20 States Raise Their Minimum Wages While the Federal Minimum Continues to Erode
On January 1st, 20 states will raise their minimum wages, lifting the pay of over 3.1 million workers throughout the country.1 New York, meanwhile, will have already raised its minimum wage on December 31st. In nine of these states (Arizona, Colorado, Florida, Missouri, Montana, New Jersey, Ohio, Oregon, and Washington) the increases are routine—the minimum wage in those states is “indexed” for inflation so that each year the minimum is automatically increased to account for rising prices. The increases in the other 11 states, plus DC, are the result of changes to minimum wage laws—either legislation passed by state lawmakers or referenda passed directly by voters at the ballot box. Later in the year, another half-a-million workers in Delaware and Minnesota will also get a raise as legislated increases take effect there.
As the table below shows, the increases range from a 12-cent inflation adjustment in Florida—raising the minimum to $8.05—up to a $1.25 increase in South Dakota that will lift the state floor to $8.50. The smaller inflation-linked increases will lift pay for the roughly 4 to 7 percent of workers with wages at or very close to the minimum. The states instituting larger increases, however, will see a more sizeable portion of the state workforce getting a raise—such as in Minnesota, where the $1.00 increase later in the year is expected to lift pay for nearly a fifth of wage earners in the state.
All told, these increases will provide workers with $1.6 billion in additional wages over the course of the year. This added pay represents a modest, but significant, boost to the spending power of the affected workers, many of whom have children and families to support.
Even in the states where the minimum is simply being adjusted for inflation, the buying power of low-wage workers is being preserved, so they can still afford the same quantity of goods and services year-to-year. Given that consumer spending accounts for roughly 70 percent of the U.S. economy, this automatic adjustment of the minimum wage each year should be a no-brainer. Just as workers across the spectrum need regular pay increases so they can continue to afford their basic needs, businesses need a customer base with growing incomes if they’re going to thrive and expand. And because minimum wage increases overwhelming benefit low- to moderate-income households, they’re an easy way to put more money in the pockets of families that are likely to go out and spend it right away. As the last column of the table shows, the $2.5 billion in added wages generated by next year’s increases will translate into about $1.1 billion in economic growth as those dollars ripple out through the economy.
It’s encouraging that five states—Alaska, Michigan, Minnesota, South Dakota, Vermont—and the District of Columbia that have larger increases taking effect next year also enacted indexing that will take effect in future years. As shown in the map below, this will bring the number of states with some form of indexing up to 15. The map also shows that as of the new year, 29 states and the District of Columbia (as well as a number of cities and smaller municipalities) will have minimum wages above the federal minimum of $7.25. At that time, 60 percent of all U.S. workers will be in states with wage floors above the federal.
All this action at the state level speaks to how broadly voters and policymakers throughout the country recognize that the federal minimum is too low. At $7.25 per hour, the federal minimum wage is worth roughly 23 percent less than it was worth in the late 1960s, and its eroding value has led to more and more workers turning to federal safety net programs because they’re paid too little from work to make ends meet. Given that the country has grown vastly richer and more productive over the past 45 years, there’s no reason why workers in any state should be getting paid less today than their counterparts a generation ago.
The good news is that states aren’t waiting for the federal government to act. This is the first time in history that so many states will be raising their wage floors in the absence of a federal increase, and the first time since 2008—when states were raising their wage floors in anticipation of the last federal increase—that so many states will be above the federal minimum. But many other states still have minimum wages at or below the federal minimum, and states with minimum wages that aren’t indexed will see their wage floors erode in the coming years. We need a national wage floor that ensures a decent level of pay for work regardless of what state one lives in. That’s why Congress should follow the example set by voters and legislators in their home states and raise and index the federal minimum wage—fixing this problem once and for all.
Note: This post has been updated from an earlier version. The previous version incorrectly accounted for state minimum wage increases that took place in 2014. The figures and table have been updated to correctly account for these increases. The earlier post also incorrectly stated that the DC minimum wage will take place on January 1. It will take place on July 1.
1. Although originally scheduled to take effect on January 1, the Alaska minimum wage increase will not go into effect until February 24th. This should not measurably change the statistics for Alaska listed in the table. Additionally, tens of thousands of workers in the District of Columbia will also get a raise next July when the District minimum wage rises from $9.50 to $10.50. Estimates for DC are not included here because data challenges make identifying affected workers in the District more challenging, although a ballpark estimate would be roughly 100,000 workers.
Even with Recent Low Inflation, Real Wages Continue to Stagnate
The Bureau of Labor Statistics released the Consumer Price Index for November 2014 today, which lets us look at trends in real (inflation-adjusted) wages. The figure below shows real average hourly earnings of all private employees (top line) and production/nonsupervisory workers (bottom line) since the recession began in December 2007. For both series, you can see that real wages fell during the recession, then jumped up in late 2008, in direct response to a drop in inflation. When inflation falls and nominal wages hold steady, the mathematical result is a rise in inflation-adjusted wages. After the deflation leading up to 2009 stopped boosting real wages, wage growth has been flat.
