm payroll employment to state unemployment insurance tax records. While revisions in most years tend to be relatively small and don’t get officially incorporated into the historical numbers until the final revisions are released in February, this year’s revisions came in much higher. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2019 total nonfarm employment of -501,000. This means that, between April 2018 and March of 2019, there were a half million fewer jobs created than initially reported. Over the last ten years, preliminary revisions averaged about -92,000, so -501,000 is large in comparison. And, usually the difference between the preliminary revision and final is plus or minus 40,000. Therefore, it’s likely the final revisions will also be around 500,000 fewer jobs in that period.

The figure below illustrates what this means for job growth over the last two years. Here, I’m comparing April 2017 through March 2019, linearly interpolating the 501,000 losses equally over the 12-month period. Initially, it appeared that payroll employment growth increased between the year ending in March 2018 and March 2019, with monthly employment growth going from an average of 193,000 to 210,000. With these sizable downward revisions, average monthly employment growth actually fell from 193,000 to 168,000 over those two periods.Read more

Raising the federal minimum wage isn’t just the right thing to do for workers—it’s also good for the economy

Raising the federal minimum wage, which has now lapsed for the longest ever period without an increase, will benefit millions of low income workers and lift more than one million Americans out of poverty.

There is widespread agreement in the economics profession these days that, in contrast to outdated textbook theories, higher minimum wages have done exactly what they’re supposed to do: raise pay for low-wage workers with little, if any, effect on employment.

That’s why it was surprising to see Mitch Albom, a millionaire fiction author and sports columnist, argue so vocally and misguidedly against the prospect of an increase in a recent opinion piece in the Detroit Free Press.

The Raise the Wage Act, which boosts the minimum wage from the current paltry $7.25 per hour to $15 an hour by 2025, has passed the House of Representatives, but Senate Majority Leader Mitch McConnell refuses to even bring it up for a vote in the Senate.

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It’s not just noncompetes—increased use of anti-competitive contracts has limited workers’ bargaining power and employers’ hiring power

During the 2019 legislative session, lawmakers in a number of states including Maine, Maryland, New Hampshire, Rhode Island, and Washington passed laws limiting employers’ ability to impose noncompetition agreements (noncompetes) on low and middle-income workers. Noncompetes have traditionally been used to protect highly confidential information or trade secrets, and the trend to restrict them is in part a response to outrageous examples of employer overuse of noncompetes to prevent very low-wage workers like sandwich makers and security guards and even no-wage workers like unpaid summer interns from going to work for competitors. These new laws are important steps to safeguard employees’ ability to move jobs and employers’ ability to hire qualified candidates.

Yet while noncompetes matter tremendously, they are only one part of a larger story about how anti-competitive contracts—sometimes not even disclosed to workers themselves—are negatively impacting workers’ wages and mobility in our economy.

As Dr. David Weil documented in his landmark book, The Fissured Workplace, as companies have grown increasingly more specialized, our workplaces have concurrently grown more fragmented. For example, during most of the twentieth century, a commercial bakery would have employed almost every person in the line of production and distribution: the workers on the assembly line, the delivery drivers, the custodians, the office staff, and the accountant. Today, many of those positions would be outsourced to employees of different specialized firms: the temporary staffing company, the logistics company, the janitorial company, and the outside accounting firm.

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Don’t be fooled by the Trump administration’s Labor Day pitch on overtime policy—it’s going to cost workers billions

Soon, the Labor Department under the Trump administration will release its final rule on worker overtime. The rumor is that the administration may showcase the rule around Labor Day and claim they are taking steps to help workers. That means an important public service announcement is in order: do not be fooled! Workers would lose billions under this rule.

It is likely that the final rule will not depart radically from the proposal the administration laid out earlier this year, which was to raise the overtime salary threshold (the threshold under which salaried workers are automatically entitled to overtime pay) to $35,308 a year. This is a dramatic weakening of a rule published just three years ago. In 2016, following an exhaustive rule-making process, the Labor Department finalized an overtime rule that would have increased the salary threshold to $47,476, (which was the 40th percentile of the earnings of full-time salaried workers in the lowest wage census region). However, a single district court judge in Texas enjoined the Department from enforcing the rule, and the court later erroneously held the rule to be invalid. Instead of defending the threshold from the egregiously flawed logic of the judge, the Department abandoned the rule and proposed their much weaker threshold, which is roughly the 20th percentile of the earnings of full-time salaried workers in the lowest-wage census region.

