A strong labor market continues into 2024 with 353,000 jobs added in January
Below, EPI economists offer their insights on the jobs report released this morning, which showed 353,000 jobs added in January.
The soft bigotry of high expectations: To combat the Black-white school achievement gap, remedy persistent segregation, don’t hope for miracle teachers
Social psychologist Robert Rosenthal died at the age of 90 this month. He was best known for his 1968 book, Pygmalion in the Classroom, co-authored by Lenore Jacobson, an elementary school principal in South San Francisco.
No book in the second half of the 20th century did more, unintentionally perhaps, to undermine support for public education, and thus diminish educational opportunities for so many children, especially Black and Hispanic children, to this day. The book and its aftermath put the onus solely on teacher performance when it came to student achievement, disregarding so many critically important socioeconomic factors—at the top of the list, residential segregation.
How did it do that?
The book described an experiment conducted in Ms. Jacobson’s school in 1965. The authors gave pupils an IQ test and then randomly divided the test takers into two groups. They falsely told teachers that results showed that students in one of the groups were poised to dramatically raise their performance in the following year, while the others would not likely demonstrate similar improvement.
At the end of that year, they tested students again and found that the first and second graders in the group that was predicted to improve did so on average, while those in the other group did not. The book, as well as academic articles that Dr. Rosenthal and Ms. Jacobson published, claimed that the experiment showed that teacher expectations had a powerful influence on student achievement, especially of young children. Pupils whose teachers were told were more likely to improve then apparently worked harder to meet their teachers’ faith in them.1
Some psychologists were skeptical, believing that the experimental design was not sufficiently rigorous to support such a revolutionary conclusion. Even the reported results were ambiguous. Teacher expectations had no similar impact on children in grades three through six. Similar experiments elsewhere did not confirm the results even for first and second graders.2
Nonetheless, the book was very influential.
The economy isn’t sick right now—but it has chronic conditions that demand attention
Despite consumer sentiment about the economy improving through the end of 2023, there is still a disconnect between how people feel about the economy and what the data show. Consumer spending was up in 2023, especially through the holiday season, yet inflation anxiety and recession fears were still present. Where does this disconnect come from? Are people simply wrong about the economy, or are the numbers lying to us?
We can square this circle by acknowledging that two things can be true at once: The economic data showing low unemployment, rising wages, and slowing inflation are indeed accurate evidence that the economy is not in a crisis, and yet people’s anxieties reflect legitimate economic concerns. Those anxieties highlight a series of structural issues that have plagued the U.S. economy for decades. It is precisely because we are not currently in an acute crisis like a recession that people have the latitude to identify these chronic economic conditions that deserve to be addressed.
Let’s start by looking at what economists mean when rightly pointing out how strong our economy is right now, especially when compared with the past few years. Then, we can dig into the chronic problems that have been facing the U.S. economy for decades.
Job Openings and Labor Turnover Survey shows a strong—but not overheating—labor market
Below, EPI senior economist Elise Gould offers her insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for December. Read the full thread here.
Don’t wait on wage growth—the Fed should cut rates at this week’s meeting
Over the past six months, core inflation has risen exactly in line with the Federal Reserve’s long-run 2% inflation target. When this key measure of inflation (which excludes volatile food and energy prices) is neither above nor below this target, this is a good sign that the Fed’s policy should be roughly neutral—aiming to neither increase nor depress economic activity.
Yet Fed interest rate policy today is nowhere near neutral—instead it is putting a stiff drag on potential growth. The Fed’s main policy instrument—the federal funds rate—stands between 5.25 and 5.5%, its highest level since at least the business cycle peak of 2007 (and maybe even the peak of 2000). There are a lot of debates among economists about the correct “neutral” level of interest rates in the economy (and even debates about whether it exists or is a useful guide to policy at all), but nobody thinks today’s rates are even close to neutral. Instead, interest rates closer to 2.5-3% are likely needed to keep monetary policy from continuing to threaten growth. (Rates lower than this would likely start providing some stimulus to the economy, which does not seem needed at the moment.)
Given that inflation has been brought all the way back down to the Fed’s target, further economic cooling is no longer needed, and the Fed should move quickly to a more neutral stance.
Extending unemployment insurance to striking workers would cost little and encourage fair negotiations
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Click here for the latest methodology estimating the cost of UI for striking workers legislation. Updated February 3, 2025.
Unions and collective action have long served as a vehicle for ensuring prosperity for working families and creating a more equal economy. Despite these critical functions, workers engaged in collective action, like strikes, have historically been barred from accessing safety net programs like unemployment insurance (UI). In a welcome development, state lawmakers are beginning to rethink this convention, recognizing the dual roles of UI in stabilizing the economy and unions in securing broad-based economic growth.
A growing number of states are proposing legislation to extend unemployment insurance to striking workers
In just the past two years, lawmakers in nine states have introduced legislation aimed at granting or enhancing striking workers’ access to UI. As shown in Table 1, New York and New Jersey are currently the only two states where striking workers can apply for UI benefits following a 14-day waiting period. This month, New York legislators proposed a further reduction to seven days.