Real average hourly earnings, December 2007– November 2014
| All private employees | Production/Nonsupervisory | |
|---|---|---|
| Dec-2007 | $23.84 | $19.90 |
| Jan-2008 | $23.79 | $19.88 |
| Feb-2008 | $23.81 | $19.89 |
| Mar-2008 | $23.83 | $19.90 |
| Apr-2008 | $23.79 | $19.90 |
| May-2008 | $23.76 | $19.86 |
| Jun-2008 | $23.56 | $19.72 |
| Jul-2008 | $23.47 | $19.65 |
| Aug-2008 | $23.62 | $19.76 |
| Sep-2008 | $23.63 | $19.77 |
| Oct-2008 | $23.89 | $20.01 |
| Nov-2008 | $24.44 | $20.43 |
| Dec-2008 | $24.71 | $20.67 |
| Jan-2009 | $24.65 | $20.64 |
| Feb-2009 | $24.62 | $20.60 |
| Mar-2009 | $24.69 | $20.69 |
| Apr-2009 | $24.71 | $20.69 |
| May-2009 | $24.69 | $20.68 |
| Jun-2009 | $24.51 | $20.55 |
| Jul-2009 | $24.56 | $20.59 |
| Aug-2009 | $24.56 | $20.59 |
| Sep-2009 | $24.51 | $20.60 |
| Oct-2009 | $24.50 | $20.58 |
| Nov-2009 | $24.48 | $20.58 |
| Dec-2009 | $24.47 | $20.60 |
| Jan-2010 | $24.50 | $20.64 |
| Feb-2010 | $24.55 | $20.68 |
| Mar-2010 | $24.57 | $20.68 |
| Apr-2010 | $24.61 | $20.74 |
| May-2010 | $24.66 | $20.80 |
| Jun-2010 | $24.65 | $20.81 |
| Jul-2010 | $24.68 | $20.81 |
| Aug-2010 | $24.68 | $20.83 |
| Sep-2010 | $24.69 | $20.82 |
| Oct-2010 | $24.68 | $20.86 |
| Nov-2010 | $24.63 | $20.81 |
| Dec-2010 | $24.54 | $20.72 |
| Jan-2011 | $24.58 | $20.76 |
| Feb-2011 | $24.48 | $20.68 |
| Mar-2011 | $24.37 | $20.58 |
| Apr-2011 | $24.34 | $20.55 |
| May-2011 | $24.32 | $20.53 |
| Jun-2011 | $24.31 | $20.50 |
| Jul-2011 | $24.34 | $20.53 |
| Aug-2011 | $24.25 | $20.48 |
| Sep-2011 | $24.23 | $20.45 |
| Oct-2011 | $24.34 | $20.49 |
| Nov-2011 | $24.29 | $20.49 |
| Dec-2011 | $24.30 | $20.48 |
| Jan-2012 | $24.27 | $20.44 |
| Feb-2012 | $24.26 | $20.41 |
| Mar-2012 | $24.26 | $20.40 |
| Apr-2012 | $24.29 | $20.45 |
| May-2012 | $24.33 | $20.47 |
| Jun-2012 | $24.37 | $20.47 |
| Jul-2012 | $24.43 | $20.52 |
| Aug-2012 | $24.29 | $20.41 |
| Sep-2012 | $24.24 | $20.33 |
| Oct-2012 | $24.17 | $20.32 |
| Nov-2012 | $24.31 | $20.42 |
| Dec-2012 | $24.38 | $20.45 |
| Jan-2013 | $24.40 | $20.50 |
| Feb-2013 | $24.31 | $20.43 |
| Mar-2013 | $24.38 | $20.50 |
| Apr-2013 | $24.47 | $20.55 |
| May-2013 | $24.46 | $20.54 |
| Jun-2013 | $24.47 | $20.53 |
| Jul-2013 | $24.42 | $20.53 |
| Aug-2013 | $24.46 | $20.53 |
| Sep-2013 | $24.46 | $20.55 |
| Oct-2013 | $24.49 | $20.58 |
| Nov-2013 | $24.52 | $20.61 |
| Dec-2013 | $24.48 | $20.61 |
| Jan-2014 | $24.50 | $20.63 |
| Feb-2014 | $24.55 | $20.71 |
| Mar-2014 | $24.53 | $20.65 |
| Apr-2014 | $24.47 | $20.62 |
| May-2014 | $24.44 | $20.59 |
| Jun-2014 | $24.44 | $20.58 |
| Jul-2014 | $24.43 | $20.59 |
| Aug-2014 | $24.56 | $20.69 |
| Sep-2014 | $24.54 | $20.66 |
| Oct-2014 | $24.57 | $20.70 |
| Nov-2014 | $24.66 | $20.74 |
Note: Earnings are adjusted to November 2014 dollars.
Source: Author analysis of Bureau of Labor Statistics's Current Employment Statistics and Consumer Price Index, public data series.
In the past month, we have also started to see falling prices, particularly with respect to gas prices. If nominal wage growth holds in the coming months, it may mean a rise in real wages. But so far, the data indicates that over the last year, real wage growth has continued to be stagnant. Average hourly earnings of private sector workers were $24.66 in November, and real hourly earnings averaged $24.51 over the last year. These wages are no better than we saw in the year ending November 2009 or November 2010, where average hourly earnings were $24.60 and $24.61, respectively. As shown in the figure below, real wage growth has been about zero on average for the last five years, and there is no sign of acceleration.
