Key takeaways:

• Recent Democratic proposals to exempt broad swaths of the middle class from federal income taxes accept a damaging frame of taxes as a pure drain on affordability.
• But taxes aren’t a drain on affordability; they fund the public services and social insurance programs that make a decent life possible for middle-class families.
• Progressive taxes on the ultrarich and corporations are essential and should be the immediate priority, but they cannot sustain the public sector alone, let alone expand it in ways needed.
• Middle-class tax rates have fallen by a third since 1979, yet economic anxiety remains high. Tax-cutting has failed because it has left the private-sector drivers of inequality untouched and starved public services.

For decades, anti-tax politicians have tried to smuggle in large tax cuts for the ultrarich and corporations by loudly offering tax cut crumbs to the middle class. Key to this effort has been framing taxes as a pure drain on typical families’ ability to afford a secure economic life. Any success in this dishonest campaign to foster anti-tax sentiment is a disaster for working people—and that’s why some recent tax policy ideas from Democrats and the rhetoric around them are so deflating.

Two things are true about taxes in the United States. First, taxes on the richest families and corporations are far too low. Second, it is broad-based taxes on the middle-class that are the foundation of a functioning public sector and a decent society.

Progressive taxes on the ultrarich and corporations are mostly needed to reduce the potential gains to the rich and powerful from rigging the rules of markets. When the powerful rig these rules and hugely disproportionate shares of income concentrate at the top—like in the United States today—progressive taxes can also raise significant revenue.

But if sharply progressive taxes succeed in reducing the incentive for rigging the rules of markets and if other policies help lead to more broadly shared income growth in the country, this means that progressive taxes will raise a lot less revenue over time.

To be clear, this would be a victory for a better society. For example, the purpose of a carbon tax is to lower greenhouse gas emissions and if it’s highly successful, it will by definition stop raising much revenue. Progressive taxes aimed at reducing inequality will see the revenue they raise start to decline when they are their most successful. Right now, we do have deep inequality in the U.S. and progressive taxes will raise a lot of money—but we shouldn’t make the public sector’s resources dependent on this remaining true forever.

But more importantly, taxing only the very rich has never been the primary foundation of public-sector resources and can’t be going forward. The revenue needed to support programs that provide social insurance and income support (Social Security and Medicaid, for example), as well as public investment and services like highways, transit, and public education requires broad-based taxation. Without Social Security providing secure retirement, Medicare, Medicaid, and the Affordable Care Act providing access to health care, and public schools providing universal education, a decent life for the middle-class would be entirely unaffordable. And without middle-class taxes supporting all of these things, they would collapse.

If typical Americans lose faith that paying broad-based taxes to support public services and investments is a good deal, it will be a disaster for their ability to afford a decent life. Sadly, some recent Democratic proposals capitulate to this view of taxes as a “pure burden” rather than an investment in the country and its people.

Senators Chris Van Hollen (D-MD) and Cory Booker (D-NJ) have both floated ideas that would draw a line below which nobody would pay any federal income tax (Van Hollen’s line is $92,000 for a married couple while Booker’s is $75,000). Both proposals pay for this with tax increases on the rich. If these tax increases on the rich were standalone pieces of legislation, they’d be excellent. But they are instead paired with tax benefits that mostly miss the bottom of the income distribution. In Booker’s proposal, the gains from the higher standard deduction that zeroes out taxes for many are actually largest for families between the 60th and 80th percentiles, and gains persist on average through the 99th percentile. Van Hollen’s bill phases out the “alternative maximum tax” that zeroes out taxes for many, and the biggest gains hit in the middle of the income distribution, but the proposal still provides gains on average for families between the 60th and 80th percentiles.

Both proposals clearly aim to address the affordability challenge that politicians have seized on, but in doing so both frame taxes as a pure drain on affordability, with Booker even calling his the “Keep Your Pay Act.” But taxes aren’t a drain on affordability. They provide the resources needed to run the public sector, and the public sector in turn does a great deal to make life more secure and more affordable over people’s lifetimes.

Social Security and Medicare, for example, both rely on payroll taxes on workers’ wages. But they also provide income for these workers in retirement. Instead of draining affordability, these programs smooth income over the lifecycle to ensure working families can afford a decent life even when they can no longer work. Food stamps and Medicaid are financed by taxes and provide benefits to people who otherwise would not be able to afford the most basic necessities: food and health care. The same people who receive Medicaid and food stamps in one era of their lives will contribute to them through taxes in other periods when they have found steady work. Again, the taxes collected are recycled back into families’ incomes in ways that minimize suffering and severe affordability crises throughout their lives.

State and local taxes—often borne quite heavily by the broad middle class—pay for public education. This education—both K–12 and higher education—is incredibly valuable and necessary for anyone operating in modern economies. Without the taxes to support education, families would have to dig into their own pockets to pay for private schooling, and it would be delivered less efficiently and much less equitably.

Other taxes finance infrastructure and other key public goods and services, without which life would be harder and more expensive for most families.

Cutting taxes even fails on the crass political grounds of buying voters’ short-term goodwill. It’s often underrecognized (mostly, again, because of conservative campaigns to hide this fact), but taxes for the middle class have been cut a lot in recent decades. Figure A below shows the percentage point change in tax rates of households at different parts of the income distribution between 1979–2019. We stop at 2019 to compare equivalent points of the business cycle. Tax rates tend to fall sharply during recessions, which can obscure the full extent of legislative changes to tax rates. Further, cutting taxes temporarily during recessions can make some sense—tax cuts are one form of fiscal stimulus that can be used to fight recessions (unless these tax cuts are quite well-targeted on low- and moderate-income families, they tend to be less efficient stimulus than spending measures).

Figure A

The largest tax cuts have gone to the bottom fifth of households—a key policy victory of recent decades. The expansion of refundable tax credits like the Earned Income Tax Credit and the Child Tax Credit—credits that are paid directly to lower-income families even if their amount is greater than the families’ tax liability—have essentially made the problem of taxing families into poverty almost nonexistent. These tax cuts should clearly be kept. But all households, not just those with very low incomes, have seen sizable tax cuts. Tax rates for households in the middle of the income distribution have been cut by a third since 1979.

And yet, does anybody feel like this tax-cutting has led to most U.S. households feeling great about their place in the economy and their prospects for affording a decent life today? Do these voters express warm feelings about the policymakers from both parties who provided these middle-class tax cuts?

The tax-cutting strategy has failed to make these households happy for two reasons. First, it leaves the private-sector drivers of inequality untouched, and as governments have collected less in taxes, employers and corporations have contributed less to middle-class families’ wages. Second, lower taxes have starved public-sector capacity and led to a degradation of public services. Strangely, the newly fashionable “abundance” movement often frames this degradation as a problem of public-sector excesses, but it’s clearly driven by disinvestment. In short, middle-class families value public services and the decades-long campaign to cut taxes has harmed the ability to provide them. The lessons for today’s tax debates should be clear.

The failure of tax-cutting to foster economic security and happiness is not all that surprising for scholars of U.S. attitudes toward taxes, who argue that Americans are not universally anti-tax. Instead, Americans view paying taxes as a patriotic good and a moral obligation. But they are angry about paying their taxes when they think others are shirking their part of the social contract, particularly when they think the richest people and corporations aren’t paying their fair share.

Because we are starting with such high levels of inequality and because of this public cynicism about the rich ever being forced to pay their fair share, the first priority—by far—for policymakers today should be to enact significant stand-alone tax increases on the ultrarich and corporations. The revenue raised solely from the ultrarich could close today’s fiscal gap, the difference between today’s budget deficits and what is needed to put them on a sustainable path going forward. And this act would convince the rest of Americans that the ultrarich are not always prioritized in policymaking and would make future debates about the costs and benefits of higher taxes for higher levels of public goods much healthier.

But we can’t run a decent society based on just taxing the rich and telling everybody else that taxes are an unfair drain. Oliver Wendell Holmes famously said that taxes are the price you pay for civilization. But if the taxes are paid only by the rich, we will get the civilization they want. That doesn’t seem good enough to me.

Summary:

• From 1916–1970, 6 million Black Americans fled the violence and economic oppression of the rural South. Among the legacies of this Great Migration is the concentration of Black Americans in urban areas.
• Today, 10 metro areas—New York, Atlanta, D.C., Chicago, Dallas, Houston, Philadelphia, Miami, Los Angeles, and Detroit—have the largest Black populations in the country and are home to 38.6% of the Black labor force.
• This analysis finds evidence of relative economic prosperity and hardship across and within these 10 metro areas, demonstrating huge stakes associated with federal budget and job cuts, anti-equity backlash, and growing concerns of a self-inflicted recession.
• Since taking office, Trump has pushed an anti-equity agenda that rolls back the clock on hard-won federal policies establishing equal employment and core labor standards and protections for Black workers. The passage of those laws was pivotal in expanding rights and opportunities sought across the decades of the Great Migration and Civil Rights Movement.
• Mass firings of federal employees and budget cuts will have harmful consequences for Black Americans across class lines.
  • Given the large share of the state’s federal workers in metro Atlanta (51% of GA total), D.C. (60% of combined D.C., MD, VA & WV total) and New York (63% of combined NY & NJ total), Trump’s attack on the public sector threatens what has historically been a pathway to better, more equitable jobs for Black Americans—thanks to robust anti-discrimination policies and public-sector collective bargaining.
  • Although these cities anchor metro areas with some of the highest Black median household incomes in the nation, federal grant funds provide critical support to under-resourced inner-city communities. Many of those federal investments in low-income and working-class communities were cut in the Republican-led budget reconciliation bill.
• In addition to his attacks on equity and workers’ rights, Trump’s policy path leads straight to recession—jeopardizing Black workers’ labor market gains in recent years, including historically low unemployment and faster wage growth.
• Based on 2023 estimates from the American Community Survey, metro area Black unemployment was lower than the Black national average in Atlanta, D.C., Dallas, Miami, and Philadelphia.
• While overall real median household income declined 1.1% between 2019 and 2023, Black median household income grew by 2.8%.
• In 2023, Black median household income exceeded the national median of $53,927 in all but two (Chicago and Detroit) of the metros observed. It was highest in the D.C. ($89,912) and Atlanta ($70,969) metro areas.
• In the face of federal rollbacks of civil and worker’s rights and growing concerns about recession, state and local governments should act to maintain and strengthen basic protections, like minimum wage and unemployment insurance, while continuing local efforts to advance racial equity and justice. However, local leaders in red states, like Florida and Texas, face state-imposed obstacles to passing progressive economic and racial justice policies. 

The concentration of Black Americans in urban areas is one of the legacies of the Great Migration—the period between 1916 and 1970 when 6 million Black Americans fled the violence and economic oppression of the rural South in search of safety and better job opportunities in cities throughout the Northeast, Midwest, and West. But even in non-Southern U.S. cities, many continued to face poor working conditions as well as employment and pay discrimination, leaving them just marginally better off than in the places they fled. Rather, significant gains in economic status only became possible through sweeping changes to federal labor and civil rights laws born from years of protest and political pressure during the decades of the Great Migration and beyond. While landmark federal labor laws passed during the 1930s improved working conditions for most white workers, many Black workers were initially excluded from the right to organize unions under the National Labor Relations Act of 1935, or minimum wage and overtime pay protections under the Fair Labor Standards Act of 1938. The steady demand for equal protection under these and other laws led to the passage of the Civil Rights Act of 1964, prohibiting segregation at all places of public accommodation and discrimination by employers and labor unions based on race, color, religion, or national origin. These federal labor and civil rights laws set a national standard for fair working conditions and equal treatment that some state and local governments have enhanced to varying degrees based on local political and economic conditions. In many cities with large Black populations, policy decisions and local economic conditions yield both positive and negative results for Black Americans.

The diverse experiences of Black people across metro areas1 exemplify the notion that Black America is not a monolith. The unique political and economic dynamics in each place produce relative economic prosperity and hardship that make up the collective economic experience of Black Americans. However, even areas once sought as places of refuge and economic opportunity are now contending with a president whose actions undermine federal laws establishing equal employment and other civil rights, as well as core labor standards and protections.