It’s useful to note that if the rule had simply been adjusted for inflation since 1975, today it would be roughly $56,500. This is more than $20,000 higher than the Trump administration’s level! The Trump administration’s weaker rule will leave behind an estimated 8.2 million workers who would have gotten new or strengthened overtime protections under the 2016 rule. This includes 4.2 million women, 3.0 million people of color, 4.7 million workers without a college degree, and 2.7 million parents of children under the age of 18. Further, the annual wage gains are $1.2 billion dollars less under the presumed Trump rule than under the 2016 rule—and these annual earnings losses will grow from $1.2 billion to $1.6 billion over the first 10 years of implementation because, unlike the 2016 rule, the Trump administration rule almost surely will not include automatic indexing.

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It’s the beginning of the school year and teachers are once again opening up their wallets to buy school supplies

It’s the beginning of the school year, a time of eager anticipation and hopeful expectations. Amid the excitement, parents are engaged in practical tasks, including opening their wallets to stock their children’s backpacks with school supplies. Teachers, too, are gearing up to go back to their classrooms by opening their wallets to buy classroom supplies. An overwhelming majority of them—more than nine out of 10—will not be reimbursed for what they spend on supplies over the school year, according to survey data from the National Center for Education Statistics (NCES).

The nation’s K–12 public school teachers shell out, on average, $459 on school supplies for which they are not reimbursed (adjusted for inflation to 2018 dollars), according to the NCES 2011–2012 Schools and Staffing Survey (SASS). This figure does not include the dollars teachers spend but are reimbursed for by their school districts. The $459-per-teacher average is for all teachers, including the small (4.9%) share who do not spend any of their own money on school supplies.

Unlike the data from the more recent 2015–2016 survey (now called National Teacher and Principal Survey or NTPS), the 2011–2012 SASS microdata provide state-by-state information, allowing us to see how much teachers spend on supplies by state. The map below shows the inflation-adjusted state-by-state spending. We know that the figures in the map are not an atypical high driven by the Great Recession because the 2011–2012 spending levels are lower than spending levels in the 2015–2016 NTPS data. The figure after the map shows that teachers’ unreimbursed school supply spending has actually increased overall since the recovery.

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The road not taken: Housing and criminal justice 50 years after the Kerner Commission report

Last year, on the 50th anniversary of the “Kerner Commission” report, the Economic Policy Institute, collaborating with the Haas Institute for a Fair and Inclusive Society at the University of California, Berkeley, and Johns Hopkins University’s 21st Century Cities Initiative, hosted a conference on “Race & Inequality In America,” not only to commemorate the report but to re-assess its findings and conclusions. The conference assembled prominent national experts in the fields of housing, employment and labor markets, criminal justice, health, and education to consider where the black-white divide has narrowed, where it has stayed the same, and where it has widened.

In The Road Not Taken we have now summarized the conclusions of these experts, adding some additional perspectives with the benefit of another year of hindsight. We focus particularly on how far we have come, or not come, in housing segregation and criminal justice disparities over the last 50 years. In particular, we examine the recommendations of the 1968 commission and note how few have ever been implemented.

The Road Not Taken notes that in some ways the last half century has seen progress—the desegregation of workplaces is perhaps the most conspicuous example, although here too, much remains to be done. In some areas, we’re about where we were—residential segregation has not diminished much, if at all. And in some areas, things have gotten much worse—the disparate incarceration of young black men, in particular.

We review the most important policies now needed to break us out of stagnation in the two most critical areas of criminal justice and housing. Reforms in both areas have been largely inadequate, partial or superficial. Unfortunately, many of the policies needed today are no different from those recommended by the Kerner Commission. Some are new. Our chief policy recommendations are these:Read more

Why Eugene Scalia is the wrong person for the job

Working women and men need and deserve a Secretary of Laborsomebody who will look out for their interests, protect them from unscrupulous employers, set strong health and safety standards, and safeguard their retirement security.

Unfortunately, corporate lawyer Eugene Scalia, the man named by President Trump to be the next Secretary of Labor, is not that person.

