June 1, 2026

The Honorable Daniel Aronowitz
Assistant Secretary
Employee Benefits Security Administration
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210

Re: Fiduciary Duties in Selecting Designated Investment Alternatives, RIN 1210-AC38

Dear Assistant Secretary Aronowitz:

I submit these comments on behalf of the Economic Policy Institute (EPI) on the Department of Labor’s (DOL) Notice of Proposed Rulemaking on Fiduciary Duties in Selecting Designated Investment Alternatives.

EPI is a nonprofit, nonpartisan think tank that has worked for 40 years to center working families in economic policy discussions.

EPI strongly opposes the Employee Benefits Security Administration’s (EBSA’s) proposed rule on Fiduciary Duties in Selecting Designated Investment Alternatives. The rule would gut protections for retirement savers in 401(k) and other participant-directed plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). In addition to our comments here, EPI has signed onto a joint comment letter with other consumer, retiree, and worker advocacy organizations expressing concern that the rule would add complexity, raise fees, and return us to an era when retirement plan participants had little protection from poor investment choices. This letter will expand on that letter to critique some of the economic arguments made in support of the proposed rule.

This letter will focus on risk, questioning EBSA’s claim that loosening protections for retirement savers will maximize risk-adjusted returns by providing access to alternative investments.

• EBSA attempts to redefine fiduciaries’ duty of prudence in selecting investment options as “maximizing risk-adjusted returns net of fees” no matter the risk rather than balancing the goals of maximizing returns and minimizing risk. (Unless otherwise noted, quotations are from the proposed rule.)
• EBSA ignores the fact that retirement savers face a worse principal-agent problem than defined benefit pension funds, since investment options are chosen by plan fiduciaries but participants bear the risk of losses.
• EBSA ignores the fact that even if pension funds that invest in alternative assets earn an illiquidity and risk premium (a big “if”), and even if individual retirement savers retire at the time they planned to (another big “if), individual retirement savers with limited investment horizons face greater timing risk and should be more risk averse.
• EBSA assumes that any asset class that does not move in sync with stock and bond markets adds useful diversification even if it is a speculative asset with a zero expected real return that only adds volatility.
• EBSA’s case for asset class diversification rests on modern portfolio theory, which assumes investors are well-informed and risk-averse, which is not a realistic description of markets for alternative assets.
• EBSA focuses narrowly on asset class diversification, ignoring the fact that adding alternative assets can concentrate rather than spread risk if these assets cannot be indexed.

Plan fiduciaries must adhere to a duty of prudence and a duty of loyalty.

Under ERISA, fiduciaries may be sued by participants or the Department of Labor (DOL) for breach of these duties when selecting investment options for participant-directed plans. Fiduciaries are required to have or obtain the expertise and information to make substantively sound decisions—going through the motions or acting with good intentions is not enough.

With minor exceptions, such as limits on employer stock, ERISA does not specify what types of investments may be included in 401(k) and similar plans. Nevertheless, plan fiduciaries, using their good judgement and leery of lawsuits, have generally avoided alternative investments that cannot be marketed to small and unsophisticated (nonaccredited) investors in other contexts. Instead, fiduciaries have increasingly moved toward low-cost index funds and similar broadly diversified and publicly traded investments that are recognized as appropriate options for retirement savers.

Lawsuits on behalf of plan participants who suffer losses from fiduciaries’ failure to uphold their duties are a critical enforcement tool. According to AARP, “Courts have repeatedly recognized that these cases play a meaningful role in improving plan governance, reducing excessive fees, and protecting participants’ long-term retirement security, without burdening employers that comply with the law.”1

The stated purpose of the proposed rule is to expand access to alternative investments.

EBSA claims that the threat of lawsuits harms retirement savers by limiting investment options available to plan participants. EBSA claims that “regulatory burdens and litigation risk…interfere with the ability of American workers to achieve…the competitive returns and asset diversification necessary to secure a dignified and comfortable retirement.”

The proposed rule includes a list of alternative assets that President Trump earlier mentioned in an executive order, including private equity, private credit, digital assets (“crypto”), and commodities.

