What to Watch on Jobs Day: President Trump inherits a slowly but steadily recovering economy
When the January jobs numbers come out on Friday, I expect we will see an economy that is continuing to slowly, but steadily recover from the Great Recession. By all measures, the labor market is on the road to (but not yet arrived at) full employment. Further, the economy the Trump administration has inherited shows no obvious risks like a wildly overvalued stock or housing market, as such there’s no particular reason to expect it to be thrown off track.
Regardless of which party is in power, we will continue to track the state of the labor market and what it means for people across demographic and educational and socioeconomic circumstances on these pages. Up-to-date and accurate reporting is only possible through the work of the Bureau of Labor Statistics (BLS). The latest BLS commissioner, Erica Groshen, has ended her four year term, during which she continued the proud tradition of both Republican and Democrat BLS commissioners in overseeing high-quality, transparent, and independent data collection and analysis. BLS data allow researchers, policymakers, the media, and consumers to better understand and interpret the goings on of the labor market. The statistics generated by the BLS allow us to form a clear picture of the economy.
Over the recovery, we’ve continued to see confirming evidence from multiples data series that the economic recovery is widespread but incomplete. Recently, there has been talk about what the “true” unemployment rate is. The BLS has an “official” unemployment rate, which is the number of people classified as unemployed—if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work—divided by the number of people in the labor force (the sum of the employed and unemployed). If you want to get more details on this, see BLS’s very clear page of definitions. This “official” measure is also referred to as the U-3. But the BLS actually has six different measures of labor market underutilization, U-1 through U-6.
Fed likely to stand pat today on interest rates: Right call, but important to understand why
The Federal Reserve is widely expected to keep the interest rates it controls unchanged today, after raising rates at its last meeting of the Federal Open Market Committee. This decision would be welcome. It’s important, however, to not just applaud the decision, but to explain why it was the right one: Much of the commentary in the run-up to today’s meeting stresses “uncertainty” as the reason for the Fed’s expected decision. This view implicitly takes the Fed’s main job as calming jittery financial markets.
In reality, the most compelling reason for the Fed to stand pat and give the economy “room to run” (in Chair Yellen’s phrase) is not found in financial markets, but in labor markets. In these labor markets there are no signs at all that wage growth is accelerating at a rate that would spur overall price inflation over the Fed’s 2 percent target. Some measures of wage growth have seen some good pick-up in recent months, but even these remain below what wage growth should be in a healthy economy. Meanwhile, some recent measures of wage growth show continued flatness, and are putting a substantial downward drag on overall price growth. Last week’s data on gross domestic product showed that on the Fed’s key price barometers—“core” prices for consumption goods (excluding volatile food and energy)—saw inflation decelerate rapidly, to 1.3 percent over the last three months.
This is inflation far below the Fed’s stated 2 percent long-run target. Consistently missing the inflation target from below is actually a more-damaging mistake than allowing inflation to exceed the target for a short spell. And until there are signs that labor market tightening has led to genuine full employment that is generating nominal wage growth of 3.5 percent consistently, it is not time to raise interest rates.
Trump leaving LGBTQ nondiscrimination executive order in place signals approval of reasonable mandates for federal contractors
Last night, the White House said that President Trump would leave in place the Obama administration’s executive order that prohibits federal contractors and subcontractors from discriminating against employees on the basis of sexual orientation or gender identity in hiring, firing, pay, promotion, and other employment practices.
It goes without saying that not revoking workplace protections for LGBTQ workers is an extraordinarily low bar for supporting LGBTQ workers. A president who truly supported LGBTQ workers would be pushing for broader legislation that prohibits discrimination, like the 2015 Equality Act, which would provide clear, fully-inclusive non-discrimination protections for LGBTQ people.
Trump’s jobs goals would require massive immigration or forcing elderly Americans to work at unprecedented rates
On the White House website, the Trump administration announced a new goal of adding 25 million new jobs over the next ten years, an extraordinarily audacious, or simply innumerate, target. If their plan were successful, it would require raising employment rates well above what we can realistically hope for given the aging of the population and historical evidence on these rates. Now I happen to love optimistic agendas, but to the extent that this goal is not fantasy based on “alternative facts,” it can mean only one of two things: either the United States needs an enormous influx of immigrants, or a much higher share of the elderly population needs to be put to work.
The addition of 25 million new jobs would bring the number of employed from 152 million to about 177 million workers, which the administration hopes to achieve in ten years. Note that this is a very generous interpretation of the administration’s target, because the Congressional Budget Office (CBO) already projects 2027 employment to be higher by about 8 million, largely due to population growth. In other words, CBO’s projections imply that business-as-usual management of the economy would accomplish one-third of the administration’s goal without any extra effort. Normally when evidence-based policymakers talk about potential new jobs they want to create, they frame this in terms of jobs above already-established baselines. But, let’s grade the Trump proposal on the generous curve I noted above.