Scalia, a graduate of the University of Chicago Law School, is a partner at the Washington, D.C.-based law firm Gibson, Dunn & Crutcher, where he specializes in labor and employment law and administrative law. He is an active participant in the activities of the Federalist Society—a right-wing legal group. Scalia was nominated in 2001 by President George W. Bush to be Solicitor of Labor, but his nomination was blocked because of opposition over his extreme views against worker health and safety protections. Bush circumvented the Senate and installed Scalia as Solicitor through a recess appointment. Scalia returned to his law firm at the beginning of 2003.

Scalia has built his career representing corporations, financial institutions, and other business organizations—and fighting worker protections like health and safety regulations, retirement security, and collective bargaining rights. Scalia’s reputation as the go-to lawyer for corporations wanting to avoid worker and consumer protections is so notorious that a headline in a Bloomberg Businessweek profile on Scalia read, “Suing the Government? Call Scalia.”1 Here are just a few examples of cases where Scalia, on behalf of corporations and trade associations, has attacked worker and consumer protections:Read more

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What to Watch on Jobs Day: Are there signs of wage acceleration?

Remember that ad from the 1980s where that woman keeps asking “Where’s the beef?” I’m feeling a little like her these days, asking “Where’s the wage growth?” It’s true that the labor market continues to chug along. The unemployment rate has been at or below 4.0 percent for the last 16 months, yet, I still find myself looking for the beef—in this case, stronger wage growth.

Earlier this week in EPI’s Macroeconomic Newsletter, Josh Bivens posited two different ways to measure wage growth using the establishment survey (CES) data that’s released every jobs day. The first measure, as EPI typically uses in our nominal wage tracker, tracks growth each month relative to the same month the prior year. For the second, he looks at quarter to quarter changes (at an annualized rate for comparison). While year over year, it’s pretty clear that wage growth has flat-lined in recent months and has yet to reach the Federal Reserve’s target zone (given inflation targets and productivity potential), the second measure shows clearly that there’s actually been a deceleration in wage growth this year. The Employment Cost Index, released yesterday, also shows a marked deceleration in private sector wage growth.

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Not just ‘no heat’ but signs of cooling: The case for FOMC rate cuts has real merit

Josh Bivens, director of research at EPI

Federal Reserve Chair Jerome Powell’s July 10 testimony before the House Financial Services Committee was unlike any hearing featuring his predecessors.

Despite the vital importance of Fed decisions for the day-to-day lives of working families, congressional hearings featuring the Fed chair speaking about the state of the economy historically have disappointed. Disinterested and poorly informed questions posed by members of Congress have elicited opaque answers from Fed chairs.

This hearing was different. The questions were probing and informed, and Powell answered them with clarity.

Perhaps the most illuminating exchange occurred when Representative Steve Stivers (R-Ohio) asked Powell if the Fed was worried that low interest rates would cause the job market to run “hot.”

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It’s not trickling down: New data provides no evidence that the TCJA is working as its proponents claimed it would

The strongest economically-respectable argument from proponents of the Trump administration’s Tax Cuts and Jobs Act (TCJA) was that corporate tax cuts would eventually trickle down to workers’ wages. The theory goes that higher after-tax corporate profits are passed down to shareholders in the form of higher dividends. Higher dividends incentivize households to save more, or attract more savings from abroad. The increased savings push down interest rates, so that it’s easier for corporations to borrow money to invest in new plants and equipment. And this new capital stock gives workers more and better tools to work with, boosting their productivity, and eventually that increased productivity should boost wages.

We’ve explained plenty of times why, in practice, this theory was unlikely to hold (and that even this theory depends on the tax cut not being debt-financed to work—but the TCJA was indeed financed solely with debt). But the bottom-line linchpin for assessing if the TCJA is working as promised is the performance of investment. We now have 18 months of data on investment since the passage of the TCJA, plenty of time for its increased incentives for private investment to have taken hold. But the data doesn’t come close to supporting the story told by TCJA proponents.

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Detailed estimates for policies in EPI’s ‘Budget for Shared Prosperity’

On June 11, 2019, EPI participated in the Peter G. Peterson Foundation’s (PGPF) “Solutions Initiative.” This project entailed submitting our own model federal tax and budget plan. In a previous post, we described the big picture behind our proposals. And in a recent report, we described the size of the spending and revenue increases in our budget, while paying particular attention to the details of our proposals for raising revenues and the reasoning behind them.