EBSA notes that under ERISA these assets are not explicitly prohibited from being included among investment options in participant-directed plans. However, EBSA warns that plan fiduciaries may be excluding more complex investment options “not necessarily in response to a prudent assessment of whether the features in those investments are best suited to the needs of plan participants and beneficiaries, but rather because of the risk of litigation if plan fiduciaries depart from more traditional investments in favor of more creative or novel options.” It provides no evidence for that assertion and does not rebut the valid presumption that this could be the framework operating as intended: fiduciaries have made prudent assessments, found these assets wanting, and decided against them— recognizing that doing otherwise would appropriately expose them to litigation risk.

EBSA reframes the goal as maximizing risk-adjusted returns” no matter the risk rather than balancing risk and return.

According to EBSA, ERISA gives fiduciaries “maximum discretion and flexibility” to determine which investment options “offer the opportunity for participants to maximize risk-adjusted returns on their retirement assets net of fees.”

However, the goal of ERISA, as the name makes clear, is retirement income security, not “maximizing risk-adjusted returns net of fees.” Under ERISA, fiduciaries are required to select a diversified menu of investment options that minimize the risk of large losses for retirement savers.2 Such losses can be caused by sharp downturns or by cumulative underperformance over many years. Retirement savers will face both types of risk if they invest directly or indirectly in the alternative assets listed in the proposed rule.

Leverage is the most obvious way to maximize risk-adjusted returns, but also the most obvious way to amplify the risk of large losses. Reputable financial advisors do not advise retirement savers to maximize risk and return through leverage, even in the case of early career workers who have more time to adjust their contributions to the plan if their risky strategy fails.

EBSA ignores the subject of leverage entirely in the proposed rule, as well as any discussion of the appropriate level of portfolio risk for retirement savers (except to claim that asset diversification reduces it). Implicitly, then, EBSA’s self-described “asset-neutral” approach is also neutral with respect to the amount of risk retirement savers should face, focusing only on maximizing returns for any level of risk. This is especially dangerous given the widespread but mistaken belief that investment returns will average out over long investment horizons.3

Encouraging risky investments harms not only unsophisticated retirement savers, but also taxpayers who subsidize accounts intended to help ordinary workers save for retirement.

Though certain risky investment options may benefit wealthy participants with a high risk tolerance, the tax advantage is intended to promote retirement savings, and retirement security, for ordinary workers, not amplify wealth inequality.

Regulatory agencies have repeatedly warned of alternative asset risks.

DOL and other regulators previously acknowledged the risks associated with private market investments, including opacity, lack of regulatory oversight, complexity, illiquidity and high fees. In a June 3, 2020, letter to private equity managers, DOL noted that private equity investments had longer time horizons, higher fees, no easily observed market value, and were subject to different regulatory requirements and oversight than publicly traded securities.4

The letter suggested that plan fiduciaries might want to limit private equity investments to a specified percentage of a fund, have the investments independently valued according to agreed-upon financial standards, and require additional disclosures to meet the plan’s ERISA obligations to report information about the current value of the plan’s investments. These suggestions were generally ignored in the proposed rule.

After the Securities and Exchange Commission (SEC) issued a risk alert on June 23, 2020,5 warning that private equity and hedge fund investors may have paid more in fees and expenses than they should have and may not have been informed of conflicts of interest,

DOL issued a supplemental statement on December 21, 2021,6 citing the SEC warning and stakeholder comments challenging the earlier letter’s uncritical acceptance of some industry talking points, notably the claim that private equity could “offer plan participants who have longer investment horizons an equities-based investment choice that may enhance retirement outcomes when compared to investment choices containing only publicly traded securities.” The DOL statement also noted that while some fiduciaries have experience evaluating private equity investments for defined benefit pensions, many fiduciaries of small individual account plans do not.

The DOL statement was rescinded in response to President Trump’s executive order of August 7, 2025,7 without addressing any of the issues raised about the advisability of including private market investments among 401(k) plan options.

DOL and other regulators have also previously been highly skeptical of crypto as an investment, let alone one offered to retirement savers. On May 11, 2021, the SEC issued a staff statement warning that Bitcoin and Bitcoin futures were highly speculative investments.8 On January 10, 2024, SEC Chair Gary Gensler went further, describing Bitcoin as “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”9 The Federal Reserve and other bank regulatory agencies also issued multiple warnings about crypto assets.10

Citing the SEC warnings, DOL issued guidance on March 10, 2022, advising 401(k) plan fiduciaries to exercise “extreme care” before adding cryptocurrencies to plan options, noting that they were difficult to valuate, even by experts, and posed custodial and recordkeeping concerns.11

The Federal Reserve and other bank regulators rescinded their guidance on April 24, 2025, and DOL followed suit on May 28, 2025, without addressing any of the issues raised about crypto risks. Beginning in 2025, the SEC also adopted a more accommodating stance toward crypto, for example, asserting that meme coins were not subject to federal securities laws12 and dismissing an enforcement action against Coinbase.13

The SEC prevents firms from marketing private assets to small (“retail”) investors for good reasons.

