Unions helped keep workers in jobs and paid during the pandemic
In a new EPI technical paper, I review data on how union workers fared relative to their nonunion counterparts during the first two years of the COVID-19 pandemic. The nationally representative data allow me to draw several important conclusions about what unions have been able to do for the workers they represent as the country confronts COVID-19.
First, unions helped maintain pay for workers. Specifically, union workers—union members and nonmembers who were covered by a collective bargaining contract—were more likely than nonunion workers to receive pay during periods when their workplaces were not open for business. Even after controlling for a wide range of worker characteristics, such as industry, occupation, education, age, gender, race and ethnicity, marital status, state of residence, and others, union workers were 10 percentage-points more likely than nonunion workers to have been paid by their employers for hours not worked due to pandemic-related closures or lost business during the pandemic period.
Second, unions saved jobs. My estimates suggest job losses were 2,000 jobs per month lower for union members than nonunion members during the first six months of the pandemic when the economy was suffering most. Even as the economy started to recover over the subsequent 16 months, unions continued to preserve an average of 1,700 jobs per month. During the 22 months I analyzed in my paper, unions saved just over 40,000 jobs, relative to what happened to workers in nonunion establishments.
Third, the union boost to wage levels remained. The union weekly earnings premium—the 7% by which the weekly earnings of union workers exceeded the earnings of comparable nonunion workers—held steady over the course of the pandemic. The pandemic hit all workers hard, but it did not reduce the relative position of union workers.
Additional findings and a complete discussion of the methodology used are available here.
Putting Minnesota’s record-low unemployment numbers in context
Minnesota set a record in June with an unemployment rate of 1.8%, the lowest number recorded for any state ever since the data began to be collected in 1976. While this is good news, the headline unemployment number must be put in proper context. In Minnesota, and across the country, payroll employment and labor force participation are still down considerably from before the pandemic. Policymakers should resist the temptation to treat a low unemployment rate as proof the economy is overheating, and instead should continue pursuing policies to bring workers into the workforce, raise wages, reduce barriers to employment, and promote racial and gender equity.
The unemployment rate is an important measure, but it doesn’t tell the full story
A 1.8% unemployment rate means that only 1.8% of Minnesotans looking for jobs report that they’re unable to find one. That’s good news. And it’s not just Minnesota that’s doing well. The June 2022 unemployment numbers also showed Nebraska at 1.9% unemployment, New Hampshire and Utah at 2.0%, and Vermont at 2.2%. Eighteen states, in total, had a June unemployment rate below 3%.
And yet, every single one of these states still had fewer jobs in June than before the pandemic. EPI’s Economic Indicators page shows that the United States is still down 524,000 jobs from its pre-pandemic peak. If we account for population growth over the last 2.5 years, the country has 3 million fewer jobs than we would expect if pre-pandemic trends had continued.
Inflation is no excuse for inaction on needed tax reforms and investments
In recent months, a number of policymakers have cited inflation concerns as the source of their opposition to budget reconciliation proposals that would raise taxes progressively and boost federal spending on public investments and social insurance. (Many of these proposals were once collected together and named the Build Back Better Act (BBBA), but since negotiations over the full BBBA faltered there has been no single name for the shifting permutations of tax and spending changes that are under debate.)
Today’s inflation is a real concern—it is running too high and is reducing households’ purchasing power. But linking fiscal policy decisions about the proper level of taxes and spending in the medium and long run to today’s inflation makes little sense. Even worse, many of these policymakers cast both the tax increases and the spending increases as potentially inflationary. This is not just unwise—it is simply economically innumerate.
The value of the federal minimum wage is at its lowest point in 66 years
The value of the federal minimum wage has reached its lowest point in 66 years, according to an EPI analysis of recently released Consumer Price Index (CPI) data. Accounting for price increases in June, the current federal minimum wage of $7.25 per hour is now worth less than at any point since February 1956. At that time, the federal minimum wage was 75 cents per hour, or $7.19 in June 2022 dollars.