Year-over-year change in real average hourly earnings of all private nonfarm employees and private production/ nonsupervisory employees, November 2009– November 2014
| All Private Employees | Production/Nonsupervisory | |
|---|---|---|
| Nov-2009 | 0.15% | 0.76% |
| Dec-2009 | -0.98% | -0.31% |
| Jan-2010 | -0.62% | 0.01% |
| Feb-2010 | -0.32% | 0.35% |
| Mar-2010 | -0.50% | -0.01% |
| Apr-2010 | -0.40% | 0.25% |
| May-2010 | -0.10% | 0.57% |
| Jun-2010 | 0.55% | 1.26% |
| Jul-2010 | 0.46% | 1.08% |
| Aug-2010 | 0.49% | 1.18% |
| Sep-2010 | 0.73% | 1.08% |
| Oct-2010 | 0.72% | 1.34% |
| Nov-2010 | 0.60% | 1.12% |
| Dec-2010 | 0.29% | 0.56% |
| Jan-2011 | 0.30% | 0.56% |
| Feb-2011 | -0.26% | 0.02% |
| Mar-2011 | -0.80% | -0.52% |
| Apr-2011 | -1.13% | -0.94% |
| May-2011 | -1.36% | -1.30% |
| Jun-2011 | -1.39% | -1.46% |
| Jul-2011 | -1.35% | -1.35% |
| Aug-2011 | -1.74% | -1.70% |
| Sep-2011 | -1.85% | -1.80% |
| Oct-2011 | -1.36% | -1.75% |
| Nov-2011 | -1.38% | -1.58% |
| Dec-2011 | -1.01% | -1.16% |
| Jan-2012 | -1.23% | -1.53% |
| Feb-2012 | -0.90% | -1.31% |
| Mar-2012 | -0.47% | -0.89% |
| Apr-2012 | -0.19% | -0.48% |
| May-2012 | 0.03% | -0.30% |
| Jun-2012 | 0.24% | -0.16% |
| Jul-2012 | 0.35% | -0.03% |
| Aug-2012 | 0.17% | -0.35% |
| Sep-2012 | 0.03% | -0.57% |
| Oct-2012 | -0.68% | -0.86% |
| Nov-2012 | 0.11% | -0.35% |
| Dec-2012 | 0.33% | -0.13% |
| Jan-2013 | 0.51% | 0.26% |
| Feb-2013 | 0.18% | 0.12% |
| Mar-2013 | 0.51% | 0.51% |
| Apr-2013 | 0.75% | 0.51% |
| May-2013 | 0.52% | 0.35% |
| Jun-2013 | 0.44% | 0.30% |
| Jul-2013 | -0.04% | 0.02% |
| Aug-2013 | 0.71% | 0.62% |
| Sep-2013 | 0.92% | 1.06% |
| Oct-2013 | 1.30% | 1.32% |
| Nov-2013 | 0.86% | 0.97% |
| Dec-2013 | 0.44% | 0.81% |
| Jan-2014 | 0.41% | 0.63% |
| Feb-2014 | 0.99% | 1.33% |
| Mar-2014 | 0.60% | 0.75% |
| Apr-2014 | 0.01% | 0.33% |
| May-2014 | -0.08% | 0.25% |
| Jun-2014 | -0.11% | 0.21% |
| Jul-2014 | 0.05% | 0.28% |
| Aug-2014 | 0.40% | 0.75% |
| Sep-2014 | 0.33% | 0.55% |
| Oct-2014 | 0.34% | 0.56% |
| Nov-2014 | 0.82% | 0.87% |
Note: Earnings are adjusted to November 2014 dollars. Light shaded area denotes recession.
Source: Author analysis of Bureau of Labor Statistics's Current Employment Statistics and Consumer Price Index, public data series.
The Fed’s Language May Change This Week—Let’s Hope It Doesn’t Signal Interest Rates Going up Sooner
The Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday of this week. Word on the street is that they will shift the language they use to describe the likely future path of short-term interest rates. Recently this language has stressed that very low short-term rates are likely to persist for “a considerable time.” The new language may instead stress the need for Fed “patience” with lower rates.
To real-life human beings, of course, parsing such language is an exercise that goes so far beyond splitting hairs it’s absurd.
But it matters. The Fed is the most important economic policymaking institution in the United States right now. They have, by far, the most influence on whether American workers’ hourly wages and living standards will begin rising or not in coming years. If they raise interest rates before genuine recovery from the Great Recession is secured, the hopes for real (inflation-adjusted) wage increases for the vast majority of Americans will be torpedoed. And, this switch from “considerable time” to “patience” will be interpreted as inflation hawks on the Fed who want to see an earlier interest rate increase gaining a small patch of intellectual territory.
Does surrendering this small patch of rhetorical territory actually mean that rates will begin rising faster than they would have otherwise? I have no idea.
New Trade Agreements will Take Center Stage in 2015. So Will Bad Arguments Made on their Behalf.
Next year, we are going to see lots of debate over trade policy. And, like clockwork, when trade policy rises to the top of policy debate, lots of bad arguments start getting thrown around on behalf of more trade agreements. Ed Gresser submits the latest round of bad ones in a paper released last week.
Gresser goes wrong out of the gate by implying very strongly that inequality is irrelevant to the living standards of low and moderate-income households. In his own words he argues:
“But “growing apart” [editor’s note: this means the rise in inequality] appears to be a phenomenon in which wealthy people rise fastest, not one in which they rise while the middle class and poor lose ground. Americans have actually grown more affluent at all income levels.”
This implicit claim is deeply wrong—the rise of inequality over the past generation has in fact been the primary drag on living standards growth for low- and moderate-income families. Gresser arrives at his irrelevance conclusion by essentially noting that cumulative income growth for low- and moderate-income households has exceeded zero over multiple decades. Well, congratulations to us, I guess. But very few countries outside of maybe North Korea have ever posted negative income growth over decades for the majority of their population.
It’s especially ironic to get this interpretation of rising inequality wrong when discussing its with expanded trade. The standard trade theory that links falling trade costs and rising inequality in rich countries like the United States is clear that this rise in inequality is accompanied by absolute (not just relative) income declines felt by the losing group. In the United States, the losing group is generally proxied by either production and nonsupervisory labor, or workers without a college degree—in either case the majority of the workforce. And while these trade-induced losses (which I estimated to be roughly $1,800 annually for a full-time worker without a college degree) do not explain all, or even the majority, of the rise in inequality over the past generation, they’re not trivial. Gresser claims to have cast doubt on these results (which are based on off-the-shelf standard trade models), but as I’ll show below, his analysis of them is completely irrelevant.
Recovery Is Nowhere Near Accomplished, and the Fed Shouldn’t Tighten Policy Until It Is
What follows are lightly edited remarks made by EPI Research and Policy Director Josh Bivens at a Dec. 9 event—Managing the Economy: The Federal Reserve, Wall Street, and Main Street—sponsored by EPI, Americans for Financial Reform, and the Roosevelt Institute Project on Financialization. Sen. Elizabeth Warren and Paul Krugman were the event’s featured speakers.