Since taking office, Trump has pushed a revisionist version of history that erases any acknowledgement of the racism, violence, and oppression that created persistent racial inequities and forever changed the demographic composition of U.S. cities. This includes issuing a barrage of executive orders that roll back the clock on hard-won federal policies that have helped Black Americans attain many of the opportunities sought through the Great Migration and Civil Rights Movement of the 1950s and 1960s. Instead, Trump’s anti-diversity, equity, and inclusion (DEI) rhetoric centers white men as the primary victims of discrimination and calls into question the “merit” or qualifications of almost anyone else. He has used those false narratives to justify eliminating the use of disparate impact liability and redirecting enforcement priorities at the Equal Employment Opportunity Commission and Office of Federal Contract Compliance Programs—severely weakening the two agencies responsible for making sure employers comply with anti-discrimination law. Trump’s anti-equity agenda—along with efforts to decimate the federal workforce, cut services and programs that working families and low-income communities rely on, and attacks on labor standards and workers’ union and collective bargaining rights—are just some of the many harmful actions that hurt workers and put the economy at risk (McNicholas et al. 2025).

As a benchmark for assessing what’s at stake under Trump’s harmful economic policies and anti-equity agenda, we explore economic conditions for Black Americans in 10 U.S. metro areas with the largest Black populations. This list includes nine of the country’s largest metros overall—anchored by the principal cities of New York, Atlanta, Washington, D.C., Chicago, Dallas, Houston, Philadelphia, Miami, and Los Angeles—as well as Detroit. Today, these 10 metro areas, including four in Southern states, are home to 38.6% of the Black labor force and 26.9% of the total labor force. Each of these metro areas account for at least one-third of their respective state’s Black labor force. Additionally, Black Americans are the largest demographic group in the principal cities of Detroit (75.9%), Atlanta (46.4%), Washington, D.C. (40.9%), and Philadelphia (39.5%) and represent over one-fifth of the population in all but Los Angeles (8.5%) and Miami (14.1%).

We examine unemployment rates, median household income, the size of the federal workforce, and federal grant dollars awarded to these places in 2023. Our analysis compares economic outcomes for Black Americans across metro areas and relative to national and state averages and considers some of the factors contributing to those differences. This cross-metro analysis allows us to go beyond a simple categorization of economic conditions as good versus bad or equal versus unequal. Instead, it raises important questions about why conditions are better in some places and worse in others. Finally, we explore the potential for state and local policy to provide a buffer against damaging federal actions that increase the risk of recession, harm workers, and exacerbate racial inequities.

Metro area unemployment rates and income reveal relative economic prosperity and hardship among Black Americans

The chaotic and harmful actions of the second Trump administration have raised the risk of recession for the otherwise strong and resilient labor market Trump inherited. One of the greatest casualties of a completely self-inflicted recession would be the labor market gains experienced by Black workers in recent years, including historically low unemployment and faster wage growth (Cid-Martinez, Maye, and Marvin 2025).

According to official estimates from the Bureau of Labor Statistics (BLS), the average annual Black unemployment rate in 2023 was a record low (5.5%), compared with an overall national unemployment rate of 3.6%. This analysis compares estimates of national, metro, principal city, and state unemployment rates for Black workers using data from the American Community Survey (ACS). ACS provides better coverage of metro area and principal city Black unemployment rates, but 2023 national estimates are higher than those reported by BLS due to differences in the survey reference periods.2

As shown in Figure A, in 2023, five of the 10 metro areas—Washington, D.C., Miami, Atlanta, Dallas, and Philadelphia—each outperformed the ACS-estimated national average of 7.2% for Black Americans. Across all 10 metro areas, Black unemployment ranged from a low of 5.6% in metro Atlanta to a high of 10.4% in the Chicago metro area.

Figure A

Figure B reveals that metro area Black median household income exceeded the national median of $53,927 in all but two of the metros observed. The exceptions were the Midwestern metro areas of Chicago and Detroit—the same places where Black unemployment was highest in 2023. Although incomes of Black residents in metro Chicago and Detroit were lower relative to the national median and other metros, their incomes were higher than the median Black household in the states of Illinois and Michigan. Median Black household incomes in those states were also the lowest among the states observed for this analysis.

Figure B

At the opposite end of the scale, Black median household income was highest in the D.C. ($89,912) and Atlanta ($70,969) metro areas. Notably, metro D.C.’s Black median household income was also significantly higher than the overall national median of $77,719. Black households in the New York ($65,758) and Dallas ($63,376) metro areas also had substantially higher median incomes than the typical Black household nationwide.

Relatively higher incomes and lower unemployment in metro D.C. and Atlanta are consistent with the fact that these places also had the largest shares of highly educated Black workers. The share of Black college graduates in the D.C. (40.8%) and Atlanta (36.2%) metro areas is well above the share of Black college graduates nationally (26.2%) and at least as high as the share of all college graduates nationwide. In contrast, the Detroit metro area had the lowest share of Black college graduates (20.8%). As we will discuss later, the high concentration of federal employment and related professional job opportunities in metro D.C. is a likely factor in attracting Black college graduates to the area.

The strength of the 2023 labor market and rise in employment among Black Americans also contributed to the growth in median Black household income. As shown in Figure C, while overall real median household income declined 1.1% between 2019 and 2023, Black median household income grew by 2.8%. The spike in inflation during this period generally muted real income growth; however, increased employment of Black workers managed to counteract the negative impact of inflation on income (Moore and Maye 2023). Black median income growth also outpaced total income growth in six of the 10 observed metro areas—Miami, Atlanta, Chicago, Detroit, Philadelphia, and Dallas. In places where real incomes declined, the decline was smaller among Black Americans.

Figure C

Echoes of the Great Migration

Across all the observed metro areas, there is a clear distinction in the average economic status of Black Americans in the principal city compared with the broader metro area, which includes surrounding suburbs. We characterize these consistent place-based differences as echoes of the Great Migration. One of the factors contributing to these differences was “white flight”—the mass relocation of white people from urban centers to suburbs in response to the rising Black population in cities during the Great Migration. More than just a demographic shift, white flight initiated a draining of economic resources away from cities that continued as more affluent Black families moved to suburbs following the passage and enforcement of fair housing laws.

Across all 10 metro areas, Black unemployment was higher in principal cities compared with the broader metropolitan statistical area (MSA) and the state. Referring again to Figure A, in 2023, Black unemployment in the city of Atlanta (8.4%) was 2.8 percentage points higher than metro Atlanta where Black unemployment was lowest and closest to the overall national average. Similarly, the Black unemployment rate was more than 3 percentage points higher in the cities of Washington, D.C. (9.9%) and Miami (9.7%), relative to the respective metro areas. In Chicago (12.3%) and Detroit (11.7%), Black unemployment was nearly 2 percentage points above metro area rates that were already at least 2 percentage points above the Black national average. Recession-level Black unemployment rates in the Midwestern cities of Chicago and Detroit are also reflected at the state level for Illinois and Michigan. For Detroit, in particular, a second wave of white flight followed the post-1980s decline in manufacturing jobs and union density, once critical sources of Black economic mobility in the region (Scott et al. 2022). 

Similarly, Black median household income was substantially lower in principal cities than the metro area and the state. Figure B shows that across all 10 metro areas, Black median household income was at least $6,400 lower in the principal city than in the metro area. The largest gap was in the D.C. metro area, where there was a difference of nearly $30,000 between Black median household income in the principal city of Washington, D.C., and the broader metro area. In other metro areas with relatively high Black median incomes, like metro Atlanta and Dallas, the difference was $17,066 and $14,849, respectively. However, even in the Detroit metro area where Black incomes were lowest, there was a gap of more than $10,000 between households in the principal city and those in the broader metro area.

Federal grants are critical to filling resource gaps in urban areas

Federal grants are critical to filling the resource gaps in principal cities since those funds are often directed toward poorly resourced communities. Table 1 provides a summary of federal grant dollars flowing to each city in recent years based on data available at USAspending.gov.3 The grant amounts include funds from block, formula, project, and cooperative agreement grant obligations, and encompass COVID-19-related obligations from the American Recovery Plan Act.

As shown in Table 1, D.C. and New York received the most in federal grant funds (an annual average of more than $6 billion each over fiscal years 2022–2024) followed by Atlanta. However, when adjusted for population size, D.C. and Atlanta had the highest per capita averages ($9,158 and $6,769 per person, respectively).

Although these cities anchor metro areas with some of the highest Black median household incomes in the nation, federal grant funds are directed toward the needs of less advantaged residents. For example, over the last three years, Atlanta’s largest federal grants were from the Department of Education to support students from low-income families in Title I schools. The largest federal grants to Washington, D.C., were from the Environmental Protection Agency, authorized through the Inflation Reduction Act to reduce greenhouse gas emissions and other pollutants and to bring green projects to low-income and disadvantaged communities. Most of the federal grant dollars going to the city of New York were from the Department of Housing and Urban Development (HUD) to support public housing.

The Department of Health and Human Services (HHS) was a major source of federal grants awarded in nine of the 10 cities. While the agency is most often associated with Medicaid funding for states, HHS funds programs like Head Start, HIV emergency relief, cancer treatment, and children’s hospitals at the city level. Across all 10 cities, the Departments of HHS, HUD, and Transportation were commonly among the top three awarding agencies, representing critical investments in health and well-being, housing, and transportation infrastructure in urban areas.

Table 1

However, due to the upside-down priorities of the current Congress, many federal investments in low-income and working-class communities have been cut to give tax cuts that overwhelmingly benefit the wealthy. In July 2025, Congress passed the Republican-led Budget Reconciliation Bill (or H.R. 1) which guts Medicaid and slashes the Supplemental Nutrition Assistance Program (SNAP), while also eliminating clean energy tax credits established under the Inflation Reduction Act, potentially putting over half a million jobs at risk (Seeburger et al. 2025). The bill results in 16 million fewer people having health coverage through 2034 and places approximately 11 million individuals at risk of losing SNAP benefits. Medicaid cuts alone could depress local spending enough to force the loss of 850,000 jobs (Bivens 2025). Overall, the Congressional Budget Office estimates that annual income for households in the lowest decile would decline by about $1,600—highlighting the devastating impact this bill will have on vulnerable families and the added strain it would place on state and local budgets (CBO 2025).

The city of Washington, D.C., was placed in a uniquely precarious position when the House’s reconciliation bill reverted D.C. to its 2024 budget. That decision slashed the city’s 2025 budget by more than $1 billion, an impossible deficit to close without laying off many city employees and severely cutting public programs and services. At of the time of this report’s publication, the House had yet to vote on an unanimously passed Senate fix that would reverse the budget cuts, needlessly placing the city’s budget in limbo. In response to House’s inaction, the mayor of D.C. proposed a 2025 supplemental budget that cuts services and freezes hiring to cover the budget gap while avoiding layoffs. Combined with federal job cuts, these actions represent a major blow to the area’s economic base and fiscal autonomy that would be especially tragic for Black Americans across class lines in the D.C. metro area.

Federal jobs cuts threaten relative economic security for the Black middle class

For Black Americans, public-sector employment has historically been a pathway to better, more equitable job opportunities. Through executive actions and legislation introduced in the 1960s and 1970s, the federal government once led in adopting anti-discrimination and affirmative action practices that increased the number of Black workers in the federal government. In the decades that followed, federal jobs have provided stable employment, excellent benefits, and opportunities for career advancement that supported a robust Black middle class. Public-sector collective bargaining has also helped to maintain the quality of these jobs through labor contracts that foster transparency through clearly defined policies and pay structures. This plays a critical role in reducing discrimination and providing workers with critical protections and recourse against other forms of exploitation or mistreatment.