8 years of the Lilly Ledbetter Fair Pay Act
This Sunday, January 29th, marks the eighth anniversary of the Lilly Ledbetter Fair Pay Act, which helps to prevent pay discrimination. While there is no silver bullet to end gender and racial pay disparities (though we have some ideas here and here), ensuring that workers can use the legal system to receive equal pay for equal work is crucial. The Lilly Ledbetter Fair Pay Act lets workers do just that, by giving them the right to file suit 180 days after the last pay violation and not only 180 days after the initial pay disparity.
The research is conclusive: pay differentials exist and sometimes to a grave degree. Women of color face an extra penalty in the labor market and that shows up in their significantly lower wages. Typical black women are paid 65 cents on the typical white male dollar, while Hispanic women are paid a mere 58 cents on the dollar.
Furthermore, wage gaps are a problem across the wage distribution and among workers of every education level. As you can see in the chart below, women are paid less than men at every level of education. Among workers with a high school degree, women are paid 78 percent of what men are paid (or 78 cents on the dollar). Among workers who have a college degree, the share is 75 percent, and among workers who have an advanced degree, it is 73 percent.
Racial gaps in wages, wealth, and more: a quick recap
Recently, I had the opportunity to present some key facts on 1A, a new NPR news program, about the state of black America. Drawing heavily upon research by my colleague Valerie Wilson and her co-author William Rodgers III, I reported on the economy for black workers and the overall disparities that remain, and, in some cases, continue to worsen. Since that hour went by fast (and you might have missed it), I want to reiterate some of those points briefly here.
Black-white wage gaps are larger today that they were 35 years ago. For both men and women who work full time, the regression adjusted racial wage gap has widened since 1979. The figure below shows that, relative to the average hourly wages of white men with the same education, experience, metro status, and region of residence, black men make 22.0 percent less, and black women make 34.2 percent less.
Adjusted average hourly wage gaps relative to white men by race and gender, 1979—2015
| All white women | All black women | All black men | |
|---|---|---|---|
| 1979 | 37.8% | 42.3% | 16.9% |
| 1980 | 36.8% | 41.1% | 17.7% |
| 1981 | 35.7% | 40.2% | 17.5% |
| 1982 | 34.3% | 39.6% | 19.2% |
| 1983 | 33.1% | 38.3% | 17.7% |
| 1984 | 32.1% | 38.4% | 18.1% |
| 1985 | 32.3% | 38.1% | 20.3% |
| 1986 | 31.3% | 36.9% | 18.6% |
| 1987 | 30.5% | 36.0% | 18.6% |
| 1988 | 30.0% | 36.7% | 18.5% |
| 1989 | 28.1% | 35.3% | 20.0% |
| 1990 | 27.1% | 34.7% | 19.8% |
| 1991 | 25.7% | 32.2% | 19.8% |
| 1992 | 24.3% | 31.9% | 20.9% |
| 1993 | 23.1% | 30.9% | 20.3% |
| 1994 | 23.0% | 32.2% | 19.1% |
| 1995 | 23.9% | 31.5% | 20.3% |
| 1996 | 23.7% | 33.9% | 22.7% |
| 1997 | 24.0% | 33.5% | 22.3% |
| 1998 | 23.7% | 31.8% | 19.8% |
| 1999 | 24.4% | 32.1% | 19.7% |
| 2000 | 24.7% | 31.9% | 19.7% |
| 2001 | 23.6% | 33.0% | 21.9% |
| 2002 | 22.5% | 32.7% | 20.6% |
| 2003 | 23.0% | 31.5% | 21.8% |
| 2004 | 23.0% | 31.3% | 21.2% |
| 2005 | 22.4% | 32.3% | 23.0% |
| 2006 | 23.1% | 31.3% | 21.7% |
| 2007 | 22.8% | 32.4% | 23.2% |
| 2008 | 22.7% | 32.4% | 23.6% |
| 2009 | 22.9% | 32.0% | 23.1% |
| 2010 | 21.8% | 31.6% | 21.1% |
| 2011 | 20.8% | 31.8% | 21.0% |
| 2012 | 22.1% | 33.5% | 21.4% |
| 2013 | 22.0% | 32.6% | 22.2% |
| 2014 | 21.3% | 32.2% | 22.8% |
| 2015 | 22.5% | 34.2% | 22.0% |
Note: The adjusted wage gaps are for full-time workers and control for racial differences in education, potential experience, region of residence, and metro status.
Source: EPI analysis of Current Population Survey (CPS) Outgoing Rotation Group microdata
President Trump’s alternative facts have foreigners and bureaucrats, not the top 1 percent, reaping the gains from economic growth
It’s no secret that we at EPI have been skeptical about President Trump’s commitment to a policy agenda that would deliver the goods for low and middle-income Americans. His campaign proposals were nearly across-the-board great for high-income households and corporate business, but bad for most American workers. His nominees for key economic posts have been consistently hostile to policies that boost bargaining power for low and middle-wage workers. And now we have his inaugural speech, in which he specifies the groups he thinks have won and lost over recent decades in the American economy.
This speech is clarifying in that he identifies foreigners and “a small group in our nation’s Capital [sic]” as the big winners. Totally absent from his speech is the “small group” that has actually done very well and whose gains genuinely crowded-out potential growth for the vast majority of American households: the top 1 percent.