The event examined key policy questions facing the Federal Reserve in coming years. Bivens’s remarks focused on the need for monetary policy to allow a genuine recovery to happen, and argued that fears over coming inflation should not persuade the Fed to hike short-term interest rates before a full recovery is achieved.
===
I’ll begin by trying to frame why we think the topics being addressed by today’s panels and speakers are so important.
They’re important first because the economy remains far from fully recovered from the Great Recession. In fact, even after last month’s excellent jobs report, we’re still only about halfway recovered in terms of employment conditions, evidenced in the figure below simply by the share of adults between the ages of 25 and 54 with a job. If I had to pick one desert-island measure of labor market slack, this one seems pretty good to me.
Congress Again Rewards Tax Dodgers with a Tax Cut
Congress has agreed to reduce the Internal Revenue Service’s fiscal year 2015 budget by about 3 percent (from almost $11.3 billion in fy2014 to $10.9 billion), with over half coming from the enforcement budget. The reduction is even larger after adjusting for inflation (almost 5 percent). This is just the latest IRS budget reduction; in inflation-adjusted terms the IRS budget has been cut by almost 18 percent since 2010.
Interestingly, earlier this week the IRS Oversight Board released the results from a survey of public attitudes on the IRS. Overall, the public appears to be satisfied with their personal interactions with the IRS—74 percent are either very or somewhat satisfied. Only 61 percent of respondents (still a majority) trust the IRS to fairly enforce the tax laws, and this number could plausibly be depressed as a result of the House GOP hearings on the possible IRS mishandling of some tax-exemption applications from conservative groups.
Two other results from the survey are notable (to me at least). First, 86 percent of respondents think it is unacceptable to cheat on their income taxes. Second, 56 percent agree that the IRS should receive extra funding to enforce the tax laws. Most Americans think it is wrong to cheat on taxes and are willing to pay a little more to catch the tax cheats, which brings me back to the IRS budget.
Most of the IRS budget is devoted to helping taxpayers with tax forms, catching honest mistakes by taxpayers, and catching tax cheats. Over the past few years, IRS’s enforcement actions have brought in about an additional $50 billion per year (this is above the $1.6 trillion collected in income taxes); this figure works out to about $10.60 in additional collections per enforcement budget dollar spent for the IRS (the average over several years).
If a $1 budget reduction yields a $10.60 reduction in enforcement collections, then the $191 million reduction in the IRS enforcement budget could prove to be a $2 billion tax cut for tax cheats. There appears to be a disconnect between what Congress enacts and what the American public wants.
Still No Skills Mismatch in the Economy: The Number of Unemployed Exceeds the Number of Available Jobs Across All Sectors
The figure below shows the number of unemployed workers and the number of job openings in October, by industry. This figure is useful for diagnosing what’s behind our sustained high unemployment. If today’s labor market woes were the result of skills shortages or mismatches, we would expect to see some sectors where there are more unemployed workers than job openings, and others where there are more job openings than unemployed workers. What we find, however, is that unemployed workers exceed jobs openings across the board.
Some sectors have been closing the gap faster than others. Health care and social assistance, which has been consistently adding jobs throughout the business cycle, has a ratio quickly approaching 1-to-1. On the other end of the spectrum, there are 6.2 unemployed construction workers for every job opening. Removing those two extremes, there are between 1.1 and 3.1 as many unemployed workers as job openings in every other industry. This demonstrates that the main problem in the labor market is a broad-based lack of demand for workers—not, as is often claimed, available workers lacking the skills needed for the sectors with job openings.
Unemployed and job openings, by industry (in millions)
| Industry | Unemployed | Job openings |
|---|---|---|
| Professional and business services | 1.1213 | 0.8374 |
| Health care and social assistance | 0.7088 | 0.6926 |
| Retail trade | 1.1393 | 0.4738 |
| Accommodation and food services | 0.9668 | 0.5724 |
| Government | 0.6862 | 0.4281 |
| Finance and insurance | 0.2670 | 0.2235 |
| Durable goods manufacturing | 0.4880 | 0.1769 |
| Other services | 0.3863 | 0.1449 |
| Wholesale trade | 0.1660 | 0.1503 |
| Transportation, warehousing, and utilities | 0.3743 | 0.1638 |
| Information | 0.1521 | 0.1005 |
| Construction | 0.7917 | 0.1273 |
| Nondurable goods manufacturing | 0.3168 | 0.1076 |
| Educational services | 0.2259 | 0.0779 |
| Real estate and rental and leasing | 0.1182 | 0.0540 |
| Arts, entertainment, and recreation | 0.2227 | 0.0726 |
| Mining and logging | 0.0546 | 0.0285 |
Note: Because the data are not seasonally adjusted, these are 12-month averages, September 2013–August 2014.
Source: EPI analysis of data from the Job Openings and Labor Turnover Survey and the Current Population Survey
Little Change in the Job Openings Data for October 2014
After a larger than usual uptick in September, the quits rate fell slightly in October, while the hires and layoffs rates continued to hold steady, according the October Job Openings and Labor Turnover Survey (JOLTS)
The figure below shows the hires rate, the quits rate, and the layoffs rate. Layoffs, which shot up during the recession, recovered quickly once the recession officially ended—they’ve been at prerecession levels for more than three years. This makes sense. The economy is in a recovery and businesses are no longer shedding workers at an elevated rate. The fact that this trend continued in October is a good sign.
But not only do layoffs need to come down before we see a full recovery in the labor market, hiring needs to pick up. While the hires rate has been generally improving, it’s still well below its prerecession level.