That history stands in sharp contrast to the Trump administration’s efforts to dismantle the public sector, beginning with workers in DEI departments within federal agencies. Trump’s attacks on the federal workforce also include attempts to limit the approval of collective bargaining agreements with federal workers. The targets of such actions include skilled and often highly educated Black workers who typically experience less employment volatility, even during economic downturns. Nationally, Black federal workers average 12.3 years of service and 45.3% hold at least a bachelor’s degree (compared with 26.2% overall) (Maye and Marvin 2025).

While federal jobs losses will obviously have an impact in the D.C. metro area, over 90% of federal workers are employed outside the nation’s capital (McNicholas and Oakford 2025). The ripple effects from large-scale job cuts are expected to show up in higher unemployment and the disruption of critical public services and government functions throughout the nation. Table 2 shows the number of federal workers who live in each of the 10 metro areas, as well as the metro’s share of total federal jobs in the state. For metro areas that cross state lines, including metro D.C., Chicago, New York, and Philadelphia, we calculate metro area jobs as a share of the combined state totals. Over 300,000 federal workers reside in the D.C. metro area, accounting for 60% of all federal workers in the District of Columbia and surrounding states of Virginia, Maryland, and West Virginia. The second largest number of federal workers (over 100,000) are in the New York metro area, representing 63% of all federal workers in New York and New Jersey. Among the single state metro areas, Atlanta is home to over half (51%) of Georgia’s federal workforce and 47% of Michigan’s federal workers are in metro Detroit.

Table 2

While metro-level federal employment numbers by race are unavailable, EPI analysis of state-level data from the Office of Personnel Management (OPM) reveals that 43.8% of Georgia’s federal workers are Black—the largest share in the country (Wilson 2025). The District of Columbia, Maryland, and Virginia each have larger numbers of federal workers than Georgia, and Black workers are just over one-fourth of the federal workforce in each those states—28.8% in D.C., 27.9% in Maryland, and 26% in Virginia.

Between January and July of 2025, BLS reported a loss of 84,000 net federal jobs but the full impact and consequences of those job losses are yet to be revealed. Though thousands of fired federal workers were reinstated by court orders in February 2025, the Supreme Court later sided with the Trump administration when it lifted a lower court’s block on mass federal layoffs, clearing the way for the Trump administration to proceed with planned large-scale cuts to the federal workforce. However, DOGE’s lack of transparency and the Trump administration’s broader data erasure efforts make it difficult to keep track of whether job cuts fall disproportionately on certain groups of workers.4

Troubling changes at the EEOC stifle equity and would be harmful to economic growth

As a large independent federal agency, the Equal Employment Opportunity Commission (EEOC) is relatively small compared with many cabinet level agencies experiencing job cuts. Headquartered in Washington, D.C., the EEOC operates 53 district and field offices across the country,5 including locations in each of our 10 featured cities with large Black populations. For 60 years, the EEOC has been integral to the enforcement of U.S. anti-discrimination laws—efforts that helped reduce employment discrimination and boost average living standards by an estimated $493 to $1,233 per person since 1960 (Maye and Wilson 2025). However, troubling changes to the structure and priorities of the agency paralyze some of the commission’s key functions and weaken enforcement against racial and gender discrimination—the most common types of discrimination claims filed (Mark, Gurley, and Rein 2025).

Instead, the Trump administration has redirected the EEOC’s priorities to focus more on investigating so-called DEI-motivated race and sex discrimination and anti-American national origin bias and discrimination (DOJ 2025; EEOC 2025). Trump also issued an executive order designed to end the use of disparate impact liability, a legal standard that works to prevent otherwise “race-neutral” policies and practices from perpetuating racial inequities (EPI 2025b). This restructuring of priorities threatens to turn the mission of the EEOC on its head by framing equity efforts intended to remedy decades of documented employment discrimination as discriminatory.

Just as the presence of EEOC offices in these cities signaled the federal government’s nationwide vigilance over employment discrimination, efforts to undermine the agency signal that employment discrimination—particularly against racial, ethnic, sexual, or religious minorities—will go unchecked. The impact of those changes extends beyond the millions of Black Americans working in and around these 10 cities alone and erodes workplace equity writ large.

State and local policy levers

As the Trump administration pushes the federal government toward a more anti-worker and anti-equity stance, decisions made by state and local policymakers will determine what kinds of protections workers in their states and cities will retain. Table 3 presents a sample of state and local policy positions related to workers’ rights for the ten metro areas featured in this analysis. These positions represent the relative progressivity of those state and local governments which could indicate their propensity to provide some buffer against harmful federal actions that raise the risk of recession, weaken labor standards, and exacerbate racial inequities. These policies include unemployment insurance (UI), minimum wage, paid leave, state preemption of local minimum wage or paid leave policies, and right-to-work laws. As a measure of the likelihood that state and local leaders will fight to maintain or strengthen equity efforts, we also include the number of Black mayors elected in each city and the existence of state or local reparations initiatives.

A basic scan of state and local policies reveals that while there is some variation in the generosity of UI benefits across states, the need for expanded federal support will once again be essential for recovery from the next recession. The scan also shows that local leaders in red states face state-imposed obstacles to passing progressive economic and racial justice policies.  

Table 3

Unemployment insurance

Unemployment insurance benefits are among the most efficient sources of support to families and the economy during a recession. Since they are targeted at individuals whose income falls due to a job loss, UI benefits provide direct income support to eligible unemployed workers while also helping to stabilize aggregate demand, the largest driver of economic growth. Estimates suggest that each dollar in UI benefits can generate nearly $2 in local spending (Evermore 2024). Despite the efficiency of UI benefits, they are often the target of austerity politics fueled by exaggerated and frequently debunked claims that overly generous benefits suppress employment (Martinez Hickey and Cooper 2021). 

While adequate federal action and support for expanding UI during a recession are critical to a quick recovery, state policymakers have some flexibility in determining how their UI programs are structured and resisting the austerity impulse. As a joint state and federal program, each state can adjust its own eligibility requirements, length of time for available benefits, and maximum weekly benefits in coordination with federal guidelines. Among the states represented in Table 3, Florida and Michigan are the only two that currently cap the number of weeks benefits can be received at less than 26 weeks. However, the maximum weekly benefit for unemployed individuals varies from a high of $605 per week in Pennsylvania (Philadelphia) to a low of $365 per week in Georgia (Atlanta).

The COVID-19 pandemic revealed the potential for major federal reforms to boost UI as a macroeconomic stabilizer by enhancing the duration, generosity, and eligibility of UI benefits (Bivens and Banerjee 2021). The pandemic also exposed administrative and fiscal inadequacies in state UI systems. Federal funds were allocated by the American Rescue Plan Act (ARPA) to improve UI systems administration, prevent fraud, and increase equitable access (DOL n.d.). However, few states took steps to strengthen severely underfunded state UI systems long term by increasing their taxable wage base (Sawo and Sherer 2022). UI reform advocates recommend increasing the taxable wage base to half of the taxable maximum for Social Security (Bivens et al. 2021). The increase would result in employers paying state unemployment taxes on a larger percentage of higher wage earners’ pay, generating more revenue and sustaining more fairness, equity, and administrative efficiency over time. Among the states considered, only New York and Illinois have a taxable wage base above $10,000, but still far below the much higher recommended base of $88,500 needed to address underfunding.6

In red states, a city’s ability to enact pro-worker policies is often at the mercy of state preemption

Several states and localities across the country have established minimum wage ordinances that exceed the federal standard. Since the federal minimum wage has remained stuck at $7.25 for over 15 years, failing to keep up with rising costs and inflation, this is a critical policy lever for supporting workers and their families’ right to a livable wage (Payne-Patterson and Maye 2023). Rasing the minimum wage supports all workers, but especially Black workers who are overrepresented in low-wage occupations.

Currently, 19 states and Washington, D.C., have passed laws raising their own minimum wage to at least $15 an hour by 2027, including several cities listed in Table 3 with local minimum wages well above the federal minimum (Hickey 2024; EPI 2025a). Washington, D.C., New York, Los Angeles, and Chicago all have a minimum wage standard of at least $15 an hour and Detroit’s minimum wage increased to $12.48 in 2025.

Sadly, four cities with large Black populations—Atlanta, Dallas, Houston, and Philadelphia—have not raised their minimum wage above the federal level. In June, the Pennsylvania state House passed a bill that would raise Philadelphia’s minimum wage to $15 an hour after years of failed attempts to increase the state’s minimum wage to that level (Huangpu 2025). The House proposal now awaits approval by the state Senate. For relatively progressive cities that also happen to be in red states, state preemption laws are a major barrier to passing a higher local minimum wage. In Atlanta, workers not covered by the Fair Labor Standards Act are paid a minimum of $5.15 an hour—$2.10 below the already insufficient federal minimum wage (GDOL n.d.). While local governments are prohibited in establishing a higher city-wide minimum wage, Dallas, Houston, and Atlanta have each passed increases for city, county, or contract workers (Cooper 2024; Barrera and Heilman 2025). Apart from preemption, right-to-work laws in these states also present barriers that limit workers’ collective bargaining rights, resulting in lower wages and benefits for all workers.

While raising the minimum wage can raise living standards for low-wage hourly workers, paid family leave enables workers to avoid the difficult tradeoff between income stability and caring for family. There is no federal law that guarantees paid family or medical leave to workers; up to 12 weeks of unpaid leave are available to eligible employees under the Family and Medical Leave Act (FMLA). However, as of 2025, 13 states and Washington, D.C., have passed their own paid family leave laws (Williamson 2024). Of the states listed in Table 3, only California, New York, and the District of Columbia currently have paid leave policies on the books. In D.C. and New York, eligible employees receive up to 12 weeks of paid leave (DCPFL n.d., NYSPFL n.d.). In California, eligible employees receive up to eight weeks of paid time off (EDD n.d.). All three policies allow workers to use this leave for caring for a loved one, bonding with a child, or military assistance. In New York, employees taking paid family leave receive 67% of their average weekly wage, while in California, workers can receive about 70–90% of wages earned five to 18 months before the claim start date. D.C. Paid Family Leave provides wage replacement of 90% of wages up to 1.5 times D.C.’s minimum wage and 50% of wages above 1.5 times D.C.’s minimum wage (DCPFL n.d.).

Will local steps toward racial reckoning withstand the rising tide of federal and state anti-equity backlash?

Every city and town in the United States has its own complicated racial history to reckon with. That history is infused in local policy and politics and shapes social and economic outcomes. As is true at the national level, decisions made by local elected leaders can either widen or narrow racial disparities. Leadership also reflects and sets the tone for how a city acknowledges, confronts, and seeks to resolve current and historic racial injustice. As measures of perceived racial progressivity, we consider the number of Black mayors elected in the principal city for each metro area and whether any local reparations initiatives have been introduced since 2020. While these are admittedly imperfect metrics, we interpret them as signals of the local political will to advance racial equity and defend current efforts. However, it is uncertain how much local efforts will be jeopardized by legal challenges triggered by aggressive federal and state anti-equity policies.

Table 3 shows that among the 10 cities observed, all except Miami have elected at least two Black mayors. The cities with the longest history of Black leadership are Washington, D.C., and Atlanta, having had seven and six Black mayors, respectively. Five Black Americans have served as mayor of Detroit. Since Black Americans are the largest demographic group in each of these cities, the larger number of Black mayors elected in these cities reflects city demographics and perhaps the degree of influence Black Americans wield in local elections. A more comprehensive analysis of city management and the policy priorities of individual mayors would be needed to assess their direct impact on Black economic outcomes or racial equity.