But we also wanted to provide more specific scores for each proposal in the “Budget for Shared Prosperity.” Estimates for spending proposals were put together by EPI and reviewed by independent scorekeepers contracted by PGPF. Estimates for the tax policies in our budget were put together by the Tax Policy Center (TPC). More information on score-keeping can be found in the report for the “Solution’s Initiative.”

Table 1 provides 30-year scores for each of the proposals in the “Budget for Shared Prosperity” in billions of dollars, as well as the effect on debt and deficits. Table 2 provides the net effects of these proposals relative to CBO baseline as a percentage of GDP. And Table 3 provides the net effects of these proposals relative to CBO baseline in billions of dollars.

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August Recess 2019: A look back at the House’s legislative victories that benefit working people

Today, Congress ended its legislative work for the summer. Members return to their districts after a busy week dominated by discussion of the Mueller report. While much of the focus of the 116th Congress has been on investigations of the Trump administration, the House of Representatives has passed several bills that would benefit working people. Just last week, the House passed the Raise the Wage Act which would raise the minimum wage to $15 an hour in 2025. This critical legislation would increase wages for over 33 million U.S. workers and lift 1.3 million people out of poverty–nearly half of them children. Workers in every congressional district in the country would benefit from this critical legislation. EPI recently released a map that shows the benefits of raising the minimum wage to $15 by 2025 by congressional district.

In March, the House passed the Paycheck Fairness Act, which would strengthen the Equal Pay Act of 1963 and guarantee that women can challenge pay discrimination and hold their employers accountable. Since the passage of the Equal Pay Act of 1963, millions of women have joined the workforce. However, more than five decades later, women are still earning less than their male counterparts. On average in 2018, women were paid 22.6 percent less than men, after controlling for race and ethnicity, education, age, and location. This gap is even larger for women of color, with black and Hispanic women being paid 34.9 and 34.3 percent less per hour than white men, respectively—even after controlling for education, age, and location. The Paycheck Fairness Act is crucial legislation in reducing these gender pay gaps and guaranteeing women receive equal pay for equal work.

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Affordability and quality—attainable goals for an effective early care and education system

Last month, Senator Warren (D-Mass.) and Representative Haaland (D-N.M.) introduced the Universal Child Care and Early Learning Act. The legislation sets out to tackle the two-pronged problem with the current early care and education (ECE) system in the Unites States today: affordability and quality. Current funding for the ECE system is insufficient because what parents can afford to pay is simply not enough to provide early educators with a fair wage and ensure high-quality care and education for young children.

The lack of affordability for families has been well-documented. EPI has consolidated information from a variety of sources and crunched the numbers on affordability for each state into handy child care fact sheets. There, you can see just how hard it is for families to pay for ECE for one, let alone two children. And, the problem of affordability isn’t limited to low-income families. In Arizona, the state with the median (middle) value of infant care costs across the nation, a typical family with children would have to pay 20 percent of their income for infant care. The cost is more than one year of in-state tuition for a four-year public college and greatly exceeds the recommended affordability standard of 7 percent.

The proposed legislation tackles affordability by setting limits on how much parents need to pay out of pocket for care. Those with incomes under 200 percent of the federal poverty line (about $40,000 for a two-parent one child family) are fully subsidized, while expenses are capped on a graduated basis up to 7 percent of income for the highest earners. This payment structure recognizes that affordability issues persist in not just the poorest of families but many middle-income families as well.

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Teachers need better professional development opportunities, more support

We recently published a deep-dive into the professional development of teachers—strengths, shortcomings, places for improvement. What we found, in short, was reason for optimism on a few fronts, substantial room for improvement on a much larger number of aspects—and also room for learning more about these systems of supports.

The lastest report of our “Perfect Storm in the Teacher Labor Market” series is devoted to examining the systems of professional supports available to teachers—i.e. the early career, ongoing professional development opportunities, and the learning communities they are part of.

Though in the report we keep the main two themes of “equity” and “quality” used in the teacher shortage series, this time, unlike in previous reports, we navigate grayer areas regarding the framing of the report and the straight correlations between the supports and the shortage. For one, because there is no set of supports deemed as ideal and universally valid in the field, because there is insufficient information about for whom, for what, and why these supports matter , and also because it is unlikely that lack of any specific resource or support can be a sole cause for expelling teachers from the classrooms or not attracting new ones to them (or at least these are less clear than in prior reports).