Laws including the Investment Company Act and Investment Advisers Act, both enacted in 1940, give the SEC the authority to regulate securities marketed to retail investors.14 In addition to requiring consistent valuations and disclosures, these laws—and regulations and guidance based on them—limit the use of leverage and guard against potential conflicts of interest.15 The sale of private funds that do not meet these requirements is generally limited to sophisticated “accredited” investors or “qualified purchasers.”

These laws are intended to protect investors who are not equipped to assess the value or risk of private market investments. During the Biden administration, the SEC proposed rules that recognized that even accredited investors in private funds were not provided with sufficient information or protection from conflicts of interest.16 The rules were overturned by the Fifth Circuit Court of Appeals based on the assumption that investors in these funds were sophisticated and able to bear losses, not that they had adequate information and protection.17

Are risk, illiquidity, and complexity opportunities to earn higher returns?

EBSA acknowledges some of the obvious disadvantages of alternative investments, but frames these as opportunities to earn a premium for accepting these risks:

Alternative asset investments are often less liquid than the publicly traded stock and bond funds that are held by funds that plan fiduciaries often make available to plan participants. Illiquid investments generally offer an illiquidity premium to investors who are willing to hold their investment, for some time, without selling it for cash. Many retirement savers, particularly younger workers, have long investment time horizons until retirement and, therefore, fit the profile of an investor who can benefit from a liquidity premium.

EBSA elsewhere alludes to “obstacles that cause a relatively higher risk premium when compared to traditional investments, such as illiquidity or information asymmetry,” but suggests that an expanded market tailored to the needs of retirement savers could reduce liquidity and valuation risks:

As this market matures a new equilibrium should be reached where there is a larger pool of viable and vetted investments, expanded by alternative assets, for asset managers to o􀆯er to plan sponsors. The tradeoff for this increased market penetration is a reduction in illiquidity premium. As the risks associated with investment in alternative assets falls, so too does the risk premium investors in the assets will enjoy.

The idea that retirement savers could knowledgeably accept such tradeoffs ignores the fundamental problem that information asymmetry, complexity, and lack of regulatory oversight make reliable ex ante valuation of private market assets impossible.18 Expanding the market, whether or not it improves liquidity, does not address this fundamental problem.

Private market investments should be niche products for sophisticated investors.

The accurate valuation of public assets is made possible by the mandatory disclosure of relevant information and market signals from daily trading. A key feature of public markets is two-sided competition, wherein knowledgeable buyers and sellers eliminate biased prices so that even unskilled and uninformed investors can get a fair shake.19 These sources of information are generally unavailable to private market investors, who in most cases must also contend with complex structures, strategies, and incentives.

Private markets are characterized by asymmetric information, so outside investors cannot assume that investment opportunities are fairly priced. Institutional investors instead rely on private fund managers’ past performance, reputational risk, and performance incentives in deciding whether to enter into limited partnerships with fund managers, known as general partners. Institutional investors with clout can also demand access to information that may not be provided to all limited partners and would not be made available to retirement savers. However, general partners’ incentives are blunted and distorted by their ability to earn millions in fees, and often in related party transactions, even when funds underperform or sustain losses, a problem exacerbated by the favorable tax treatment of fund managers’ share of investment returns, known as carried interest. Past performance, meanwhile, has been found to be a weak predictor of future performance.

In a comment submitted about the proposed rule, former investment banker Jeffrey Hooke and business school professor Michael Imerman estimated that private market investments should earn a premium of 200-500 basis points over their public counterparts to compensate for illiquidity, leverage and opaque financial reporting. Far from earning such a premium, Hooke and Imerman estimate that over 95% of state pension plans investing in private assets fail to beat a 60-40 stock-bond benchmark over long periods.20 Even if some institutional investors with superior clout and expertise can expect higher risk-adjusted returns by investing in private market assets, the wide dispersion in fund performance suggests that other institutional investors are not assured of benefiting from these investments and that retirement savers would fare even worse.21

The expected real return on purely speculative assets is zero.