Last July marked the longest period without a minimum wage increase since Congress established the federal minimum wage in 1938, and continued inaction on the federal minimum wage over the past year has only further eroded the minimum wage’s value. As shown in Figure A, a worker paid the current $7.25 federal minimum wage earns 27.4% less in inflation-adjusted terms than what their counterpart was paid in July 2009 when the minimum wage was last increased, and 40.2% less than a minimum wage worker in February 1968, the historical high point of the minimum wage’s value.
The minimum wage increases of the late 1960s expanded the coverage of the minimum wage to include industries like agriculture, nursing homes, restaurants, and other service industries. The earlier exemption of these industries from the federal minimum wage disproportionately excluded Black workers from this important labor protection. The application of the minimum wage to these industries raised workers’ incomes and directly reduced Black-white earnings inequality. Congress’s failure to raise the minimum on a regular basis in the interim, however, has eroded the value of the federal minimum wage and worsened racial earnings gaps.
The growing housing supply shortage has created a housing affordability crisis
Rising housing costs have made housing largely inaccessible and unaffordable to most Americans, but have acutely impacted communities of color and low- to moderate-income families over the past several decades. The median asking rent in the United States rose above $2,000 for the first time in June 2022. Given that the U.S. Department of Housing and Urban Development (HUD) sets the standard of affordability at 30% of household income, $2,000 per month would only be “affordable” for households earning at least $80,000 per year—well above the median U.S. household income ($67,521).
A growing housing supply shortage is a key contributor to the housing affordability crisis. Following the Great Recession, the share of homes being built fell significantly, causing buyer demand to exceed housing production. In fact, fewer new homes were built in the decade following the Great Recession than in any decade since the 1960s. This deficit has now expanded even further, contributing to a shortfall of over 3 million homes and growing.
Some of the leading factors responsible for the housing shortage are land availability and exclusionary zoning laws, which restrict the kinds of homes that can be put in certain neighborhoods—maintaining segregation. Examples of exclusionary zoning laws include minimum lot and square footage requirements, limits on the height of buildings, and restrictions on building multi-family homes. These laws have historically sought to exclude lower-income residents from living in more affluent suburban developments with access to high-performing schools, employment, and other amenities. In the early decades of the 20th century, these laws were also used as a vehicle for explicit racial discrimination excluding Black residents from predominantly white neighborhoods.
Today, the legacy of these laws remains in place and has had far-reaching consequences for all families trying to secure housing. Despite the Fair Housing Act prohibiting discrimination based on race, color, national origin, religion, sex, and other identities, the law does not prohibit class-based discrimination. This allows a legal loophole where people earning low incomes can be restricted to certain neighborhoods and excluded from living in more affluent areas with broader investment and economic opportunity. Given that Black and Latinx families have far less wealth and income than white households, on average, these exclusionary zoning laws are often used to intentionally drive people of color out of certain communities and keep neighborhoods more uniformly white. The pattern of this discriminatory practice over time has exacerbated many racial economic disparities we see today and also takes root in the current housing unaffordability crisis.
A recession would be worse than today’s inflation
The Federal Reserve has been under intense pressure in recent months to sharply raise interest rates in the name of taming inflation. The voices calling for these rate increases often explicitly say that they are worth doing even if they greatly increase the risk of recession. At their last open market committee meeting, the Fed heeded these voices and raised rates by 0.75%—the largest single increase in 28 years—and indicated commitment to continuing to raise rates until inflation normalized, even if this increased the risk of recession.
The Fed’s actions to date do not guarantee a recession, but they have already made one more likely. Moreover, if they continue on a hawkish path much longer, a recession is quite probable. This would be a huge and avoidable policy mistake. Inflation is not being driven by large macroeconomic imbalances between aggregate demand and supply. Wage growth is already decelerating noticeably. In short, the point of rate hikes—bringing demand and supply into balance and restraining wage growth—has already been accomplished.