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Social Security expansion would likely bolster, not hurt, economic growth

A recent analysis from the Penn Wharton Budget Model (PWBM) claims that expanding Social Security benefits along the lines of Rep. John Larson’s (D-Conn.) Social Security Act of 2100 (“the Act”) would slow economic growth. The model warrants a closer look, not just because it casts doubt on Social Security expansion, but because some of its dubious assumptions can be used against almost any policy that raises progressive taxes to pay for programs tilted in favor of low- and moderate-income Americans.

The Act, which has over 200 cosponsors, would increase payroll tax revenues to pay for expanded benefits while eliminating or greatly reducing Social Security’s long-term deficit. Among other things, the act would subject earnings above $400,000 to the Social Security payroll tax (earnings above $132,900 are not currently taxed); gradually raise the payroll tax rate; increase benefits in a progressive fashion;1 and change the consumer price index used for the cost-of-living adjustment to better match the higher inflation faced by seniors.

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Low-wage workers will see huge gains from minimum wage hike, CBO finds

Raising the federal minimum wage to $15 an hour will be hugely beneficial to low-income Americans, according to a new report from the non-partisan Congressional Budget Office.

At the same time, the analysis forecasts the loss of around 1.3 million jobs. There are good reasons not to take this prediction seriously, as I explain below. But even taking CBO’s findings at face value, an overwhelming share of low-wage workers would benefit from the minimum wage increase.

The main takeaway from the CBO’s report is the estimate that a $15 minimum wage by 2025 would raise wages of up to 27.3 million low-wage workers, decrease income inequality, and reduce the number of families in poverty by 1.3 million. Overall, CBO found that low-wage workers as a group would benefit enormously from the minimum wage increase. According to CBO’s own findings, the increase to $15 would raise total annual earnings for low-wage workers by $44 billion.

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Revived debate over school busing highlights deepening racial segregation

When Senator Kamala Harris told former Vice President Joe Biden “that little girl was me,” she evoked a mostly-forgotten era, a half-century distant, when federal courts mandated busing of black children to schools in white neighborhoods.

The court orders were controversial and unpopular amongst almost all whites and many blacks, and yet: assemble a list of African Americans in their mid-to-late 50s or early 60s, and who are the most successful lawyers, political leaders, executives in the non-profit, corporate, and foundation sectors, or otherwise spread throughout the professional and managerial class, and you will find a disproportionate share were bused during the heyday of court-ordered school desegregation—roughly 1968 to 1980.

Masterful books, one by Susan Eaton (The Other Boston Busing Story, 2001) and another by a team led by Amy Stuart Wells (Both Sides Now, 2009) recount interviews with adults who had been bused for desegregation decades earlier. Eaton interviewed 65 African Americans who, as children, took part in a voluntary busing program that transferred students from Boston public schools to white suburbs where family sizes were declining, leaving schools with empty seats. Wells’s team interviewed 215 white and black adults who, as children, had been bused out of their segregated black schools in six cities—Austin (TX), Charlotte (NC), Englewood (NJ), Pasadena (CA), Shaker Heights (OH), and Topeka (KS).[*] The books have lost none of their relevance; indeed, if you are intrigued by Harris’ remark and you missed the Eaton and Wells books the first time around, this is a good time to get them from your local library or used bookstore and catch up.

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What to Watch on Jobs Day: Data volatility or signs of an economic slowdown?

On Friday, the release of Bureau of Labor Statistics (BLS) estimates of June job growth and unemployment will provide a first look at how the labor market has performed over the first half of the year. The unfortunate timing of the release for the Friday after the Independence Day holiday, however, means that EPI will have limited capacity to perform a full same-day analysis. But there are several things I will be tracking this Friday.

May’s noticeable slowdown in the pace of job growth, foreshadowed by the exceptionally slow pace of hiring reported by ADP last month, raised some concerns about whether an economic slowdown was imminent. The economy added 75,000 jobs in May which was significantly less than April’s growth of 224,000 and below the year-to-date average of 164,000 a month. With the June ADP estimates coming in much higher—102,000 private sector jobs added in June compared to 41,000 in May— we will be looking to see if there’s a similar rebound in the BLS estimates.

