Taking affordability seriously: Even with recent oil shocks, affordability remains mostly an issue of incomes, not prices
Key takeaways:
- Affordability is not just about prices; it’s the outcome of a race between income growth and price inflation. When income growth is slower than price inflation, affordability worsens. When income growth is faster, affordability improves.
- Focusing just on prices is bad for understanding how the economy works and how it has performed in the recent past, and it leads to an overly restrictive policy menu for improving families’ affordability.
- Policy can more reliably address income growth for typical families. This growth has been stunted for decades by the rise of inequality. Closing this gap by ensuring more equitable distribution of future growth is the strongest tool we have for improving affordability.
Affordability has been the policy buzzword of recent years. Much of the affordability discourse—both among policymakers and the public—has focused near-exclusively on prices as the big affordability problem. But affordability is not a problem of high prices, instead it’s the outcome of a race between incomes and prices. And the reason typical families have faced an affordability crunch in recent decades is not because prices have grown exceptionally fast, it’s because incomes for the vast majority have grown too slowly. This income growth has been suppressed mostly by rising inequality that has put a growing wedge between overall economic growth and the income growth of typical families.
Getting the drivers of affordability right is important—it’s not just quibbling. If you only examine price growth and try to infer what has happened to affordability over periods of economic history, you’ll usually get the story wrong. And if policymakers only look at how to change the trajectory of prices while ignoring what they can do to change the trajectory of incomes, they will be far less effective in providing useful relief to U.S. families. There are far more ways to use policy to raise incomes in a targeted and effective way than there are to suppress price growth.
Below, we provide some more background on why analyses of affordability need to include incomes, why policymakers have much more scope to raise incomes in a useful way as opposed to pushing down prices, and why focusing just on prices can obscure whether affordability has improved or worsened.
Raising revenues the right way: How we tax matters for building trust in the public sector
Taxes are the price of living well in a modern democratic community. The social contract relies on the idea that people both benefit from and contribute to maintaining a community in the ways they can; the tax code is one way of making sure that happens. Public trust builds under certain conditions: when the government collects tax revenue fairly and equitably and when people perceive that government institutions are competent and well intentioned in using that revenue to provide community services. This in turn makes it easier to collect revenue and provide expanded services in the future. When governments collect revenues in ways that feel unfair or inequitable, and when programs are hamstrung and unable to meet community needs, people become understandably skeptical.
Our decisions about whom and how to tax are decisions about which community needs we have the capacity to address and at what scale. Progressive taxes like personal, investment, and corporate income taxes generate more revenue from those who have the greatest ability to pay, and for whom the cost of losing the next dollar is small, relative to the last dollar of a family struggling to make rent and afford groceries. On the other hand, regressive revenue strategies like non-strategic tariffs, fees and fines, and an overreliance on sales taxes, especially when combined with cuts to social programs, heighten the sense that the system is unfair. Where progressive revenue strategies can bind a community together in mutual support and expand capacity to meet needs through good governance, regressive strategies erode people’s trust in the public sector.
Colorado and Virginia laws have suppressed unions for decades. Now it’s up to Governors Polis and Spanberger to change course.
At a moment of relentless Trump administration attacks on workers and their unions, state lawmakers across the country are taking action to shore up workers’ rights to unionize and collectively bargain. Yet two of this year’s biggest opportunities for states to remove obstacles to unionization remain in limbo, awaiting action from Governor Jared Polis in Colorado and Governor Abigail Spanberger in Virginia.
Strengthening collective bargaining rights is one of the most powerful policy levers states have available to confront primary economic challenges facing all workers today: an affordability crisis driven by the long-term suppression of workers’ pay, growing income inequality, and persistent racial and gender labor market disparities. It’s widely recognized that in today’s wildly unequal economy, millions of workers wish they had a union contract but face daunting obstacles to exercising their legal rights to get one. Moreover, many workers have never been protected by federal labor law at all due to Jim Crow-era exclusions.
For the second year in a row, Colorado and Virginia state legislators have passed landmark legislation to remove barriers to unionization:
- In Colorado, legislators have passed the Worker Protection Act to repeal an 83-year-old state policy that has limited Colorado workers’ freedom to form unions by requiring they undergo a state-mandated “second election” before they can secure full collective bargaining rights.
- In Virginia, lawmakers have passed collective bargaining legislation to ensure full union rights for more than 500,000 state and local government employees and home care workers—all of whom have historically been denied coverage under federal labor law. The legislation would replace Virginia’s longstanding ban on public employee collective bargaining that has resulted in one of the largest public-sector pay gaps in the nation.