It’s unclear what evidence Trump could be referring to when decrying that “small group in our nation’s Capital” as the winners in recent decades. Since the recovery from the Great Recession began, for example, federal spending has grown more slowly than in nearly every other post-war recovery.
The increased diversity of New York City union construction employment
This blog post presents some early findings of a forthcoming report* on the race and ethnic diversity of construction employment—union and nonunion—in New York City, updating some of my research released in 2013. The issues were clarified in the earlier research:
“Construction is a sector that has historically excluded black workers—including the unionized portion of the industry. Giving minority workers access to good jobs is an important part of closing our large and persistent racial wage inequities, so this is a critical issue. It was on this basis that many progressives have been hostile to infrastructure spending in the past: it provided jobs in a sector where it was well known and documented that black workers had been excluded from opportunities. Some people, such as National Black Chamber of Commerce CEO Harry C. Alford, contend that ‘construction sites are still close to Jim Crow.’
It is worth asking whether and to what extent construction work is racially exclusionary, especially the unionized sector as Alford also contends. After all, there have been changes over the years, with unions increasing the number of minorities admitted into apprenticeship programs, and undertaking project labor agreements that incorporate community agreements that bring excluded populations into the industry. What does the current situation look like and how does the union sector compare to the nonunion sector? It turns out that, at least in one of our largest and heavily unionized cities, New York City, Alford’s characterization is quite outdated.”
So-called “right-to-work” laws will lower wages for union and nonunion workers in Missouri
The Missouri legislature is poised to pass bills to weaken unions and clear the way for corporate dominance in the state. So-called “right-to-work” laws force unions to represent employees who pay nothing toward the costs of collective bargaining. It’s bad enough that these laws allow them to get the benefits of higher wages and better fringe benefits without paying their fair share. What’s worse is that these laws force unions to defend non-dues payers when they need to be defended against unjust discipline or being fired. Arbitration can cost thousands of dollars, including the cost of hiring lawyers.
These bills won’t lead to more manufacturing plants or better jobs or anything good. They lead only to weaker unions, less bargaining power for Missouri workers, and lower wages.
Wages are 3.1 percent lower in so-called “right to work” (RTW) states, for union and nonunion workers alike—after correctly accounting for differences in cost of living, demographics, and labor market characteristics. The negative impact of RTW laws translates to $1,558 less a year in earnings for a typical full-time worker.
Washington University in St. Louis professor Jake Rosenfeld finds that the dramatic decline in union density since 1979 has resulted in far lower wages for nonunion workers, an impact larger than the 5 percent effect of globalization on their wages. Specifically, nonunion men lacking a college degree would have earned 8 percent or $3,016 annually, more in 2013 if unions had remained as strong as they were in 1979.
Between 1979 and 2013, the share of private sector workers in a union has fallen from about 34 percent to 11 percent among men, and from 16 percent to 6 percent among women. The authors note that unions keep wages high for nonunion workers for several reasons: union agreements set wage standards and a strong union presence prompts managers to keep wages high in order to prevent workers from organizing or their employees from leaving. Moreover, unions set industry-wide norms, influencing the moral economy.
Rosenfeld’s report shows that working class men have felt the decline in unionization the hardest; their paychecks are noticeably smaller than if unions had remained as strong as they were almost 40 years ago. Rebuilding collective bargaining is one of the tools we have to reinvigorate wage growth, for low and middle-wage workers.
That’s why the so called “right-to-work” efforts make no sense. We need workers to have more bargaining power, to negotiate for higher wages. The RTW laws are designed by the business lobby to benefit corporate titans.
One wonders why state legislators go along with them when they hurt the vast majority of their constituents.
Another reason women will march on Saturday—for better wages and greater economic security
As thousands of women gather on the National Mall to advocate for women’s rights, here’s one issue that policymakers can address: wage growth. By closing the gender wage gap and eliminating the inequality that has kept nearly all workers’ pay from rising with productivity, we could raise women’s median hourly wages by 69 percent—from $15.67 to $26.47.
Over the last several decades, women have entered the workforce in record numbers and made great strides in educational attainment. Nevertheless, when compared with men, women are still paid less, are more likely to hold low-wage jobs, and are more likely to live in poverty. Typical women are paid only 83 cents for every dollar paid to a typical man. Gender wage disparities are present at all wage levels and within education categories, occupations, and sectors—sometimes to a grave degree. For example, relative to white non-Hispanic men, black and Hispanic women workers are paid only 65 cents and 58 cents on the dollar.
Closing the gender wage gap is absolutely essential to helping women achieve economic security. But in order to bring genuine economic security to American women and their families, we must do more. In particular, we must reverse the decades-long trend of stagnant wages for the vast majority of workers. Indeed, while the gender wage gap has persisted, hourly wage growth for the vast majority of workers has stalled, as the benefits of increased productivity have accrued to those at the top. This is the result of intentional policy decisions that have eroded the leverage of the vast majority of workers to secure higher wages.