Overall, May’s unemployment rate, labor force participation rate, and share of the population with a job each signaled an economy basically treading water. However, there have been questions about whether the recent rise in the black unemployment rate is another potential sign of a slowing economy or just typical volatility in the data series. Last month, the black unemployment rate ticked down 0.5 percentage point to 6.2 percent after rising from 6.0 percent in November to as high as 7.0 percent in February. Over the same period of time, the white unemployment rate has remained relatively stable. Given that tighter labor markets have typically yielded disproportionate improvements for black workers and other historically disadvantaged groups, I will be tracking whether the June numbers provide any more clarity about what (if any) conclusions we can draw from the black unemployment rate.

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What’s good for Wall Street is often bad for American workers and manufacturing: The overvalued dollar

A strong dollar is hurting American workers and main street manufacturers, as I explained last week in the New York Times. I discussed what can be done about it, which builds on a crucial plank of Elizabeth Warren’s American Jobs plan.

In order to rebalance U.S. trade, the dollar needs to fall 25–30 percent, especially against the currencies of countries with large, persistent trade surpluses such as China, Japan, and the European Union. This would help to address the trade deficits that have eliminated nearly 5 million good-paying American manufacturing jobs over the past two decades and some 90,000 factories. In fact, trade with low-wage countries has pulled down the incomes of 100 million non-college educated workers by roughly $2,000 per year.

This week, Ruchir Sharma of Morgan Stanley trotted out a bunch of very shaggy dogs in defense of a strong currency. But he never mentioned the real reason Wall Street loves a strong dollar. An overvalued greenback has enabled the cheap imports that fuel the massive profits of American giants ranging from Apple and Amazon to Costco and Walmart. And multinational corporations have used offshoring, and the threat of moving more plants abroad, to drive down U.S. wages and benefits, and to weaken domestic labor unions.

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The Public Service Freedom to Negotiate Act provides public-sector workers the right to join in union and collectively bargain

In February 2018, teachers went on a statewide strike in West Virginia to demand just wages and better teaching and learning conditions. For nine days, schools across the state were closed as teachers, students, and community supporters protested at the state capital against the state government’s chronic underfunding of public education and the impact on the teachers and students. After a week and a half of striking, the West Virginia teachers received a pay increase, but more importantly, they sparked a movement that prompted public school teachers across the nation to strike in support for fairer pay and better working conditions.

The teachers in West Virginia and across the nation relied on the solidarity and support from their communities to win these fights, because in many states public-sector workers do not have the right to collectively bargain. Under current federal law, public-service workers do not have the freedom to join in union and collectively bargaining for fair pay, hours, or working conditions. There are more than two dozen states with laws that protect public-service workers’ right to join unions, but dozens more have lack any rights. Last year, the Supreme Court’s 5-4 decision in Janus v. AFSCME Council 31 overturned 40 years of precedent by barring unions from requiring workers who benefit from union representation to pay their fair share of that representation. And states continue to perpetrate the assault on public-service employees by either denying or undermining workers’ ability to act collectively in addressing workplace issues.

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The federal government’s housing policies deepened segregation: A response to a critique of The Color of Law

In The Color of Law, I wrote that de facto residential segregation is a myth. The distribution of whites and blacks into separate and unequal neighborhoods in metropolitan areas nationwide was not accidental or merely the product of private activity, but was reinforced, created, and sustained by federal, state, and local policy to a sufficient extent to make these residential patterns a civil rights violation, or de jure segregation. The book describes how the Franklin D. Roosevelt and Harry S Truman administrations required residential segregation in their many housing programs. These two presidencies were the first in American history to invest federal funds in civilian housing.

Until now, reviewers of the book have accepted the book’s extensively documented historical account, as the subtitle summarizes: “a forgotten history of how our government segregated America.”

But now, Richard Walker, director of the Living New Deal, a campaign to promote the legacy of the Roosevelt administration’s public works projects, has written a critique of The Color of Law in the socialist magazine, Jacobin, and I’ve responded.

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Immigration enforcement is funded at a much higher rate than labor standards enforcement—and the gap is widening

One clear way to understand the priorities of a government is to look at how it spends money. If it’s true as they say that “budgets are moral documents,” then this Congress and administration do not place much value on worker rights or working conditions. A comparative analysis of 2018 federal budget data reveals that detaining, deporting, and prosecuting migrants, and keeping them from entering the country, is the top law enforcement priority of the United States—but protecting workers in the U.S. labor market and ensuring that their workplaces are safe and that they get paid for every cent their earn is barely an afterthought.