Both pieces of legislation would correct historical wrongs—restoring rights that Colorado and Virginia workers have been denied since the 1940s, when past state lawmakers adopted anti-union policies amid a wave of white supremacist, big business backlash to multiracial union organizing. Yet both pieces of legislation were vetoed by their states’ respective governors in 2025 and are now once again awaiting governors’ signatures in 2026.
In Colorado, Governor Polis has already indicated intent to once again veto the Worker Protection Act, but it’s not too late for Polis to seize his second chance to sign the bill.
In Virginia, Governor Glenn Youngkin vetoed the collective bargaining legislation in 2025 and was ineligible to run for reelection because of term limits. This year, when the legislation was first sent to newly elected Virginia Governor Spanberger, she proposed extensive, damaging amendments to weaken the bill instead of signing it. The General Assembly has since rejected those amendments, and now Spanberger has her own “second chance” to sign this transformative legislation into law.
Meanwhile, scores of anti-worker actions from the Trump administration are continuing to accelerate a decades-long trend of weakening workers’ rights, suppressing wages, and eroding bargaining power. This year, state lawmakers have handed both Governor Polis and Governor Spanberger historic opportunities to rebalance unequal power in their states’ economies and remove major obstacles Coloradans and Virginians face to exercising their rights to unionize and collectively bargain. And the choices Polis and Spanberger make in the next few weeks will shape economic outcomes in their states for years to come.
Job gains were steady in April, but wage growth continued to weaken
Below, EPI senior economist Elise Gould offers her insights on the jobs report released this morning, which showed 115,000 jobs added in April. Read the full thread here.
Class of 2026: Young college graduates face a weaker labor market—but a more mixed picture than the headlines suggest
Key takeaways:
- The unemployment rates for young college graduates and young noncollege workers have risen slightly faster than the overall unemployment rate.
- But the rise in young college graduate unemployment in particular was mostly due to higher labor force participation: The employment-to-population ratio for young college graduates has held steady since 2024.
- Certain demographic groups, such as Black and Hispanic workers, face higher unemployment and lower hourly wages, even for young people with limited work experience.
- In the long run, the college degree is losing its edge: Unemployment for young college graduates has risen in historical terms, and the college wage premium has been flat or falling in recent years.
Over the last couple of years, the overall labor market has slowly weakened—with many arguing that the weakening is most pronounced for young college graduates (whom we define as young workers ages 22–27 with only a college degree).1 The evidence is actually pretty mixed—by some measures the young college graduate labor market is notably weaker, but their outcomes are largely no worse than those of noncollege young people or the labor market writ large.Read more
A snapshot of Black employment trends under Trump 2.0: Black workers—particularly men—are experiencing lower employment compared with a year ago
Key takeaways:
- Black unemployment rose and employment fell in Q1 2026, reflecting a deterioration in labor market conditions. In the first quarter of 2026, the Black unemployment rate (7.6%) was 1.2 percentage points higher than in the first three months of the second Trump administration.
- Black men’s employment-population (EPOP) ratio decreased by 1.7 percentage points (from 60.5% to 58.8%) since the first quarter of 2025, with noncollege graduates driving this decline.
- Black women’s EPOP ratio was the same in Q1 2026 as in Q1 2025 (56.4%), with gains among noncollege graduates offsetting losses among college graduates.
The rising Black unemployment rate and big employment losses among Black women made major news headlines in 2025. In a February 2026 analysis, I examined the nature of those losses, noting the large impact on Black women who were college graduates and public-sector workers. With so much of the Trump policy-induced 2025 labor market decline appearing to land first on Black workers who typically have relatively secure employment, the longer-term significance of those losses is of continuing interest. This post provides an update for the first quarter of 2026, examining changes in the overall Black unemployment rate and gender-specific employment trends for Black women and men relative to the first quarter of 2025. For consistency with the prior analysis, I apply the same mutually exclusive race and ethnicity categories used in EPI’s State of Working America Data Library and include all people age 16 or older when examining outcomes by gender. While these estimates differ slightly from those reported by the Bureau of Labor Statistics (BLS), they lead to similar conclusions.