Meanwhile, the voluntary quits rate, which has been flat since February (1.8 percent), saw a modest spike up in September to 2.0 percent, then fell to 1.9 percent in October. The overall trend in the recovery has been positive. A larger number of people voluntarily quitting their job indicates a labor market in which hiring is prevalent and workers are able to leave jobs that are not right for them, and find new ones. While there was a drop in October, these series are somewhat volatile and one should not rely too much on a one-month trend.
There are still 5.6 percent fewer voluntary quits each month than there were in 2007, before the recession began. A return to pre-recession levels of in voluntary quits would indicate that fewer workers are locked into jobs they would leave if they could.
Hires, quits, and layoff rates, December 2000–October 2014
| Month | Hires rate | Layoffs rate | Quits rate |
|---|---|---|---|
| Dec-2000 | 4.1% | 1.4% | 2.3% |
| Jan-2001 | 4.4% | 1.6% | 2.6% |
| Feb-2001 | 4.1% | 1.4% | 2.5% |
| Mar-2001 | 4.2% | 1.6% | 2.4% |
| Apr-2001 | 4.0% | 1.5% | 2.4% |
| May-2001 | 4.0% | 1.5% | 2.4% |
| Jun-2001 | 3.8% | 1.5% | 2.3% |
| Jul-2001 | 3.9% | 1.5% | 2.2% |
| Aug-2001 | 3.8% | 1.4% | 2.1% |
| Sep-2001 | 3.8% | 1.6% | 2.1% |
| Oct-2001 | 3.8% | 1.7% | 2.2% |
| Nov-2001 | 3.7% | 1.6% | 2.0% |
| Dec-2001 | 3.7% | 1.4% | 2.0% |
| Jan-2002 | 3.7% | 1.4% | 2.2% |
| Feb-2002 | 3.7% | 1.5% | 2.0% |
| Mar-2002 | 3.5% | 1.4% | 1.9% |
| Apr-2002 | 3.8% | 1.5% | 2.1% |
| May-2002 | 3.8% | 1.5% | 2.1% |
| Jun-2002 | 3.7% | 1.4% | 2.0% |
| Jul-2002 | 3.8% | 1.5% | 2.1% |
| Aug-2002 | 3.7% | 1.4% | 2.0% |
| Sep-2002 | 3.7% | 1.4% | 2.0% |
| Oct-2002 | 3.7% | 1.4% | 2.0% |
| Nov-2002 | 3.8% | 1.5% | 1.9% |
| Dec-2002 | 3.8% | 1.5% | 2.0% |
| Jan-2003 | 3.8% | 1.5% | 1.9% |
| Feb-2003 | 3.6% | 1.5% | 1.9% |
| Mar-2003 | 3.4% | 1.4% | 1.9% |
| Apr-2003 | 3.6% | 1.6% | 1.8% |
| May-2003 | 3.5% | 1.5% | 1.8% |
| Jun-2003 | 3.7% | 1.6% | 1.8% |
| Jul-2003 | 3.6% | 1.6% | 1.8% |
| Aug-2003 | 3.6% | 1.5% | 1.8% |
| Sep-2003 | 3.7% | 1.5% | 1.9% |
| Oct-2003 | 3.8% | 1.4% | 1.9% |
| Nov-2003 | 3.6% | 1.4% | 1.9% |
| Dec-2003 | 3.8% | 1.5% | 1.9% |
| Jan-2004 | 3.7% | 1.5% | 1.9% |
| Feb-2004 | 3.6% | 1.4% | 1.9% |
| Mar-2004 | 3.9% | 1.4% | 2.0% |
| Apr-2004 | 3.9% | 1.5% | 2.0% |
| May-2004 | 3.8% | 1.4% | 1.9% |
| Jun-2004 | 3.8% | 1.4% | 2.0% |
| Jul-2004 | 3.7% | 1.4% | 2.0% |
| Aug-2004 | 3.9% | 1.5% | 2.0% |
| Sep-2004 | 3.8% | 1.4% | 2.0% |
| Oct-2004 | 3.9% | 1.4% | 2.0% |
| Nov-2004 | 3.9% | 1.5% | 2.1% |
| Dec-2004 | 4.0% | 1.5% | 2.1% |
| Jan-2005 | 3.9% | 1.4% | 2.1% |
| Feb-2005 | 3.9% | 1.4% | 2.0% |
| Mar-2005 | 3.9% | 1.5% | 2.1% |
| Apr-2005 | 4.0% | 1.4% | 2.1% |
| May-2005 | 3.9% | 1.4% | 2.1% |
| Jun-2005 | 3.9% | 1.5% | 2.1% |
| Jul-2005 | 3.9% | 1.4% | 2.0% |
| Aug-2005 | 4.0% | 1.4% | 2.2% |
| Sep-2005 | 4.0% | 1.4% | 2.3% |
| Oct-2005 | 3.8% | 1.3% | 2.2% |
| Nov-2005 | 3.9% | 1.2% | 2.2% |
| Dec-2005 | 3.7% | 1.3% | 2.1% |
| Jan-2006 | 3.9% | 1.3% | 2.1% |
| Feb-2006 | 3.9% | 1.3% | 2.2% |
| Mar-2006 | 3.9% | 1.2% | 2.2% |
| Apr-2006 | 3.8% | 1.3% | 2.1% |
| May-2006 | 4.0% | 1.4% | 2.2% |
| Jun-2006 | 3.9% | 1.2% | 2.2% |
| Jul-2006 | 3.9% | 1.3% | 2.2% |
| Aug-2006 | 3.8% | 1.2% | 2.2% |
| Sep-2006 | 3.8% | 1.3% | 2.1% |
| Oct-2006 | 3.8% | 1.3% | 2.1% |
| Nov-2006 | 4.0% | 1.3% | 2.3% |
| Dec-2006 | 3.8% | 1.3% | 2.2% |
| Jan-2007 | 3.8% | 1.2% | 2.2% |
| Feb-2007 | 3.8% | 1.3% | 2.2% |
| Mar-2007 | 3.8% | 1.3% | 2.2% |
| Apr-2007 | 3.7% | 1.3% | 2.1% |
| May-2007 | 3.8% | 1.3% | 2.2% |
| Jun-2007 | 3.8% | 1.3% | 2.0% |
| Jul-2007 | 3.7% | 1.3% | 2.1% |
| Aug-2007 | 3.7% | 1.3% | 2.1% |
| Sep-2007 | 3.7% | 1.5% | 1.9% |
| Oct-2007 | 3.8% | 1.4% | 2.1% |