While little progress has been made to advance the issue of reparations at the federal level, since 2020, several state and local governments have taken initiative in addressing their own histories of racial and economic injustice against Black Americans. Reparations initiatives exist in all except the three cities in red states whose governors have aggressively pushed anti-DEI legislation: Miami in Florida, and Dallas and Houston in Texas. In most places where a reparations initiative exists, activity has been at the city or county level. However, both city- and state-level initiatives exist in California and New York. Current state and local reparations efforts range from the appointment of a task force to study the issue, to exploring plan options, approving legislation, and implementing a plan. While there are open questions about whether local plans are truly reparative or will have any measurable economic effect on closing the racial wealth gap, they are at least a signal of willingness to confront and seriously consider government accountability for eliminating racial inequities (Moore 2023).7

Conclusion

The strong and stable economy Trump inherited withstood months of his administration’s harmful and chaotic policy actions before clear signs of a softening labor market became evident in the July jobs report. Large downward revisions to May and June payroll employment estimates signaled a weaker labor market than originally reported, bringing average three-month job growth down to just 35,000 net new jobs compared with 127,000 over the preceding three months. Rather than taking this sobering news as a sign that he should reconsider the current policy path, Trump misrepresented the news as a politically motivated personal attack and fired BLS Commissioner Erika McEntarfer. Such careless actions unjustifiably erode confidence in one of the world’s most respected statistical agencies and endangers sound economic decision-making.

If the Trump administration and Congress continue along the current path, there is a very real risk of a recession in the coming months—and a lot at stake for Black Americans who typically suffer higher rates of unemployment and take longer to recover lost jobs and income from a downturn. In recent years there have been economic gains that should be protected and expanded. Five metro areas in this analysis had Black unemployment rates below the national average in 2023 and the median Black household income was above the national median in eight metros. At the same time, there is evidence of persistent inequities and economic hardship that demand a commitment to long-term solutions and investment in underserved communities. Two metro areas were below national measures of Black unemployment and income, but across all 10 metro areas, principal city residents had higher unemployment and lower incomes compared with the broader metro area which includes surrounding suburbs. Trump’s anti-equity, anti-worker agenda undermines both of those objectives by decimating the federal workforce and attacking public sector unions; cutting the federal budget for Medicaid, SNAP, and other programs that benefit low-income families; weaponizing civil rights enforcement to discourage diversity, equity and inclusion; and weakening core labor standards and protections.

State and local governments have some policy levers at their disposal for improving worker protections, but the effect those policies can have on the economic well-being of Black Americans varies by place, and in some cases is conditional on federal or state actions. For example, while cities and states have some capacity to increase their minimum wage or pass paid leave policies, preemption is a major barrier for local leaders seeking to pursue more progressive policies in red states. The law allows states some flexibility to adjust the duration and amount of unemployment insurance benefits, one of the most efficient sources of income support during a recession. Yet severe underfunding of state systems due to a far too low state taxable wage base starves their capacity to make substantial improvements in the fairness, equity, or generosity of benefits without federal funding. Moreover, in a recession, there is little any state can do to expand benefits and speed recovery without increased federal support—a step we can’t assume to be a priority of the current Congress or president. Finally, while many of cities we observe could be considered more racially progressive than the country as a whole, federally led anti-DEI backlash raises the possibility of legal challenges against local policies in support of equity and racial justice.

Black America is not a monolith. That statement is an assertion of the right to self-determination and individual expression that racism denies Black Americans. It is also a reflection of the varied experiences shaped by differences in local policy, economic conditions, political influence, and culture. Still, history shows that the pursuit of collective freedom, justice, and equity for Black Americans has always required decisive national actions that raise the standards for fair and equal treatment of all people in this country. The Trump administration’s denial of that history and lowering of those standards is not just several steps backwards for Black Americans, but moves all of the United States in the wrong direction.

Notes

1. A metro area is a region that includes a principal city and surrounding cities and towns with economic and social ties to the urban core.

2. The labor market statistics produced by BLS are based on data collected in the Current Population Survey (CPS). CPS interviews are conducted in a single designated week each month and annual averages align with the calendar year, whereas respondents answer the ACS at times that vary throughout the month and year and annual figures are averaged over the prior 12 months.

3. USAspending.gov is the official open data source of federal spending information, including information about federal awards such as contracts, grants, and loans. Since annual grant totals can change as data are updated on a rolling basis, we use a three-year average to minimize the sometimes substantial effect updates can have on a single year’s grant total. A downloaded transaction summary as it existed at the time of our analysis is available upon request.

4. The OPM data used to report the share of Black federal workers are no longer publicly available.

5. Workers can call or visit EEOC field offices to ask questions about potential employment discrimination or to directly file an individual complaint. Field offices may also recommend charges for EEOC Commissioners to pursue against specific employers.

6. The $88,500 corresponds to half of the 2025 taxable wage limit for Social Security, which was $176,100, up from $168,600 in 2024.

7. In May 2025, FirstRepair and Decolonizing Wealth Project launched a mapping tool that documents state and local reparations initiatives across the United States. See: FirstRepair and Decolonizing Wealth Project, “Mapping the U.S. Reparations Movement” (web page), https://www.reparationsresources.com/.

References

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Cooper, Tori. 2024. “Atlanta Mayor Signs Legislation to Increase City Employee Pay.” Atlanta News First, August 20, 2024.

DC Paid Family Leave (DCPFL) (website). n.d. Accessed June 17, 2025.

Department of Labor (DOL). n.d. “American Rescue Plan Act UI Modernization Grants Map” (web page). Accessed June 13, 2025.

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The COVID-19 pandemic had a devastating impact on state, city, county, tribal, and territorial governments. Close to 1.5 million state and local public employees lost their jobs in the first few months of the pandemic, severely limiting governments’ ability to effectively provide basic public services. After the Great Recession of 2008–2009, it took more than a decade for public-sector job numbers to return to their previous levels, in part because the federal government did not provide enough assistance to state and local governments. Austerity in public spending directly contributed to a much slower economic recovery in the 2010s. With ARPA, however, Congress and President Biden dedicated resources sufficient to tackle the scale of the problem, avoiding the missteps policymakers made in responding to the Great Recession.

State and local governments were given great latitude in how to spend the fiscal recovery funds they received, from supporting public health measures to recruiting and retaining public employees to infrastructure spending on water, sewer, and broadband. This meant that policymakers were able to make spending decisions in line with the needs of their communities. As EPI has documented, these funds were used to support transformative investments across the country and did much to improve the lives of working families.

While recipients have until the end of 2026 to spend their fiscal recovery funds, December 31, 2024, was the deadline to obligate the funds, meaning commit the funds to specific projects. Any funds not obligated by December 31 are to be refunded to the Treasury. The final quarter of 2024 saw a flurry of activity by recipients to meet the deadline. Of the 159,000 spending projects created by recipients between 2021 and the end of 2024, more than one in six, according to EPI analysis of Treasury data, were created or modified in just the last three months of 2024.

Forty-nine states and the District of Columbia succeeded in fully obligating their fiscal recovery funds. (Florida did not obligate $8.7 million, less than 0.1% of its total $8.8 billion allocation.) This is a welcome result and a considerable improvement from the data as of September 30, 2024, when only seven states had obligated their funds.

The overwhelming majority of the roughly 27,000 local governments receiving fiscal recovery funds also obligated 100% of their funds. There are exceptions to this trend, though. EPI analysis shows nearly 2,500 failed to report obligating any of their funds, and more than 4,000 more obligated less than 75% of their funds. Thirty-seven cities and counties were allocated more than $5 million yet reported no obligations. It is perhaps not a surprise that 23 of them (62%) come from the South, a region that has long disinvested in public services.

There is reason to believe, however, that these numbers may come down over time. A majority of the local governments that reported no obligations received fewer than $150,000 in fiscal recovery funds, supporting local reports and communications with policymakers and stakeholders that indicated smaller cities and counties were having a more difficult time navigating the reporting system. A Treasury email to local governments on May 21 extended a grace period for those that were unable to file their reports on time or that had errors in their reporting, and Treasury will not begin procedures to recoup unobligated funds until July.

ARPA fiscal recovery funds played an essential role in helping restore the economy and public services in the wake of the COVID-19 pandemic. Government spent at the scale of the problem, bolstering demand in the macroeconomy, providing critical services, and helping millions of workers and families weather the crisis. The success of the program is a valuable lesson that policymakers would do well to remember in the future, when the next recession hits.

Key findings:

• Young workers—those 16–24 years old—have experienced historically strong real wage growth (9.1%) since February 2020, exceeding the wage growth for workers ages 25 and older (5.4%).
• Wages for young workers have also grown faster than the prices of rent and college tuition since February 2020.
• A smaller share of young adults is unemployed, underemployed, or “idled”—neither employed nor enrolled in further education—than their averages over the prior three decades.
• However, recent Trump administration policy actions could be devastating for young adults trying to get a foothold in the labor market as they enter the workforce following graduation.

Young workers have experienced a strong labor market coming out of the pandemic recession, with better job opportunities and faster wage growth than they experienced in much of the prior four decades. However, the Trump administration’s recent attacks on the federal workforce, higher education, and registered apprenticeships—as well as imposing extreme tariffs—threaten to reverse these gains. In this first post in a series on young adults, we examine their labor market prospects as they graduate from high school and college this spring and discuss how policy changes might impact their prospects.1

Young adults have experienced historically fast wage growth in this business cycle

Figure A shows that real (inflation-adjusted) wage growth has been strong for workers of all ages in the pandemic recovery, but young workers have experienced faster wage growth (9.1%) than workers ages 25 and older (5.4%). Compared with the previous four business cycles, real wage growth in this recovery has been extraordinarily fast for young workers. It was not only significantly above zero for the first time in the early stages of a recovery, but also 14.4 percentage points faster than the recovery following the Great Recession of 2008.

Though the difference is not as stark, it is worth noting that workers ages 25 and older have also experienced faster wage growth this business cycle than in prior business cycles. This is no accident—all age groups have seen strong wage growth during the pandemic recovery because of intentional policy decisions.

After the huge job losses in March and April 2020 (specifically in industries most likely to employ young workers), policymakers passed large fiscal recovery packages that spurred rapid rehiring efforts, which gave workers leverage to secure higher wages and better working conditions. Further, pandemic relief efforts like expanded unemployment insurance coverage and economic impact payments gave these workers the economic security to be more selective than normal when job hunting.

Figure A

Wages for young workers have grown faster than rent and college tuition

We also compare nominal wage growth with the growth in prices of goods and services that stress the budgets of young adults. In addition to exceeding overall inflation, nominal wage growth for young workers (40.3%) has significantly outpaced growth in the cost of rent (27.4%) and college tuition (8.6%) since February 2020 (Figure B).

While rent and college tuition are unaffordable for many young adults and their families, the rate of growth since 2020 suggests they have not become any more unaffordable over this period. This is a crucially under-recognized achievement: strong labor markets directly made both college attendance and the cost of rent more affordable for young workers in recent years.

Figure B

Young adults are less likely to experience unemployment and underemployment now than in the past

Labor market outcomes for young workers have also been more promising recently than on average over the prior three decades. Figure C below shows the unemployment rate, underemployment rate, and “idling” rate in March 2025 and the average in the July 1990 to March 2024 period.2

The unemployment rate for young workers now is 9.2% compared with 12.1% on average between 1990 and 2024. The underemployment rate is also lower today compared with the prior three decades. The underemployment rate is the share of the labor force that either 1) is unemployed, 2) is working part time but wants and is available to work full time (an “involuntary” part timer), or 3) wants and is available to work and has looked for work in the last year but has given up actively seeking work in the last four weeks (“marginally attached” worker).

Another important measure of opportunities for young adults is what we call the idled rate—the share of young adults who are neither employed nor enrolled in school. This idled rate is useful because it is often hard to judge whether higher employment of young people is unambiguously good. For example, in some states that have weakened child labor laws, 16- and 17-year-olds are now at higher risk of facing exploitative conditions like subminimum wages, safety hazards, or long hours that interfere with high school completion. But it is almost always unambiguously bad when young people lack opportunities to either work or be enrolled in school—and this is what the idled rate measures. The share idled in 2025 is lower than on average between 1990 and 2024.