In the first quarter of 2026, the Black unemployment rate (7.6%) was 1.2 percentage points higher than in the first three months of the second Trump administration. While a rise in the unemployment rate can sometimes be for “good” reasons—workers getting drawn into the labor force because of strengthening job opportunities—that was not the case here: the rise in the Black unemployment rate reflected a decline in employment. The Black employment-population ratio (EPOP)—the share of working-age people who are employed—declined 0.8 percentage points over the same period, from 58.3% in Q1 2025 to 57.5% in Q1 2026 (see Figure A).
First quarter 2026 estimates reveal lower employment among Black men relative to the first quarter of 2025: Q1 Black employment-to-population ratios, 2025 and 2026
| Q1 2025 | Q1 2026 | |
|---|---|---|
| Black overall | 58.3% | 57.5% |
| Black women | 56.40% | 56.40% |
| Black men | 60.50% | 58.80% |
Source: Author's analysis of Current Population Survey microdata, EPI Current Population Survey Extracts, Version 2026.4.13, https://microdata.epi.org.
Looking more closely at changes in employment for Black women and men separately, Black women’s first quarter EPOP was the same in 2026 as in 2025 (56.4%), while employment among Black men was 1.7 percentage points lower (from 60.5% to 58.8%). BLS published estimates by race—limited to the sample of people age 20 or older and not exclusive of ethnicity—show a similar decline for Black men (-1.5 percentage points), but a 0.4 percentage point increase for Black women.
Figure B shows that among Black women, Q1 2026 employment was lower than Q1 2025 for college graduates but higher for noncollege graduates, resulting in essentially offsetting effects. The opposite was true among Black men, for whom the decline in employment was driven by lower employment among noncollege graduates and higher employment for college graduates.
First quarter 2026 estimates reveal lower employment among Black workers, specifically Black men, relative to the first quarter of 2025: Q1 Black employment-to-population ratios by educational attainment, 2025 and 2026
| Q1 2025 | Q1 2026 | |
|---|---|---|
| Black women, non-college | 49.4% | 50.0% |
| Black women, college | 72.9% | 72.0% |
| Black men, non-college | 55.6% | 53.3% |
| Black men, college | 75.4% | 77.6% |
Source: Author's analysis of Current Population Survey microdata, EPI Current Population Survey Extracts, Version 2026.4.13, https://microdata.epi.org.
These first quarter 2026 estimates incorporate annual population adjustments applied to Current Population Survey (CPS) data each January to reflect updated population estimates from the U.S. Census Bureau. Since the previous year’s data are not adjusted, monthly data across the two years are not strictly comparable. This year, shifts in the demographic composition of the population also resulted in larger than usual discontinuities in labor force measures by race, ethnicity, and gender between December 2025 and January 2026—which is why this analysis is focused on a comparison between the first quarters of 2025 and 2026, when the population controls are the most up to date.
Based on this analysis, we can conclude that overall, labor market conditions for Black workers were not better in the first quarter of 2026 compared with the early months of the Trump administration. Black men’s employment is lower than what was reported in the first quarter of 2025, and while Black women’s employment is unchanged overall, employment among college-educated Black women is lower than first quarter 2025 estimates.
May Day then and now: The ongoing fight for workers’ rights
May 1 is International Workers’ Day. Also known as “May Day,” its origins trace back to 1856 in Australia, where workers organized a day of stoppages and celebrations to demand an eight-hour workday. However, May 1 didn’t become a widespread international day for labor until after the infamous Haymarket Affair of 1886.
Workers in Chicago, including many immigrants, went on strike on May 1 to demand the eight-hour workday. At least four strikers were killed while picketing the McCormick Harvester factory, at that point the largest factory in the world. A large rally was held on May 4 to protest violence against peaceful picketers. As police moved to disperse the crowd, someone threw a bomb that killed seven officers. Police fired back indiscriminately, wounding and killing an undetermined number of workers.
What followed was a sweeping crackdown: police raids, the arrests of hundreds of men and women, and the indictment of eight people—five of whom were German immigrants. The partisan judge Joseph E. Gary conducted the trial where all 12 jurors acknowledged prejudice against the defendants. All defendants were convicted with no evidence and seven were sentenced to death; four were hanged, one died by suicide, and two had their sentences commuted. The trial is widely considered a miscarriage of justice.
In the aftermath, socialists and unionists worldwide began marking May 1st as a day of international worker solidarity. However, in 1894, U.S. President Grover Cleveland—looking to make peace with labor prior to the midterm elections after more than 30 workers were killed during the Pullman Strike—established Labor Day in early September. He did this explicitly to avoid associating it with May Day and the labor unrest it represented. In 1955, at the height of the Cold War, President Eisenhower proclaimed May 1 “Loyalty Day” instead of “May Day” in response to the holiday’s popularity in communist countries.