| Nov-2007 | 3.7% | 1.4% | 2.0% |
| Dec-2007 | 3.6% | 1.3% | 2.0% |
| Jan-2008 | 3.5% | 1.3% | 2.0% |
| Feb-2008 | 3.5% | 1.4% | 2.0% |
| Mar-2008 | 3.4% | 1.3% | 1.9% |
| Apr-2008 | 3.5% | 1.3% | 2.1% |
| May-2008 | 3.3% | 1.3% | 1.9% |
| Jun-2008 | 3.5% | 1.5% | 1.9% |
| Jul-2008 | 3.3% | 1.4% | 1.8% |
| Aug-2008 | 3.3% | 1.6% | 1.7% |
| Sep-2008 | 3.1% | 1.4% | 1.8% |
| Oct-2008 | 3.3% | 1.6% | 1.8% |
| Nov-2008 | 2.9% | 1.6% | 1.5% |
| Dec-2008 | 3.2% | 1.8% | 1.6% |
| Jan-2009 | 3.1% | 1.9% | 1.5% |
| Feb-2009 | 3.0% | 1.9% | 1.5% |
| Mar-2009 | 2.8% | 1.8% | 1.4% |
| Apr-2009 | 2.9% | 2.0% | 1.3% |
| May-2009 | 2.8% | 1.6% | 1.3% |
| Jun-2009 | 2.8% | 1.6% | 1.3% |
| Jul-2009 | 2.9% | 1.7% | 1.3% |
| Aug-2009 | 2.9% | 1.6% | 1.3% |
| Sep-2009 | 3.0% | 1.6% | 1.3% |
| Oct-2009 | 2.9% | 1.5% | 1.3% |
| Nov-2009 | 3.1% | 1.4% | 1.4% |
| Dec-2009 | 2.9% | 1.5% | 1.3% |
| Jan-2010 | 3.0% | 1.4% | 1.3% |
| Feb-2010 | 2.9% | 1.4% | 1.3% |
| Mar-2010 | 3.2% | 1.4% | 1.4% |
| Apr-2010 | 3.1% | 1.3% | 1.5% |
| May-2010 | 3.4% | 1.3% | 1.4% |
| Jun-2010 | 3.1% | 1.5% | 1.5% |
| Jul-2010 | 3.2% | 1.6% | 1.4% |
| Aug-2010 | 3.0% | 1.4% | 1.4% |
| Sep-2010 | 3.1% | 1.4% | 1.4% |
| Oct-2010 | 3.1% | 1.3% | 1.4% |
| Nov-2010 | 3.2% | 1.4% | 1.4% |
| Dec-2010 | 3.2% | 1.4% | 1.5% |
| Jan-2011 | 3.0% | 1.3% | 1.4% |
| Feb-2011 | 3.1% | 1.3% | 1.4% |
| Mar-2011 | 3.2% | 1.3% | 1.5% |
| Apr-2011 | 3.2% | 1.3% | 1.5% |
| May-2011 | 3.1% | 1.3% | 1.5% |
| Jun-2011 | 3.3% | 1.4% | 1.5% |
| Jul-2011 | 3.1% | 1.3% | 1.5% |
| Aug-2011 | 3.2% | 1.3% | 1.5% |
| Sep-2011 | 3.3% | 1.3% | 1.5% |
| Oct-2011 | 3.2% | 1.3% | 1.5% |
| Nov-2011 | 3.2% | 1.3% | 1.5% |
| Dec-2011 | 3.2% | 1.3% | 1.5% |
| Jan-2012 | 3.2% | 1.2% | 1.5% |
| Feb-2012 | 3.3% | 1.3% | 1.6% |
| Mar-2012 | 3.3% | 1.2% | 1.6% |
| Apr-2012 | 3.2% | 1.4% | 1.6% |
| May-2012 | 3.3% | 1.4% | 1.6% |
| Jun-2012 | 3.2% | 1.3% | 1.6% |
| Jul-2012 | 3.2% | 1.2% | 1.6% |
| Aug-2012 | 3.3% | 1.4% | 1.6% |
| Sep-2012 | 3.1% | 1.3% | 1.4% |
| Oct-2012 | 3.2% | 1.3% | 1.5% |
| Nov-2012 | 3.3% | 1.3% | 1.6% |
| Dec-2012 | 3.2% | 1.2% | 1.6% |
| Jan-2013 | 3.2% | 1.2% | 1.7% |
| Feb-2013 | 3.4% | 1.2% | 1.7% |
| Mar-2013 | 3.2% | 1.3% | 1.6% |
| Apr-2013 | 3.3% | 1.3% | 1.6% |
| May-2013 | 3.3% | 1.3% | 1.6% |
| Jun-2013 | 3.2% | 1.2% | 1.6% |
| Jul-2013 | 3.3% | 1.2% | 1.7% |
| Aug-2013 | 3.4% | 1.2% | 1.7% |
| Sep-2013 | 3.4% | 1.3% | 1.7% |
| Oct-2013 | 3.3% | 1.1% | 1.8% |
| Nov-2013 | 3.3% | 1.1% | 1.8% |
| Dec-2013 | 3.3% | 1.2% | 1.8% |
| Jan-2014 | 3.3% | 1.2% | 1.7% |
| Feb-2014 | 3.4% | 1.2% | 1.8% |
| Mar-2014 | 3.4% | 1.2% | 1.8% |
| Apr-2014 | 3.5% | 1.2% | 1.8% |
| May-2014 | 3.4% | 1.2% | 1.8% |
| Jun-2014 | 3.5% | 1.2% | 1.8% |
| Jul-2014 | 3.6% | 1.2% | 1.8% |
| Aug-2014 | 3.4% | 1.2% | 1.8% |
| Sep-2014 | 3.6% | 1.2% | 2.0% |
| Oct-2014 | 3.6% | 1.2% | 1.9% |
Note: Shaded areas denote recessions. The hires rate is the number of hires during the entire month as a percent of total employment. The layoff rate is the number of layoffs and discharges during the entire month as a percent of total employment. The quits rate is the number of quits during the entire month as a percent of total employment.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey
JOLTS Report Mostly on Trend: Jobs-Seekers-To-Job-Openings Ratio Falls Below 2.0 for the First Time Since the Great Recession
This morning’s Job Openings and Labor Turnover Summary (JOLTS) shows that the total number of job openings in October was 4.8 million, up 149,000 since September. Meanwhile, according to the Census’s Current Population Survey, there were nearly 9.0 million job seekers, which means there were 1.9 times as many job seekers as job openings in October. This is the first time since the Great Recession that the jobs-seekers-to-job-openings ratio fell below 2.0. While we are moving in the right direction, keep in mind that in a labor market with strong job opportunities, there would be roughly as many job openings as job seekers, while in October, job seekers still so outnumbered job openings that nearly half of the unemployed were not going to find a job no matter what they did.