Figure C

Recent Trump policy decisions could harm the economic futures of young adults

These promising outcomes for young workers are a tremendous policy achievement. The decision to use large fiscal relief and recovery packages to heal the labor market as quickly as possible after the pandemic recession has paid off enormously for the nation’s young workers. However, recent actions by the Trump administration threaten to reverse these gains.

Specifically, attacks on higher education in the form of cuts to university funding and uncertainty around student loans will make college less attainable for all, but in particular for young women and Black and Hispanic people. This will only further exacerbate significant gaps in education, wages, and lifetime earnings across race/ethnicity and gender.

The administration has also attacked federal initiatives to expand access to registered apprenticeships, another accredited system through which young workers advance their careers and reach higher earnings. Data show that union registered apprenticeships are increasingly important pathways to living-wage skilled trades careers for young and low-income people, women, and Black and Hispanic workers, illustrating the disproportionate harm that these attacks will have.

Additionally, the current administration has launched large-scale attacks on the federal workforce, supported drastic cuts to Medicaid, pursued mass deportations, and imposed extreme tariffs.

Cuts to the federal workforce mean that young people interested in public service careers will have fewer opportunities. Further, major staffing cuts to the Department of Labor and National Institute for Occupational Safety and Health will weaken the enforcement of laws that keep workers safe and investigate wage violations (which disproportionately harm young workers, women, people of color, and immigrants). Meanwhile, Medicaid cuts would directly harm young people who are lower income and rely on Medicaid to meet their health care needs, including the high share of women who depend on Medicaid for their pregnancy.

Those cuts—combined with current immigration and tariffs policies—could lead to an economic recession. Young workers are often hurt more in a recession due to the “last hired, first fired” phenomenon and their lack of a significant foothold in the labor market. Graduating into a recession can set them back for years to come, depending on the depth and duration of the recession. To prevent a recession and remove the threat of undoing gains made over the pandemic recovery, these policy actions must be halted immediately.

In the next blog post in this series, we will delve deeper into the wages of high school and college graduates, respectively, and discuss gaps that exist across race and ethnicity and gender.

1. We define young workers as 16–24 years old. For all of our data in this post we use 12-month moving averages. For example, March 2025 data represent the average of April 2024 to March 2025. Smoothing over 12 months allows for sufficient sample sizes for analysis and to account for seasonal fluctuations throughout the year. Data for young workers, in particular, may vary by season given changes in their schedule between the academic year and the summer.

2. The idling data are available starting in 1984, but we use July 1990 as the start date to capture only full business cycles.

While job numbers are still rising, federal layoffs are increasing and uncertainty is growing. The stock market does not measure broader economic health, but the significant market declines since Trump took office indeed reflect broader economic weakness. Trump’s tariffs are not well-designed to support manufacturing growth and have been implemented in a haphazard manner. The Federal Reserve Bank of Atlanta is now forecasting negative 2.4% GDP growth for 2025.

In 2021, as the nation was still reeling from a COVID-19-induced recession, the Biden administration passed the American Rescue Plan Act. ARPA was key to the country’s rapid recovery from the COVID recession and provided greater support for unemployed workers, expanded child tax credits, and investments in healthcare, infrastructure, and food assistance. This policy lifted people out of poverty, put money in the pockets of working families, and kept our economy afloat.

Following recommendations from EPI and many other stakeholders, ARPA designated $350 billion for State and Local Fiscal Recovery Funds (SLFRF) to help governments deal with the economic impacts of the pandemic. SLFRF was part of a deliberate strategy to avoid the policy errors of the Great Recession, when state and local governments’ austerity measures delayed economic recovery and hurt working families. In addition to contributing to a broad recovery across the economy, SLFRF helped fuel a strong recovery in public services. The funds were a vital tool to help rebuild after the devastation of the pandemic.

Many state and local governments aimed beyond just recovery. They used their fiscal recovery funds to build a more resilient public sector and to strengthen protections for working families. As we teeter on the edge of another economic catastrophe, it’s worth highlighting what some state and local governments did that will make their states, cities, and counties better able to weather whatever is coming. The U.S. Treasury Department’s rules for use of fiscal recovery funds gave government great flexibility in how they used them, and many governments took the opportunity to make smart decisions that will serve working families well in the event of a recession.

Strengthening unemployment insurance systems

Any significant increase in unemployment will put a strain on state unemployment insurance (UI) systems. Before the onset of the COVID-19 pandemic, fewer than half of states had modernized their systems to facilitate online UI applications, offer multiple languages, or handle a large influx of applicants. As a result, UI systems were frequently overwhelmed and their errors proliferated during the pandemic.

These problems emphasized the need to improve UI systems, leading many states to invest fiscal recovery funds on improvements. Wisconsin set aside $80.8 million to fund “upgrades to outdated technology” in UI operations. Kansas spent $9.6 million to add “user-friendly” upgrades to their system. Hawaii allocated just over $41 million to move their UI program onto a cloud-based system, increasing the speed with which they can handle “future unanticipated and drastic increases in unemployment.” Arizona allocated $20.1 million to replace its “aged and difficult-to-adapt” UI benefit system. Colorado, Nevada, New Jersey, Vermont, and Virginia are also among the states that invested fiscal recovery funds in UI modernization. Notably, no Southern states except Virginia listed any UI modernization projects in the latest reporting data. This is consistent with the Southern economic development model, which privileges corporations and the wealthy over working families, in part by eroding basic public services.

If and when we see a surge in unemployment, states that improved their UI systems with fiscal recovery funds will be in a far better position to help working families with targeted, timely assistance.

Investing in housing and in protecting working families from eviction

When there is economic distress of any kind, working families face increased housing insecurity, especially renters. While moratoriums prevented over two million evictions during the pandemic, their expiration created great housing insecurity, especially in Black and brown communities.

Many states and localities took action on housing and renter protections. In the first two years of ARPA, more than 4.5 million households accessed mortgage, rent, or utility assistance, and $6 billion was committed to affordable housing. In addition to short-term assistance, some localities, like Johnson County, Iowa, and Detroit, Michigan, used part of their fiscal recovery funds to give tenants facing evictions a free right to counsel—a policy that has been shown to significantly reduce the rate of eviction.

Such protections will be helpful to working families in any future recession. Investments in housing and tenant protection can make a real difference in the long term.

Restoring the public sector

At the start of 2020, state and local government workforces had still not fully recovered from the Great Recession of 2008–2009. State and local governments shed 1.5 million jobs in the first few months of the pandemic. But by the end of 2023, this deficit had been closed thanks to SLFRF spending—and it closed more quickly in states that spent more of their fiscal recovery funds.

Supporting state and local government employees isn’t just good for those employees, it is also important for private sector job growth. And public sector workers are necessary to implement social safety net programs and other measures to help working families in a recession.

Many state and local governments used their fiscal recovery funds for attracting and retaining workers. Some, like the state of Minnesota and Lexington County, South Carolina, provided premium pay to government workers as a retention measure. San Jose, California, was able to begin filling the more than 800 persistent vacancies in city jobs with their recovery funds, and Salt Lake City, Utah, committed $1.5 million to hire unfilled public sector positions. Overall, state and local governments committed over $151 billion in “revenue replacement”—much of which prevented further job cuts in vital public services. These funds provided by ARPA will help mitigate the harms of a potential future recession.

Expanding broadband access

Broadband access, especially in rural parts of the country, provides an important boost to local economies and is associated with reductions in poverty and unemployment and improvements in mental health.

More than $8 billion in fiscal recovery funds were allocated to expand broadband access in states, cities, and counties, on top of $65 billion in the Infrastructure Investment and Jobs Act (IIJA) passed in 2021. These investments will help level the playing field for all communities and help working families better deal with the disruptions and challenges of a future recession.

And more…

State and local governments used their fiscal recovery funds in myriad other ways that will make it easier for working families to weather the next recession:

• St. Paul, Chicago, and New Orleans, Louisiana, helped erase medical debt for residents, as did the state of New Jersey.
• Charleston, West Virginia, built a community grocery store in an underserved Black community to reduce food insecurity.
• The Merrimack Valley Regional Transit Authority in Massachusetts used ARPA money to eliminate all bus fares and expand staffing and equipment to increase the number of buses and routes. Ridership is up 40% since fares were eliminated.
• Colorado created an innovative program to extend unemployment insurance to undocumented workers, ensuring that undocumented low-wage workers and their families will be supported if they lose their job through no fault of their own.
• Boston, Massachusetts, Buffalo, New York, and Chicago, Illinois, used fiscal recovery funds to establish pre-apprenticeship programs to help people in underserved communities gain access to quality infrastructure and climate jobs.

All these investments matter. Working families will certainly struggle if there is an economic downturn. But states, counties, and cities that used their fiscal recovery funds wisely will help blunt the economic pain.

All SLFRF spending data in this piece, unless otherwise cited, is from mandated reports submitted to Treasury by state and local governments, available here.

Let’s start with a quick recap about the debt ceiling and how it could cause a crisis. The U.S. Treasury draws on banking accounts at the Federal Reserve to fund federal governmental activities—remitting paychecks to federal government employees, sending Social Security checks to beneficiaries, reimbursing doctors for treating Medicare-covered patients, paying defense contractors and interest to bondholders, and so on. These accounts are fed on an ongoing basis by both tax revenues and the proceeds from selling bonds (debt). But because the United States has a statutorily imposed limit of how much outstanding debt is allowed, in theory the debt ceiling means that when it’s hit that Treasury would no longer be allowed to sell bonds and deposit these proceeds. In this scenario, accounts at the Federal Reserve would dwindle as they are now only fed by ongoing taxes, which are insufficient to cover all spending. It’s worth noting that this would be such a disastrous outcome that policymakers should feel obligated to engage in any possible workaround.

The U.S. is currently running a federal budget deficit of just over 6% of gross domestic product (GDP). If the debt ceiling was allowed to bind spending at levels that could be financed only by taxes, federal spending would have to be cut instantly by over $1.5 trillion (on an annualized basis—equal to roughly $130 billion per month). This $1.5 trillion is people’s incomes throughout the economy (whether they are federal employees or contractors or Social Security recipients or doctors and hospitals reimbursed by federal health programs). As incomes were slashed, these households would pull back on spending. Businesses losing customers would pull back investment. A vicious spiral leading to recession would begin with shocking speed.

Further, throughout U.S. economic history the downward spirals of economic crises were ended entirely because the federal government’s taxes and spending have acted as “automatic stabilizers”—taxes fell and spending rose as unemployment soared and the economy entered recession. But in a crisis driven by the debt ceiling, as taxes fall spending would have to fall further. Instead of acting as an automatic stabilizer, the federal government would act as a crisis amplifier.

This extremely grim set of totally predictable outcomes is why we’re so strident that the debt ceiling should be abolished. It serves no useful purpose and only provides a means through which extremists in Congress can do profound damage to working people. It also needs to be raised soon to avoid this kind of potential crisis.

But for now, another threat of political zealots and the crises they could cause looms even larger.

Elon Musk’s recent spate of illegal impoundments and firings can be seen as an attempt to mimic what a debt ceiling crisis would look like. Instead of spending being bound by a legal bar against issuing new debt, spending is currently being bound by the whims of a billionaire who bullied his way into accessing the Treasury accounts that distribute spending where it is legally obligated to go and shutting it down. But in terms of pushing the economy closer to crisis, how spending is suddenly constricted is less important than the result—sharp spending reductions can throttle economic activity and push the economy closer to recession and crisis. And because these spending reductions would only relent or reverse at the whim of Musk’s team, the automatic stabilizer function of the federal government could not be relied upon to kick into gear.

At this point, the illegal impoundments have not added up to a scale that would be comparable to a debt ceiling scenario, but, again, this is entirely because the Musk team has so far decided to not impound that much spending. If they decide that it would be fun to impound more and cause a crisis, what’s to stop them? Having one person in charge of whether or not the U.S. government actually spends the money that’s been legally obligated by Congress is not just a democratic disaster, it is absolutely a recipe for economic crisis.