In 2013, the Migration Policy Institute (MPI) made headlines with a report that highlighted the fact that appropriations for immigration enforcement agencies exceeded funding for the five main U.S. law enforcement agencies combined by 24 percent. A recent report from MPI updated the numbers, showing that after six years of skyrocketing spending, immigration enforcement agencies received $24 billion in 2018, or $4.4 billion more than they did in 2012 (in constant 2018 dollars). This amounts to “34 percent more than the $17.9 billion allocated for all other principal federal criminal law enforcement agencies combined,” which includes the Federal Bureau of Investigation, Drug Enforcement Administration, Secret Service, Marshals Service, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.

With $24 billion in federal spending and climbing, immigration enforcement has undoubtedly become the top law enforcement priority of the U.S. government and the Trump administration. Where do labor standards and worker rights fit in?

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Worker bonuses slump 22 percent after GOP tax cuts

Data from the Bureau of Labor Statistics’ Employer Costs for Employee Compensation gives us a new chance to look at private sector workers’ nonproduction bonuses in 2018 and March 2019 to gauge the impact of the GOP’s Tax Cuts and Jobs Act of 2017. The bottom line is that bonuses in the most recent quarter, March 2019, remained very low at $0.72 per hour (in $2018), the same as in December 2018 and far below their $0.88 level in 2017 or the $0.90 level in 2018.

This is not what the tax cutters promised, or bragged about soon after the tax bill passed. They claimed that their bill would raise the wages of rank-and-file workers, with congressional Republicans and members of the Trump administration promising raises of many thousands of dollars within ten years. The Trump administration’s chair of the Council of Economic Advisers argued last April that we were already seeing the positive wage impact of the tax cuts:

Following the bill’s passage, a number of corporations made conveniently-timed announcements that their workers would be getting raises or bonuses (some of which were in the works well before the tax cuts passed). But as EPI analysis has shown there are many reasons to be skeptical of the claim that the TCJA, particularly its corporate tax cuts, would produce significant wage gains.

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Focus on the boom, not the slump—The Fed’s new policy framework needs to stop cutting recoveries short: EPI Macroeconomics Newsletter

Josh Bivens

For the past six months the Federal Reserve has been soliciting input to guide a reassessment of its “monetary policy framework.” This reassessment has been pegged to the 10-year anniversaries surrounding the financial crisis of 2008–09 and the Great Recession. While the Fed’s policy framework deserves much scrutiny, focusing too narrowly on what it could have done differently during the crisis and its aftermath would be a bad mistake.

The Fed failure that inflicted real damage on low- and middle-wage workers over recent decades was generally not insufficient effort in fighting recessions. Instead, the mistake was cutting short recoveries before they had maximized opportunities for employment and wage growth. In short, the time to worry about Fed actions that do not protect the interests of low- and middle-wage workers is during economic booms, not during slumps.

This newsletter explains why the Fed should keep the following points in mind as it undertakes its reassessment:Read more

Teachers are always there to help, but now we’re the ones who need a boost

The teacher shortage is real and it exists for many reasons. The question is why do we lose so many young educators? What causes them to not enter teaching? Why do many leave their chosen field after just a few years? And how can we make teaching as financially rewarding as other fields when the reality is many localities do not have the funds to raise salaries?

Many colleges and universities now require educators to have a Bachelor’s degree prior to entering an education program. After getting a Bachelor’s degree future teachers have one more year to get teaching credentials or in many cases they can spend two more years getting a Master’s degree.

In other words: teachers face the unenviable choice of incurring greater debt prior to entering the workforce or changing majors and entering the workforce after only four years with less debt but also less credentials. This is a significant problem since students average $30,000 in college debt. Some of my colleagues owe something closer to $60,000 in debt. It is the passion, the call of teaching, the desire to make a difference that leads people into education not the paychecks.

When you consider teacher’s salaries you have to ponder how someone with this much debt can afford to take a starting position with the national average starting salary less than $40,000 in 2017! Why would anyone become a teacher?

It is not surprising that education programs are now considering changing course in Virginia to make education once again a four-year degree program. If we want the best people in education we need to make it affordable to get a degree. We also need to consider the portability of that degree. Some states work with surrounding states for reciprocity of licensure, however; a teacher usually has to take additional courses if he/she relocates too far away. This presents yet another drawback.

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