Rising inequality is the root of affordability problems
Key takeaways:
- Income inequality has skyrocketed since 1979 because of intentional policy choices that suppressed wages for typical families to accelerate income growth at the top.
- Middle-class household incomes would be roughly $30,000 higher today if their incomes had simply kept pace with average income growth since 1979.
- Recognizing that today’s affordability problems are overwhelmingly inequality problems is the key to constructing the right policy solutions.
- As a start, protecting workers’ right to organize unions, fostering long periods of very low unemployment, and keeping minimum wages high will help typical families claim their fair share of income growth.
When most people—including policymakers—complain about a lack of affordability, they think of prices being too high. But affordability is the outcome of a race between prices and incomes. After all, goods and services were a lot cheaper 90 years ago during the Great Depression, but we all know that nearly everybody is richer today than their peers back then. Bringing incomes into the affordability picture makes for better understanding and better policy.
New Congressional Budget Office (CBO) data show that rising income inequality is the main reason that affordability feels out of reach for too many U.S. families. For more than four decades, most of the income growth in the U.S. economy has been funneled to those at the very top, leaving typical families with far less than their proportionate share of the economy’s gains. If middle-class household incomes had simply kept pace with average income growth since 1979, their pay would be roughly $30,000 higher today. If we account for taxes and government transfers, incomes would still be $19,000 higher today for these middle-class households. Think of this gap as an “inequality tax”: the amount that rising inequality has cost the typical U.S. family. Life would be much more affordable for these families today if they hadn’t been hit by this inequality tax.
Virginia governor’s amended collective bargaining bill would leave workers’ rights optional and large public-sector pay gap unaddressed
This year, large majorities in both houses of Virginia’s General Assembly passed landmark legislation to extend equal collective bargaining rights to most public-sector workers. The Assembly’s collective bargaining bill proposed replacing Virginia’s Jim Crow-era ban on public employee collective bargaining with a new law affirming public-sector workers’ rights and creating a legal pathway to a union contract for those who choose to unionize. The Assembly bill was poised to put Virginia on a transformative path to narrowing one of the largest public-sector pay gaps in the nation and improving public education and services for all Virginians by reducing crisis-level shortages of educators, first responders, health care workers, corrections staff, and other frontline workers. Strengthening collective bargaining rights is also one of the most powerful policy levers states have available to confront primary economic challenges affecting all workers today: an affordability crisis driven by the failure of wages to keep pace with inflation, growing income inequality, and persistent racial and gender labor market disparities.
Once the Assembly’s bill reached her desk, Virginia Governor Abigail Spanberger had the opportunity to strengthen it or sign it into law. Instead, Governor Spanberger put forward her own heavily amended version of the bill last week, weakening the proposed collective bargaining framework so extensively that her version would lock Virginia into an unstable, ineffective system in which collective bargaining would remain merely “optional” and where employers and workers would remain perpetually uncertain about what rules might apply to them from year to year depending on what appointees of future governors might decide. The governor’s amended bill will now be considered by the Assembly in its one-day veto session this week. Below, we analyze some of the many substantive differences between the Assembly bill and the governor’s bill, as well as the likely economic impacts.
Voucher programs fail rural schools
Voucher programs—which use public funds to finance private education—have been sweeping state and federal legislatures over the past few years. These bills are harmful to public schools, especially public schools in rural communities. Yet, this week, the “Keep Public Funds in Public Schools Act” was introduced in the Senate, which would repeal the national private school voucher program passed in the 2025 reconciliation bill, thereby protecting rural communities from these programs. Often framed as “school choice” programs, vouchers give parents the equivalent of per-pupil public school funding to send their child to any private or homeschool program they choose.
But diverting public funds away from public K–12 schools and toward private schools does not guarantee educational opportunities will be expanded for all students—and this is especially true in rural communities. Most obviously, because students in rural communities often don’t have a private school option and therefore cannot use the vouchers, state voucher programs—which are financed by all the taxpayers in a state—amount to an education subsidy for wealthy urban families at the expense of strong public schools. Moreover, for rural areas that can support multiple school systems, voucher programs introduce a potentially large cost for the students that remain in public schools, as any sharp drop in public school enrollment will raise the fixed cost per pupil of running schools. For example, school facilities and staff that are efficient for 1,000 students in a school may no longer be efficient if enrollment were to drop to 800 or 900.Read more