The slight decline in the jobs-seekers-to-job-openings ratio in October comes on the heels of a steady decrease since its high of 6.8-to-1 in July 2009, as you can see in the figure below. The ratio has fallen by 0.9 over the last year.
At the same time, the 9.0 million unemployed workers understates how many job openings will be needed when a robust jobs recovery finally begins, due to the existence of 5.8 million potential workers (in October) who are currently not in the labor market, but who would be if job opportunities were strong. Many of these “missing workers” will go back to looking for a job when the economy really picks up, so job openings will be needed for them, too.
The job-seekers ratio, December 2000–October 2014
| Month | Unemployed job seekers per job opening |
|---|---|
| Dec-2000 | 1.1 |
| Jan-2001 | 1.1 |
| Feb-2001 | 1.3 |
| Mar-2001 | 1.3 |
| Apr-2001 | 1.3 |
| May-2001 | 1.4 |
| Jun-2001 | 1.5 |
| Jul-2001 | 1.5 |
| Aug-2001 | 1.7 |
| Sep-2001 | 1.8 |
| Oct-2001 | 2.1 |
| Nov-2001 | 2.3 |
| Dec-2001 | 2.3 |
| Jan-2002 | 2.3 |
| Feb-2002 | 2.4 |
| Mar-2002 | 2.3 |
| Apr-2002 | 2.6 |
| May-2002 | 2.4 |
| Jun-2002 | 2.5 |
| Jul-2002 | 2.5 |
| Aug-2002 | 2.4 |
| Sep-2002 | 2.5 |
| Oct-2002 | 2.4 |
| Nov-2002 | 2.4 |
| Dec-2002 | 2.8 |
| Jan-2003 | 2.3 |
| Feb-2003 | 2.5 |
| Mar-2003 | 2.8 |
| Apr-2003 | 2.8 |
| May-2003 | 2.8 |
| Jun-2003 | 2.8 |
| Jul-2003 | 2.8 |
| Aug-2003 | 2.7 |
| Sep-2003 | 2.9 |
| Oct-2003 | 2.7 |
| Nov-2003 | 2.6 |
| Dec-2003 | 2.5 |
| Jan-2004 | 2.5 |
| Feb-2004 | 2.4 |
| Mar-2004 | 2.5 |
| Apr-2004 | 2.4 |
| May-2004 | 2.2 |
| Jun-2004 | 2.4 |
| Jul-2004 | 2.1 |
| Aug-2004 | 2.2 |
| Sep-2004 | 2.1 |
| Oct-2004 | 2.1 |
| Nov-2004 | 2.3 |
| Dec-2004 | 2.1 |
| Jan-2005 | 2.2 |
| Feb-2005 | 2.1 |
| Mar-2005 | 2.0 |
| Apr-2005 | 1.9 |
| May-2005 | 2.0 |
| Jun-2005 | 1.9 |
| Jul-2005 | 1.8 |
| Aug-2005 | 1.8 |
| Sep-2005 | 1.8 |
| Oct-2005 | 1.8 |
| Nov-2005 | 1.7 |
| Dec-2005 | 1.7 |
| Jan-2006 | 1.7 |
| Feb-2006 | 1.7 |
| Mar-2006 | 1.6 |
| Apr-2006 | 1.6 |
| May-2006 | 1.6 |
| Jun-2006 | 1.6 |
| Jul-2006 | 1.8 |
| Aug-2006 | 1.6 |
| Sep-2006 | 1.5 |
| Oct-2006 | 1.5 |
| Nov-2006 | 1.5 |
| Dec-2006 | 1.5 |
| Jan-2007 | 1.6 |
| Feb-2007 | 1.5 |
| Mar-2007 | 1.4 |
| Apr-2007 | 1.5 |
| May-2007 | 1.5 |
| Jun-2007 | 1.5 |
| Jul-2007 | 1.6 |
| Aug-2007 | 1.6 |
| Sep-2007 | 1.6 |
| Oct-2007 | 1.7 |
| Nov-2007 | 1.7 |
| Dec-2007 | 1.8 |
| Jan-2008 | 1.8 |
| Feb-2008 | 1.9 |
| Mar-2008 | 1.9 |
| Apr-2008 | 2.0 |
| May-2008 | 2.1 |
| Jun-2008 | 2.3 |
| Jul-2008 | 2.4 |
| Aug-2008 | 2.6 |
| Sep-2008 | 3.0 |
| Oct-2008 | 3.1 |
| Nov-2008 | 3.4 |
| Dec-2008 | 3.7 |
| Jan-2009 | 4.4 |
| Feb-2009 | 4.6 |
| Mar-2009 | 5.4 |
| Apr-2009 | 6.1 |
| May-2009 | 6.0 |
| Jun-2009 | 6.2 |
| Jul-2009 | 6.8 |
| Aug-2009 | 6.5 |
| Sep-2009 | 6.2 |
| Oct-2009 | 6.5 |
| Nov-2009 | 6.3 |
| Dec-2009 | 6.1 |
| Jan-2010 | 5.5 |
| Feb-2010 | 6.0 |
| Mar-2010 | 5.8 |
| Apr-2010 | 5.0 |
| May-2010 | 5.1 |
| Jun-2010 | 5.3 |
| Jul-2010 | 5.0 |
| Aug-2010 | 5.0 |
| Sep-2010 | 5.2 |
| Oct-2010 | 4.8 |
| Nov-2010 | 4.9 |
| Dec-2010 | 5.0 |
| Jan-2011 | 4.8 |
| Feb-2011 | 4.6 |
| Mar-2011 | 4.4 |
| Apr-2011 | 4.5 |
| May-2011 | 4.5 |
| Jun-2011 | 4.3 |
| Jul-2011 | 4.0 |
| Aug-2011 | 4.3 |
| Sep-2011 | 3.9 |
| Oct-2011 | 4.0 |
| Nov-2011 | 4.2 |
| Dec-2011 | 3.7 |
| Jan-2012 | 3.5 |
| Feb-2012 | 3.7 |