However, not all legislative efforts have been successful. The Connecticut Senate rejected a bill that would have permitted striking workers to access UI after 14 days, while California Governor Gavin Newsom vetoed a similar bill that passed in the state legislature. Presently, Massachusetts and Pennsylvania legislators are considering laws with 30-day waiting periods, Illinois and Ohio are considering bills with 14-day waiting periods, and Washington is considering a bill with a seven-day waiting period.
Decline of labor unions weakens American democracy
Earlier today, the U.S. Bureau of Labor Statistics (BLS) announced that the share of workers represented by unions was 11.2% in 2023, down slightly from 11.3% in 2022. This news of stagnation is especially sobering for the American labor movement because the past year was full of major victories and growing momentum. The UAW’s ‘stand up’ strike led to record contracts for autoworkers, graduate students around the country won union elections, and public support for labor unions reached near-record highs—especially among young Americans. The decline of the American labor movement since the 1970s has been a major cause of stagnating wages and rising income inequality, and contributes to U.S. workers facing more dangerous working conditions than their counterparts in other wealthy countries. With the 2024 presidential election approaching, however, it is crucial to look beyond these economic consequences—as important as they are—and to recognize that the decline of American labor unions also leaves American democracy vulnerable.
That is the conclusion of our recent EPI report on labor unions and the use of ballot drop boxes during U.S. elections. Since ballot drop boxes are a highly secure way to increase access to voting during elections, the Republican Party has sought to limit their use as part of a broad assault on voting rights. During the 2022 midterm elections, for example, we found that unified Republican control of a state government was associated with a 95% decrease in ballot drop boxes per capita. Seventeen states completely banned ballot drop boxes—and all but one of them had either a Republican governor or a Republican-controlled legislature. By contrast, Democrats championed the John Lewis Voting Rights Advancement Act (VRAA) of 2021—national legislation that included protections against numerous state-level voting restrictions, including those related to ballot drop boxes. Senators Joe Manchin and Kyrsten Sinema, however, joined Republicans to block these reforms in early 2022.
There’s no debate: Measurable income inequality has skyrocketed in recent decades
This is an excerpt from an op-ed that originally ran in CNN. Read the full op-ed here.
In recent years, researchers have debated the simple question of whether inequality has risen a lot or a little in the United States over the past half-century. Lots of arguments in this debate surround highly technical issues like, “Should the income of owners of ‘pass-through businesses’ be reported as wages or business profits?” or “Is income that is not reported on tax returns mostly earned by rich or middle-class households, and how do you know?”
But we’ve identified available data that sidesteps nearly all these complexities and demonstrates that inequality has indeed risen enormously: what individual Americans earn in the labor market.
State and local governments have only spent about half of American Rescue Plan funds as critical deadline nears
2024 is the last opportunity for state and local governments to make spending decisions on funds provided by the American Rescue Plan Act (ARPA). Many states, localities, and school districts still have considerable unspent ARPA funds. At a time when the public sector has still not fully recovered from the job losses of the pandemic, governments should use remaining ARPA funds to shore up public services and invest in education.
ARPA allocated $350 billion to state and local governments (State and Local Fiscal Recovery Funds, or SLFRF). While governments do not need to spend those funds until 2026, they must be obligated by December 31, 2024. ARPA also provided an additional $122 billion to school districts and state education authorities (Elementary and Secondary Schools Emergency Relief, or ESSER III). That money must be obligated by September 30, 2024, and must be spent by January 28, 2025.
The latest SLFRF spending data, covering the period ending June 30, 2023, show that roughly half of fiscal recovery funds had yet to be spent. The amount is even higher for local governments, with more than 56% of funds unexpended.
Youth subminimum wages and why they should be eliminated: Young workers face pay discrimination in 34 states and DC
In 2023, the issue of child labor re-emerged as a national crisis. Federal data on the rise of child labor violations and numerous investigative reports of widespread illegal youth employment garnered sustained media attention, sparking outrage from the public and lawmakers alike. At the same time, EPI has documented an ongoing, coordinated effort to roll back existing child labor protections that is gaining momentum in states across the country. Legislative proposals to weaken child labor protections—some of which have already been enacted—allow employers to hire teens for more dangerous jobs or extend the hours young people can work on school nights.
What has received far less attention is the long-standing system of pay discrimination against young workers under federal and state laws. These laws allow employers to pay youth less than adults in the same jobs and, in many cases, exclude young workers from the minimum wage protections that cover most adult workers.
In states across the country, advocates and lawmakers are working to eliminate subminimum wages for low-wage tipped or disabled workers. Amid increased child labor violations and a growing movement to roll back protections for working youth, lawmakers should also work to eliminate youth subminimum wages. Age-based pay discrimination is unfair and harms workers of all ages.