To date, the real damage done by the illegal impoundments and firings is the valuable work of federal employees that is not being performed and the hollowing out of key state capacity. Our federal workforce was too small and too poorly paid even before the Trump administration allowed Musk’s teams to start arbitrarily hacking at it. Further constricting it will lead to a profoundly less functional government—and that matters a lot to people’s lives, cheap cynicism aside. But if the DOGE team isn’t stopped, their cuts won’t just sap the long-run productivity of the economy, it could easily cause a full-blown crisis in the near term.

Introduction

In 2023, the Biden-Harris administration selected the Gulf Coast as the location of one of seven Regional Clean Hydrogen Hubs (H2Hubs), designating up to $1.2 billion in federal funding to develop clean hydrogen production facilities in Texas and Louisiana. This investment will help the U.S. economy transition away from carbon-emitting energy sources and has the potential to create a long-lasting and growing workforce in Texas for hydrogen production and use.

It is vital that this large public investment creates high-quality careers for Texas workers, both those constructing new facilities as well as those who operate hydrogen plants. Without intentional policy choices, this outcome is not guaranteed. The Community Benefits Plan (CBP) being negotiated for the hub must include provisions that protect workers’ right to organize, set high wage and working standards, and create equitable pathways for workers to enter the industry. Setting high labor standards and respecting workers’ freedom to organize in unions will not only help Texas workers earn their fair share of the federal investments but also spur the hydrogen industry to grow quickly and efficiently.

Hydrogen industrial policy background

Hydrogen is an important technology for reducing carbon emissions to fight climate change, either through renewable generated hydrogen production or natural gas generated hydrogen with carbon sequestration. Scaling up the hydrogen industry will also create thousands of good jobs, reduce air pollution, and increase state and national energy resiliency.

Hydrogen technology and infrastructure is an important facet of the Biden-Harris administration’s industrial policy agenda. In 2021 and 2022, Congress passed the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA), each of which have provisions that invest large amounts of public money into the research and scaling up of hydrogen technology. Both BIL and the IRA contain requirements and incentives to increase labor standards on hydrogen projects and create community benefits.

The BIL H2Hubs program allocates $7 billion to the Department of Energy for the development of seven hubs for hydrogen production, delivery, and end-use (OCED n.d.a). The goals of the H2Hubs program are to accelerate hydrogen technology development and usage across the U.S. and create good construction and manufacturing jobs in this nascent industry.

The Gulf Coast H2Hub in Texas is likely to receive up to $1.2 billion in federal subsidies from BIL (OCED n.d.b.). Each H2Hub has a distinct mixture of investments and hydrogen technologies being developed. The Gulf Coast hub will catalyze investment in large-scale hydrogen production using both natural gas and carbon capture as well as renewable powered electrolysis.1 The hub plans to develop salt cavern hydrogen storage, a large open access hydrogen pipeline, and multiple hydrogen refueling stations. The hydrogen produced will be used to power industrial processes like creating ammonia in addition to fueling fuel cell trucks and other forms of transportation. In total, the hub is anticipated to create 35,000 construction jobs and 10,000 permanent jobs.

To be awarded funding, the Gulf Coast Hub must negotiate a Community Benefits Plan with local stakeholders to set labor standards and other community benefits for Texas hydrogen projects. The CBP must address four interdependent policy priorities: 1) engaging communities and labor; 2) investing in America’s workforce; 3) advancing diversity, equity, inclusion, and accessibility; and 4) implementing the Justice40 initiative2 (OCED n.d.c). The CBP for the hub provides an opportunity for labor and community groups to secure legally binding agreements for high labor standards in the hydrogen industry.

The federal government is not only providing billions of dollars’ worth of subsidies for hydrogen companies but is also committed to demand-side support of the hydrogen industry (CEA 2023). BIL invests up to $1 billion to ensure the early commercial viability of hydrogen during the riskiest early years of the industry (DOE 2023).

During the construction and early operation of hydrogen plants, producers in Texas are likely to receive clean energy tax credits created by the IRA. In particular, the Section 45V Clean Hydrogen Production Tax Credit and Section 48 Energy Credit both provide strong incentives for private sector investment in hydrogen production. Both hydrogen credits increase to five times in value if a tax credit recipient meets the prevailing wage and apprenticeship requirements in the IRA (Ding, Baldino, and Zhou 2024). These incentives are intended to set high labor standards during the construction of hydrogen facilities.

Texas hydrogen projects will also have access to a variety of loans through the Department of Energy’s Loan Program Office (LPO) (LPO n.d.). The IRA increased the LPO’s existing loan programs by approximately $100 billion in new loan authority (LPO 2023). Hydrogen businesses could benefit from several PLO authorities including Title 17 Section 1703 Innovative Energy and Innovative Supply Chain Projects and Title 17 Section 1706 Energy Infrastructure Reinvestment Projects (Section 1706).

The historic and multifaceted investment by the federal government into Texas hydrogen production has successfully created private-sector investment in the industry. The Gulf Coast Hub is led by an industry group called HyVelocity, Inc., which in turn includes large energy corporations including AES Corporation, Air Liquide, Chevron, ExxonMobil, Mitsubishi Power Americas, Orsted, and Sempra Infrastructure (HyVelocity n.d.). These companies are investing in the nascent industry because hydrogen production is expected to become extremely economically valuable. The Gulf Coast Hub could generate $100 billion in additional GDP in Texas by 2050 (Ati et al. 2023).

The massive outlay of public dollars to develop the hydrogen industry demands intentional investment in the Texas workers who will build and operate hydrogen plants. The CBP for the Gulf Coast Hub should include legally binding agreements between hydrogen producers and labor that will protect workers’ right to organize, set high wage and working standards, and create equitable pathways for workers to enter the industry.

Securing high job quality for the hydrogen workforce

According to the U.S. Department of Energy, the Gulf Coast Hub will create approximately 45,000 jobs (OCED n.d.b). The Rhodium Group splits these jobs into two categories: plant investment jobs and operation and maintenance (O&M) jobs (Bower et al. 2023). Plant investment jobs are those needed to construct, engineer, and build hydrogen facilities, while O&M jobs are the permanent ongoing jobs needed to operate the plant.3 Most jobs associated with hydrogen will be plant investment jobs. The Rhodium Group estimates that for a conventional hydrogen plant being retrofitted for carbon capture, 520 jobs will be created for building and implementing the retrofits, while 80 jobs will be created for the ongoing operation of the plant (Bower et al. 2023).

Plant investment

Some of the key types of jobs involved in a hydrogen plant’s development include workers in the construction trades; metal workers and assemblers; and machinery installers, maintenance, and repairers. Prevailing wage standards are the first essential policy for ensuring high job quality for workers building hydrogen facilities.

The federal Davis-Bacon Act mandates that contractors and subcontractors on federally funded construction must pay workers at least the prevailing wage. The prevailing wage is a standard hourly rate of wages and benefits paid to workers performing similar work in a specific geographic area. Prevailing wage standards like Davis-Bacon have been shown to boost workers’ pay and benefits and reduce racial pay gaps (Mangundayao, Poydock, and Sherer 2022). All projects receiving federal money in the Gulf Coast Hub will be subject to Davis-Bacon prevailing wage standards.

The Community Benefits Plan in the H2Hubs program also provides a powerful opportunity to strengthen job standards through the inclusion of Project Labor Agreements (PLAs). PLAs specify workers’ wages and fringe benefits and may include provisions requiring contractors to hire through union hiring halls or develop procedures for resolving employment disputes. PLAs also often include language that prevents workers striking or from employers locking workers out.

PLAs are not union contracts and both union and nonunion employers can bid on projects, but incentivizing the use of union labor has other benefits. Research shows that unionized construction labor is 14% more productive than nonunion labor (McFadden, Santosh, and Shetty 2022). PLAs are effective at reducing construction costs, making the completion of projects more efficient, while also setting high health and safety standards (Mangundayao, McNicholas, and Poydock 2022). Unionized construction workers also earn higher, and more often family-sustaining, wages. On average, unionized construction workers earn 35.6% more than other construction workers accounting for education, geography, and other characteristics (Scott et al. 2022). Unions also have long been shown to decrease wage disparities between white workers and workers of color and between men and women.

PLAs can also help create better and more equitable pathways into construction jobs (Belman and Bodah 2010). Hydrogen projects should set high requirements for hours worked by qualified apprentices. A qualified apprentice is a worker participating in a high quality, structured education and training programs vetted and approved by the U.S. Department of Labor or a state apprenticeship agency, otherwise known as a registered apprenticeship (ApprenticeshipUSA n.d.a). Registered apprenticeships are essential to developing a skilled and equitable workforce because they work directly with employers to meet industry standards and prioritize diversity of hiring while paying apprentices fairly for their hands-on work (ApprenticeshipUSA n.d.b).

Texas hydrogen projects can also strengthen local communities by using local hire policies (sometimes called targeted hire) to prioritize recruitment of individuals who reside in the area where a project is being built (Lawliss, Finfer, and Sherer 2022). Targeted hire can also be aimed towards groups such as people of color, women, veterans, or people with disability. Texas should require PLAs with local hire provisions for hydrogen projects to ensure local community members benefit from the new job opportunities.

The Inflation Reduction Act also includes tax credits to incentivize high labor standards and workforce development. Texas hydrogen projects will likely be eligible for IRA tax credits for clean hydrogen production and/or carbon sequestration. These credits quintuple in value if a project commits to prevailing wage and specific apprenticeship targets (Ding, Baldino, and Zhou 2024). Projects receiving BIL funding must already meet Davis-Bacon standards, so they will be eligible for the expanded tax credit if they meet the apprentice targets as well. PLAs can ensure that hydrogen projects meet the IRA tax credit criteria, benefiting both the firms building new facilities and the workers and communities who will be part of the industry.

Operations and maintenance

Once hydrogen facilities in Texas are built, operations and maintenance workers must produce hydrogen effectively and safely. At a conventional hydrogen facility retrofitted for carbon capture, these O&M occupations include machinery installers, maintenance, and repairers; metal workers and assemblers; freight movers; and production occupations (Bower et al. 2023).4 The CBP can be used to make sure these jobs are well paid, safe, and provide opportunity to key communities.

Texas, particularly the Houston and Gulf region, is a global hub for the oil and gas industry. The state also has a large base of chemical manufacturing, gas production, and other manufacturing industries (CHF 2022). Texas produces a third of total hydrogen production in the U.S. (Day 2024).5 Many occupational skills already used in oil, gas, and other gas manufacturing industries in Texas should be transferable to hydrogen production (Wells 2022). The exact distribution of skills and occupations in O&M is not clearly developed, but many jobs will not require college degrees (DOE 2008; Bezdek 2019).

Business groups, labor partners, and educational institutions in Texas must collaborate to develop training and education pathways for hydrogen workers. As with construction and other trade apprenticeships, these training programs should be paid apprenticeship opportunities, and intentionally recruit local workers, workers of color, and women. There should also be clear pathways for Texas oil and gas workers to transition to the hydrogen workforce, with wage insurance, retraining support, and re-employment guarantees (Pollin et al. 2021). The CBP can be used to negotiate these partnerships and create an equitable workforce development pipeline into the industry.

Although hydrogen does not release toxins like fossil fuels when burned, in many contexts it is more flammable, and its flame is almost invisible, putting hydrogen O&M workers at considerable risk (OEERE n.d.). Skilled and empowered workers are the front line for ensuring proper hydrogen safety practices.

Research shows that by giving workers a stronger voice on the job, unions improve workplace safety and health across a wide range of industries (Dean, McCallum, and Venkataramani 2022; Manzo IV, Jekot, and Bruno 2021; Leigh and Chakalov 2021). To that end, it is vital that hydrogen O&M workers have the chance to organize into unions. The Gulf Coast Community Benefits Plan should include language that requires labor peace agreements (LPAs) for workers at hydrogen facilities.