Besides failing to recognize these points, many voices in this debate have implicitly or explicitly argued that recession and inflation cause equivalent damage, or that inflation actually causes worse damage than recession. This view is clearly wrong—the economic damage wrought by recessions is far greater than that by single-digit inflation rates.
A common argument runs that inflation harms everybody in the economy, but only those who lose their job are harmed by recession. This is the opposite of truth. A recession directly reduces economy-wide incomes while inflation does not.
June inflation data show continued growth in overall CPI, but don’t capture recent price declines in food and energy
Below, EPI director of research Josh Bivens offers his insights on today’s release of the consumer price index (CPI) for June. Read the full Twitter thread here.
Rising minimum wages in 20 states and localities help protect workers and families against higher prices
On July 1, three states, 16 cities and counties, and the District of Columbia raised their minimum wages. These updates can all be viewed in EPI’s interactive Minimum Wage Tracker and in Table 1 and Table 2 below. At a time when families are coping with rising prices, these increases will help many low-wage workers and their families make ends meet.
State minimum wage increases
Connecticut, Nevada, Oregon, and the District of Columbia raised their minimum wages, with increases ranging from $0.50 per hour in Oregon’s nonurban counties1 to $1.00 in Connecticut. The new wage floors in Connecticut ($14.00), Nevada ($10.50), and Oregon ($13.50) were set in legislation passed in the last few years, while the District of Columbia’s minimum wage ($16.10) went up due to automatic annual inflation adjustment built into the District’s minimum wage law. (Eighteen states and the District of Columbia, as well as dozens of cities and counties, have automatic annual inflation adjustment built into their minimum wage laws.)
Added to the 21 states that raised their minimums at the start of the year, a total of 24 states and the District of Columbia have raised their minimum wages in 2022. Florida and Hawaii also have minimum wage increases scheduled to occur in October. Hawaii’s increase will be the first of four increases, recently enacted by state lawmakers, that will ultimately bring the state’s minimum wage to $18 by 2028.
Jobs report: Moderating wage growth means the Fed doesn’t need to raise interest rates further to contain inflation
Below, EPI president Heidi Shierholz offers her initial insights on the jobs report released this morning, which showed 372,000 jobs added in June and wage growth continuing to decelerate. Read the full Twitter thread here.
Will Friday’s wage growth numbers stop the Fed from snatching defeat out of the jaws of victory?
This Friday’s data from the Bureau of Labor Statistics (BLS) could be enormously consequential for what the Federal Reserve does over the next few months. If, as we think, Friday’s data continue to show decelerating wage growth, then the Fed really doesn’t need any more interest rate increases to contain inflation. But if the Fed ignores this and tightens anyhow, the magnificent achievement of a rapid recovery from the worst economic shock of the century could be thrown away, snatching defeat from the jaws of victory.
In March and April of 2020 as COVID-19 first spread across the United States, 22 million jobs were lost. Aided by the CARES Act passed in April 2020, the first 12 million jobs came back pretty easily over the following six months—businesses that had closed their doors but not gone bankrupt during the months of lockdown simply re-opened. But, job growth slowed in every month between August 2020 and December 2020—and in that last month employment contracted. Progress had not just stalled but gone backwards. At a similar point in the recovery from the Great Recession of 2008–2009, fiscal policymakers perversely shifted toward austerity and the result was that it took a full 10 years to regain pre-recession labor market health.
This time, however, additional fiscal support was passed in December 2020 and with the American Rescue Plan in March 2021. And since December 2020, the pace of job growth has been spectacular, with 9.2 million jobs added in 17 months—about 540,000 jobs every single month. Fiscal policy led the way on this, but the Federal Reserve has played a strong supporting role in boosting growth over this time as well. Today, unemployment is fully recovered to pre-pandemic levels and labor force participation nearly so. This is a huge policy accomplishment.