| Mar-2012 | 3.3 |
| Apr-2012 | 3.5 |
| May-2012 | 3.4 |
| Jun-2012 | 3.3 |
| Jul-2012 | 3.5 |
| Aug-2012 | 3.4 |
| Sep-2012 | 3.4 |
| Oct-2012 | 3.2 |
| Nov-2012 | 3.2 |
| Dec-2012 | 3.4 |
| Jan-2013 | 3.3 |
| Feb-2013 | 3.0 |
| Mar-2013 | 3.0 |
| Apr-2013 | 3.1 |
| May-2013 | 3.0 |
| Jun-2013 | 3.0 |
| Jul-2013 | 3.0 |
| Aug-2013 | 2.9 |
| Sep-2013 | 2.8 |
| Oct-2013 | 2.8 |
| Nov-2013 | 2.6 |
| Dec-2013 | 2.6 |
| Jan-2014 | 2.6 |
| Feb-2014 | 2.5 |
| Mar-2014 | 2.5 |
| Apr-2014 | 2.2 |
| May-2014 | 2.1 |
| Jun-2014 | 2.0 |
| Jul-2014 | 2.1 |
| Aug-2014 | 2.0 |
| Sep-2014 | 2.0 |
| Oct-2014 | 1.9 |
Note: Shaded areas denote recessions.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey
Furthermore, a job opening when the labor market is weak often does not mean the same thing as a job opening when the labor market is strong. There is a wide range of “recruitment intensity” with which a company can deal with a job opening. For example, if a company is trying hard to fill an opening, it may increase the compensation package and/or scale back the required qualifications. Conversely, if it is not trying very hard, it may hike up the required qualifications and/or offer a meager compensation package. Perhaps unsurprisingly, research shows that recruitment intensity is cyclical—it tends to be stronger when the labor market is strong, and weaker when the labor market is weak. This means that when a job opening goes unfilled when the labor market is weak, as it is today, companies may very well be holding out for an overly-qualified candidate at a cheap price.
A Victory for U.S. and Migrant Workers
For 5 years, the Obama administration has been trying to make reasonable improvements to one of the United States’ main guestworker program for lower skilled workers. The H-2B visa is used by businesses that want low-cost gardeners, hotel maids, cooks and dishwashers, forestry workers, workers to pick and pack crab meat, and various other kinds of laborers. The businesses that hire H-2B workers don’t want U.S. workers who expect a decent wage and they don’t want U.S. workers who might get sick of poor working conditions and quit to find a better job. They want migrant laborers from abroad, who may think being paid a poverty-level wage is a great windfall and who can’t quit—no matter how abusive the working conditions are—because they will be deported if they try to switch jobs. Many H-2B workers secure their temporary jobs in the United States by paying labor recruiters thousands of dollars to connect them to U.S. employers. The employers that ultimately hire them benefit from this arrangement because H-2Bs workers are so indebted to recruiters that their lives will be in danger if they return home before their contract is finished. Businesses call this a “reliable” workforce.
The Bush administration issued rules for the H-2B visa that gave businesses what they wanted: below-market wages so they could discourage U.S. workers from applying and underpay the migrants who did apply. EPI’s analysis has shown that the Bush rules led to wages that fell more than 25 percent below the true prevailing wage. Migrant advocates sued to have the Bush rules thrown out, and a federal court agreed. So the Obama administration set out to rewrite the rules to protect both U.S. workers who might want some of these jobs and the mostly Mexican migrants who come to work with H-2B visas. The Department of Labor issued rules to require more honest recruiting of U.S. workers before a business can look abroad, rules to protect the migrants against exploitation by recruiters and businesses, and—most importantly—a rule to set a true prevailing wage that businesses using the H-2B visa have to offer and pay to U.S. and migrant workers alike.