LPAs are contracts between an employer and a union where the employer agrees to remain neutral and not interfere with union organizing. In turn, unions agree not to engage in picketing, work stoppages, or other economic interference with employers. U.S. employers are charged with violating federal law in more than 40% of union elections and spend more than $400 million a year on “union avoidance” consultants (McNicholas et al. 2019; McNicholas et al. 2023). These strategies undermine workers’ legal right to organize but are treated by many employers as a cost of doing business. Requiring LPAs for hydrogen would help prevent illegal employer behavior, secure smooth plant operation, and give workers a fair opportunity to organize.

Conclusion

The single greatest influence on job quality is workers’ bargaining power. When policies set high standards and workers can form unions, it leads to better jobs. Union jobs typically have higher wages, better health care benefits, better retirement safety, and safer working conditions. In 2023, 64% of Texas workers said unions are good for workers, but only 5.4% of Texas workers were covered by a union contract (Posson, Halbrook, and Cervantes 2024). This disconnect is a product of Texas state policies like its so-called “right-to-work” law and other limitations on collective bargaining rights.

When policy does not support worker power, the results are predictable. Workers in the rapidly growing Texas solar and wind energy industries report low wages and high levels of injuries and illness (Behgam et al. 2024). To avoid this path with the Gulf Coast Hub, Texans must build on the strong labor standards incentivized through the federal BIL and IRA. The Community Benefits Plan for the Gulf Coast Hub should include project labor agreements, labor peace agreements, and related measures that empower the Texas hydrogen workforce.

Notes

1. Other hydrogen hubs have different technological makeups and will focus on other technologies like car fuel cells (OCED n.d.b).

2. The Justice40 initiative directs 40% of the overall benefits of certain federal investments to flow to disadvantaged communities. The Justice40 initiative was established by executive order by the Biden-Harris administration.

3. The Rhodium Group’s definition of plant investment jobs also includes the workers who maintain supply chains for hydrogen plant construction, but this report focuses on workers directly building hydrogen facilities.

4. Production occupations include inspectors, testers, processing technicians, and chemical equipment operators and tenders.

5. Most of this hydrogen is created with natural gas, which means it must be retrofitted with carbon capture technology to reduce emissions.

References

ApprenticeshipUSA. n.d.a. “Inflation Reduction Act Apprenticeship Resources” (web page). Accessed September 15, 2024

ApprenticeshipUSA. n.d.b. “What is a Registered Apprenticeship Program?” (web page). Accessed September 15, 2024.

Ati, Nikhil, Filipe Barbosa, Abhinav Charan, Celine Guo, Jessica Li, Brandon McGee, and Mim Tansamrit. 2023. Unlocking Clean Hydrogen in the US Gulf Coast: The ‘Here and Now’. McKinsey & Company, August 2023.

Behgam, Cecilia, Jason Castillo, Bo Delp, Avalon Hoek Spaans, Jillian Morley, Kim Selig, and Bethany Figueroa. 2024. Power and People: Working Conditions in the Texas Clean Energy Transition. Texas Climate Jobs Project, August 2024.

Belman, Dale, and Matthew M. Bodah. 2010. Building Better: A Look at Best Practices for the Design of Project Labor Agreements. Economic Policy Institute, August 2010.

Bezdek, Roger H. 2019. “The hydrogen economy and jobs of the future.” Renewable Energy and Environmental Sustainability 4, no. 1. https://doi.org/10.1051/rees/2018005

Bower, Galen, Whitney Jones, Ben King, and Nathan Pastorek. 2023. “Clean Hydrogen  Workforce Development: Opportunities by Occupation.” Rhodium Group, September 27, 2023.

Center for Houston’s Future (CHF). 2022. Houston’s Future as a Global Center for Clean Hydrogen Manufacturing, Recycling, and Electrolysis. Center for Houston’s Future, December 2022.

Council of Economic Advisors (CEA). 2023. The Economics of Demand-Side Support for the Department of Energy’s Clean Hydrogen Hubs. White House Council of Economic Advisors, July 2023.

Day, Paul. 2024. “U.S. Gulf Coast a Natural Fit for Clean Hydrogen Industry.” Reuters, May 23, 2024.

Dean, Adam, Jamie McCallum, and Atheendar Venkataramani. 2022. Unions in the United States Improve Worker Safety and Lower Health Inequality. Washington Center for Equitable Growth, December 2022.

Ding, Yifan, Chelsea Baldino, and Yuanrong Zhou. 2024. Understanding the proposed guidance for the Inflation Reduction Act’s Section 45V Clean Hydrogen Production Tax Credit. International Council on Clean Transportation, March 2024.

Department of Energy (DOE). 2008. Effects of a Transition to a Hydrogen Economy on Employment in the United States. July 2008.

Department of Energy (DOE) 2023. “Biden-Harris Administration to Jumpstart Clean Hydrogen Economy with New Initiative to Provide Market Certainty And Unlock Private Investment” (news release). Department of Energy, July 5, 2023.

HyVelocity. n.d. “HyVelocity Hub: Rapidly Scaling Clean Hydrogen Supply and Demand” (website). Accessed September 15, 2024.

Lawliss, Michael, Lew Finfer, and Jennifer Sherer. 2022. Using Local and Economically-Targeted Hire to Promote Good Jobs through the Infrastructure Investment and Jobs Act. Jobs to Move America, September 2022.

Leigh, J. Paul and Bozhidar Chakalov. 2021. “Labor Unions and Health: A Literature Review of Pathways and Outcomes in the Workplace.” Preventative Medicine Reports 24, no. 101502. https://doi.org/10.1016/j.pmedr.2021.101502

Loans Program Office (LPO). 2023. “Inflation Reduction Act of 2022” (web page). Last updated September 22, 2023.

Loans Program Office (LPO) n.d. “Igniting Possibilities: LPO Investments in Clean Hydrogen Projects Span Energy Generation, Energy Storage, and Advanced Transportation” (web page). Accessed, September 13, 2024.

Mangundayao, Ihna, Celine McNicholas, and Margaret Poydock. 2022. “Project Labor Agreements on Federal Construction Projects Will Benefit Nearly 200,000 Workers.” Working Economics Blog (Economic Policy Institute), February 9, 2022.

Mangundayao, Ihna, Margaret Poydock, and Jennifer Sherer. 2022. “Re: Updating the Davis-Bacon and Related Acts Regulations.” Comments submitted on behalf of the Economic Policy Institute to U.S. Department of Labor Wage and Hour Division of Regulations, Legislation, and Interpretation Director Amy DeBisschop, May 17, 2022.

Manzo IV, Frank, Michael Jekot, and Robert Bruno. 2021. The Impact of Unions on Construction Worksite Health and Safety. Illinois Economic Policy Institute, November 2021.

McFadden, Michael, Sai Santosh, and Ronit Shetty. 2022. Quantifying the Value of Union Labor in Construction Projects. Mechanical Industry Advancement Fund, December 2022.

McNicholas, Celine, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau. 2019. Unlawful: U.S. Employers are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns. Economic Policy Institute, December 2019.

McNicholas, Celine, Margaret Poydock, Samantha Sanders, and Ben Zipperer. 2023. Employers Spend More Than $400 Million per Year on ‘Union-Avoidance’ Consultants To Bolster Their Union-Busting Efforts (fact sheet). March 29, 2023.

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Pollin, Robert, Jeannette Wicks-Lim, Shouvik Chakraborty, and Gregor Semieniuk. 2021. Impacts of the Reimagine Appalachia and Clean Energy Transition Programs for Pennsylvania. Political Economy Research Institute, January 2021.

Posson, Amanda, Shannon Halbrook, and Samuel Cervantes. 2024. Texas Workers Want Unions. Every Texan, May 2024.

Scott, Robert, Valerie Wilson, Jori Kandra, and Daniel Perez. 2022. Botched Policy Responses to Globalization Have Decimated Manufacturing Employment with Often Overlooked Costs for Black, Brown, and Other Workers of Color. Economic Policy Institute, January 2022.

Wells, Ian. 2022. “Response to Request for Information: Regional Clean Hydrogen Hubs Implementation Strategy.” BlueGreen Alliance, March 21, 2022.

A teacher shortage means that demand for teachers (proxied by vacant positions) is greater than the current supply of willing teachers (proxied by new hires). But the demand side of the teacher labor market is not set through any market mechanism. In this country, we rightly think that education is a public good everyone deserves and, as a result, rely on policymakers to decide how much society should invest in public education. If policymakers set the demand for inputs into public education (like teachers) to be low relative to the socially optimal level of investment in public education (by not allocating enough funding for public schools), shortages are easy to avoid. Yet the absence of a shortage would not mean we got the level of education investment right.

Take one obvious historical example: the collapse in public education spending during the recovery from the Great Recession of 2008–2009. Figure A is replicated from the first post in this series and focuses on the period leading up to and after the Great Recession. It shows that during the recovery from the Great Recession, there was no teacher shortage in the classical sense. In 2008–2009, job openings and hires both decreased and then hires slightly outpaced job openings in the recovery of that recession. Quits also declined, and didn’t return to pre-recession levels until 2013.

Figure A

In this period, fiscal austerity—at both federal and state levels—squeezed public financing for education. This squeeze reduced the funds available to spend on positions, including teachers, and so the insufficiently few teaching positions that were open were relatively easy to fill. There was no teacher shortage in the classical sense, but the absence of a shortage hid a woefully low level of public investment in education during that time.

One way to check if the demand for educational inputs has been set too low by policymakers is to assess investments in public education relative to the underlying capacity to make these investments. A decent proxy for underlying capacity is gross domestic product (GDP)—how much output is generated in the economy over an increment of time. If this economic capacity grows appreciably faster than public education spending, then one could conclude that this spending is inappropriately low. Figure B maps the change in GDP with changes in public education spending. Both measures are normalized by public school enrollment to make this a more informative comparison: If GDP rose rapidly yet educational spending fell solely due to the demographics of a smaller cohort of school-age children, this would not necessarily be a bad thing. The graph, indexed to 2003, shows that per-pupil educational funding kept up with per-pupil GDP through 2008. In short, the nation’s investment “effort” in education was relatively constant. Yet, in the wake of the Great Recession, fiscal austerity at the state and local level led to a divergence in the country’s capacity for funding education versus actual funding for education. Weak demand for education as a result of austerity measures in public budgets led to higher student-teacher ratios, reduced teacher pay, and reduced job satisfaction, thereby worsening the working conditions on offer to teachers.

Figure B

What does the optimal demand for teachers look like?

Over the last 20 years, we’ve seen several forms of suboptimal teacher labor markets. Since 2018, the demand has outpaced supply, creating a textbook labor shortage. In the Great Recession, demand didn’t outpace supply, but lackluster public spending on education reduced the overall demand for teachers, almost certainly far below any social optimum.

While we don’t claim any particular year was perfect from the vantage of teacher labor markets, an optimal demand for teachers would reflect a low student-teacher ratio, high levels of teaching satisfaction, and strong wages and benefits. Over the last 20 years, 2008 was recent high-water mark for having one of the lowest student-teacher ratios on record at 15:1. These conditions were met with strong job satisfaction among teachers: The Survey of the American Teacher documented that the share of teachers that were very satisfied with their careers in 2008 was 62%, hitting a high since the survey began in 1984. In 2008, average per-pupil spending on public education matched the rate of growth of GDP per student, suggesting that spending was in line with our capacity to invest in education.

How many extra teachers would we need today if student-teacher ratios remained at 2008 levels? Figure C shows actual teacher employment and projected teacher employment had it kept the same student-teacher ratio it had in 2008. Even accounting for the fact that enrollment in public sector education decreased in the last few years, the gap between actual teacher employment and the teacher employment needed to match student enrollment remains strikingly large. In 2023, we were short 233,000 teachers relative to the socially optimal level of education staffing. Using a different methodology, we came up with a very similar estimate of the total teacher shortage in 2022, suggesting that while this estimate is large, this is the number of teachers we need to have a robust public education program in the United States.

Figure C

Just because 2008 was a recent high-water mark for U.S. investment in public education, this hardly means that we would not have had large social benefits from investing even more in public schools that year. For example, data on school funding adequacy in 2009 (the oldest year data are available) show districts with more than 15% of students in poverty needed an additional $1,770 per pupil (2009 dollars) to provide adequate education, and that likely didn’t change much between 2009 and 2008. To bring all districts up to adequacy would likely require even more spending than what was spent in 2008.

Conclusion

In Part I of this blog series, we outlined the current teacher shortage and suggested policies to solve this shortage, namely policies that raise teacher pay. Since 2018, job openings have outpaced hires at alarming rates and quits are on the rise. This shortage should be a priority for policymakers.

However, solving today’s teacher shortage would not constitute a silver bullet when it comes to making an appropriate investment in the nation’s public education. Since the onset of the Great Recession, funding for public education has not kept pace with our nation’s capacity to fund education and students have suffered as a result. More funds flowing to the nation’s public schools—particularly funds flowing to low-income and high-poverty school districts—would yield large benefits for students and society at large.

In a separate report, we’ve further shown that Congress has a role they could play by increasing the amount of federal dollars that go to districts across the country. Not only would those funds increase educational capacity, which would support the hiring of teachers, but federal funding is also equity based—with higher-poverty districts receiving a larger share of the funds.

Figure A

Despite the remarkable similarity in unemployment rates shown in Figure A, Black workers in Maryland and Alabama may not be as equally well off as they appear to be. Figure B reveals that between 2018 and 2023, a much larger share of Maryland’s Black population was employed than Alabama’s. In 2023, the employment-to-population ratio (EPOP) in Maryland was 64.6%, compared with just 55.5% in Alabama and 59.6% for the United States as a whole. 

Figure B

If Black unemployment rates are so similar in both states, why are employment-to-population ratios so different? Because of fundamental differences in each state’s approach to social and economic policy. While Alabama adopts the Southern economic development strategy, for example, Maryland does not. This strategy seeks to disempower workers—especially Black and brown workers—to ensure employers can extract their labor for as little compensation as possible. In practice, this translates to higher rates of incarceration in Alabama than in Maryland, especially for Black men. Alabama has no minimum wage, compared with Maryland’s $15 per hour wage floor. Alabama lacks pro-worker, family-supportive labor policies like Maryland’s paid sick days and paid family and medical leave laws. And Alabama underinvests in public services.

Each of these policy decisions limits job opportunities that support a decent standard of living and can lead workers to become discouraged and leave the labor market. Since workers who leave the labor market are no longer counted as unemployed, the Southern economic development strategy may be artificially lowering Alabama’s Black unemployment rate. To underscore how vastly different labor market conditions are for Black workers in two states with similarly low unemployment rates, we compare these components of the Southern economic development strategy in Alabama versus Maryland. 

Alabama incarcerates more of its residents

Figure C shows that Alabamians are incarcerated at a rate that is 1.4 times higher than all Americans and 1.7 times higher than Marylanders.1 This is remarkable given that the United States as a whole already incarcerates its citizens at a rate higher than any country in the world. It is not just that Alabama imprisons more of its residents than Maryland does, Black Alabamians are highly overrepresented in the prison population. 

Figure C

According to data from the Prison Population Initiative, in 2021 just 26% of Alabama’s resident population was Black compared with 43% of its jail population and 53% of its prison population. Maryland also incarcerates Black residents at a disproportionately high rate—Black Marylanders made up 29% of the resident population of the state but were 59% of Maryland’s jail population and 71% of those in Maryland’s prisons. However, since Maryland incarcerates residents at a lower rate, fewer Black residents are incarcerated overall: 594 per 100,000 Black Marylanders compared to 1,014 per 100,000 Black Alabamians are incarcerated in prisons alone. 

Incarceration disproportionately impacts Black men and has ripple effects in the labor market for reentering workers since having a criminal history makes it more difficult to find a job. Ban the box policies seek to reduce the stigma and penalty associated with a criminal record by eliminating disclosure on job applications and delaying background checks until later in the hiring process. Maryland has a statewide ban the box policy for both public and private sector employment, while in Alabama, ban the box has only been adopted for the city of Birmingham.

While these facts do not establish a causal relationship, a striking pattern between rates of incarceration and EPOPs for prime age Black men emerges. Between 2017 and 2021, prime-age (25–54) Black men in Maryland, where incarceration rates are lower, were an average of 14.9 percentage points more likely to be employed than prime-age Black men in Alabama. As shown in Figure D, 83% of prime-age Black men in Maryland were employed compared with just 68.1% in Alabama and 75.4% of Black men nationally. Similarly, Black women were more likely to be employed in Maryland (78.6%) than they were in Alabama (70.6%) or nationally (72.5%). 

Figure D

Large numbers of low-wage jobs do not serve Alabamians and their families

Another factor distinguishing Alabama’s labor market from that of Maryland is the quality of available jobs. The Southern economic development model prescribes that workers are paid low wages and, in keeping with this, Alabama has no state minimum wage; what applies is the federal minimum wage, which has been stuck at $7.25 per hour since 2009. In contrast, as of January 1, 2024, Maryland raised its minimum wage from $13.25 per hour to $15 per hour. 

In December 2023, before Maryland’s $15 per hour minimum wage was in effect, fewer than 10% of Marylanders were paid less than $15 per hour. But in Alabama, the percentage of workers was 22%: More than one in five Alabamians were paid less than $15 per hour. 

Many Alabamians lack access to paid sick leave and paid family and medical leave

In addition to differences in employment-to-population ratios, incarceration rates, and minimum wages, Alabamians are much less likely than Marylanders to have access to paid sick leave and paid family and medical leave—supports which are crucial for balancing work and family. For example, while 90.8% of workers in Maryland have access to paid sick leave, just 68.2% do in Alabama. Again, these dramatically different outcomes reflect different policy approaches in the two states.

Maryland has an earned sick and safe leave law whereby all workers can accrue up to 64 hours of leave time to use for their own or a family member’s illness and in cases of domestic violence, sexual assault, or stalking. The law requires employers with 15 or more employees to provide paid leave, while smaller employers may provide unpaid leave. Additionally, Maryland Family and Medical Leave Insurance goes into effect starting in 2026. This law requires all employers to participate in some form of paid leave insurance offering workers up to 12 weeks of paid leave for the birth of a child, their own or a family member’s serious illness, or to arrange for a family member’s military deployment. In contrast, Alabama does not require employers to provide workers with paid family and medical leave. Rather, employers or individuals may purchase paid family leave benefit policies from private insurance companies. This approach will undoubtably leave many workers, especially low-wage workers, without paid leave. For those who are covered, policies will likely provide fewer weeks of coverage and lower wage replacement rates at higher costs. 

Alabama underinvests in the public sector

The private versus public approach to paid leave is emblematic of broader differences in how the role of government is perceived in Alabama versus Maryland. These disparate views are clearly reflected in each state’s willingness to invest in its public sector, even when the cost is subsidized by the federal government rather than being paid from state and local revenues. Under the American Rescue Plan Act of 2021 (ARPA), federal funds were granted directly to state and local governments. In addition to investments in infrastructure and public health, other approved uses of these funds included offering hiring and retention bonuses to fill public employee vacancies and raising public sector wages. As of September 2023, Maryland has spent 86% of its total state allocation and increased public sector employment by 3.5% between September 2022 and September 2023. Alabama, on the other hand spent just 36% of allocated funds and public sector employment grew just 1.1% over the same period.

These data show that comparing state unemployment rates in isolation paints a misleading picture. At any level of geography, the unemployment rate overlooks workers who want a job but aren’t actively searching due to discouragement, care responsibilities, or other obstacles. But interstate comparisons of unemployment rates also fail to distinguish the quality of jobs available and how policy choices influence these outcomes. Maryland and Alabama provide a striking example of how policies to support working people, ensure adequate pay and access to paid leave, and invest in public goods can help drive higher rates of employment while helping workers to cover basic necessities like food, rent, childcare, and transportation. 

1. The overall incarceration rate includes those in prisons, jails, federal prisons, youth facilities, and involuntary commitments. Prisons and Jails make up the vast majority of these. 

 
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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.

Table 1

These averages conceal considerable variations in expenditures: Half of state and local governments have spent less than 40% of their SLFRF allocation.

Figure A

Five state governments—Oklahoma, Tennessee, South Carolina, Mississippi, and Missouri, all states with Republican governors and Republican-led legislatures—have still spent less than 10% of their fiscal recovery funds, and another 14 states have spent less than 30%.

States slower to use their funds have higher public-sector job losses

As we have noted in previous posts on SLFRF spending, there is a correlation between how much SLFRF dollars a state has spent and state government employment. The 10 lowest-spending states have 4.4% fewer state government jobs than before the pandemic; the 10 highest-spending states only have 2.7% fewer.

Table 2

Governments have used fiscal recovery funds in many innovative, equity-enhancing ways. One of the clearest needs now, though, is rebuilding the public sector. While the private-sector recovery has been strong—with employment 3.6% above where it was in February 2020—state and local government employment has only now reached the level it was before the pandemic started. However, since the U.S. population has gone up by 1.2% since the last quarter of 2019, another 274,000 state and local government jobs would be required to reach pre-pandemic per capita levels.

This shortfall in public employment comes after a decade of public-sector disinvestment in the name of austerity following the Great Recession. In the 2010s, the federal government did not provide state and local governments with the resources they needed. Now, through ARPA, the federal government has done its job, and the onus is on state and local governments to use the resources they’ve been given.

The first thing they can and should do is raise public-sector wages, which are inadequate and have largely driven this shortfall in state and local government jobs. One-third of state and local government workers are paid less than $20 an hour, and 15% are paid less than $15 an hour. While the public sector has smaller Black-white and Hispanic-white pay gaps than the private sector, Black and Hispanic employees are still disproportionately represented among the lowest-paid jobs, which also employ a disproportionate share of women workers. Meanwhile, the teacher pay penalty has hit a new high: Teachers are now paid 26.4% less than comparable college-educated, non-teaching peers.

State governments are reporting increasing difficulties in filling vacancies. SLFRF dollars can be used to raise public-sector pay, create hiring and retention incentives, and expand benefits to attract public employees. Given the importance of a strong public sector to the overall health of the economy, filling these vacancies should be a high priority.

School districts also should invest in recruiting and retaining staff

The public-sector shortfall is most acute in education. We are still 76,000 state and local education jobs below February 2020 employment levels. The shortfall is quite dramatic in particular areas—the number of school bus drivers, for example, has decreased 16.5% since the beginning of the pandemic and continues to decline.

This is primarily a job for the $122 billion in ARPA funds allocated to the Elementary and Secondary Schools Emergency Relief Fund (ESSER III), which came on top of $60 billion in earlier funds allocated in 2021 (ESSER I and ESSER II). While projections from the Edunomics Lab at Georgetown University suggest that school districts, on the whole, are on track to use their funds, many districts have barely begun spending their ESSER III allocations. Just 37% report using ARPA funds to hire staff.

Like SLFRF, most ESSER III funds went directly to localities for school districts to use as they see fit with relatively few restrictions. Reports from national and state partner groups strongly suggest that many school districts have been unable to decide between competing funding needs and have opted to sit on the money. Many districts are also, understandably, concerned about the financial state of their school districts once the ESSER III money dries up.

Keeping ESSER III money for a rainy day, though, is not an option. ESSER III was specifically intended to help address urgent needs in schools arising from the pandemic, and school districts that do not obligate the money by the end of September 2024 will lose their remaining funds. Staffing shortages not addressed with ESSER III funds will only get worse as time goes on. It is vital for school districts to invest in their workforces during 2024.

When ARPA was enacted in 2021, the deadline to obligate and spend SLFRF and ESSER III dollars seemed very far away. State and local governments had plenty of time to make deliberate, careful decisions about how to use the money. The time for deliberation, however, is coming to an end. Governments need to act quickly to restore public services with the funds they have left before they lose them—forever.