With private market investments, the challenge lies in gauging the expected risk and return of underlying assets. With most crypto and other speculative assets, there is no expectation of profit unless the buyer has better information than the seller. At best, these assets are “digital gold,” used as a store of value, a means of exchange, or a hedge against inflation, but with added risks associated with custody, safekeeping, and regulatory uncertainty.22

As the SEC acknowledged last year, some crypto assets can be compared to physical collectibles like rare tulip bulbs, baseball cards, and Beanie Babies because they are nonproductive investments.23 Under the Economic Recovery Tax Act of 1981, most physical collectibles are banned from tax-favored retirement plans because they “do not contribute to productive capital formation.”24 Though digital collectibles, unlike physical collectibles, are not currently banned from investment options offered to participants in tax-favored retirement plans, it is not clear why they should be exempted.25

Similar to much crypto, commodity futures are largely speculative and regulated by the Commodities Future Trading Commission (CFTC), though investors may be compensated for hedging the risk of producers or consumers. The New York Times recently described how the CFTC’s enforcement capacity has been hollowed out and the agency has become captive of crypto and prediction markets.26

A market for speculative assets exists for the same reason there are casinos, racecourses, and prediction markets: A subset of the population, rather than being risk averse, likes to gamble. However, gambling does not belong in tax-subsidized accounts intended to promote retirement income security.

Assessing the performance of private funds poses serious challenges.

The debate around whether investing in private market assets is worth the high fees, risk, and illiquidity is complicated by a lack of consistent disclosure requirements. As documented by Oxford University professor Ludovic Phalippou and others, private equity general partners, when marketing themselves to pension funds and other potential investors, cite irrelevant or misleading statistics, sometimes manipulating the timing of valuations or excluding funds that have been committed but not yet invested to inflate reported returns.27

Given the subjectivity of internal valuations and evidence that they are misleading and manipulated, limited partners’ return on investment can only be known once assets have been sold and the proceeds distributed. This happens too infrequently to be useful in making investment decisions, a problem exacerbated by the fact that private fund managers can prevent limited partners from fully exiting.28

Even after the return on investment is known to limited partners, it is difficult to know whether the return was sufficient to compensate for risk and illiquidity, since the degree of leverage and other risk factors is generally unknown to outside investors.

The available evidence does not show that alternative assets improve risk-adjusted returns. Because performance metrics reported by private equity and other alternative assets are unreliable, researchers have looked at whether institutional investor portfolios that include these investments have outperformed benchmarks composed of broad stock and bond indices. Many found that they did not, especially in the years since the 2008 financial crisis.29

For example, a 2022 report from the Center for Retirement Research at Boston College found that public pension funds that invested more in alternative investments did not have higher returns, though the investments may have served to dampen reported volatility.30 Similarly, researchers at the Canada Pension Plan Investment Board found that while private equity appeared to outperform stocks before the financial crisis, it did not do so on a risk-adjusted basis.31

A more positive study published by the Georgetown Center for Retirement Initiatives found that 401(k) participants would have seen slightly higher returns over a 20-year period if target date funds had included private equity and other alternative investments.32

However, even this industry-funded study showed that large-cap U.S. stocks outperformed private equity in the decade after 2011. The study relied on a proprietary database of pension fund returns that is subject to major revisions and may not include a representative sample of pension funds.

Perhaps the most telling indicator of private funds’ mediocre performance is the industry’s resistance to providing comparable metrics even to their own investors. In 2024, after the SEC attempted to standardize information about fees and performance provided to limited partners in private funds,33 the industry challenged the rule before the Fifth Circuit Court of Appeals, which sided with the industry on the basis that access to the funds was generally limited to “some of the most sophisticated and wealthiest investors.”34 Of course, this will no longer be true if private assets are marketed to retirement savers.

The proposed “safe harbor” does not protect retirement savers—or fiduciaries.

At the heart of the proposed rule is what EBSA describes as a process-based “safe harbor” that would shield fiduciaries who adhere to the process from liability even if the investment options they select for the plan are poor choices. EBSA lists six factors that fiduciaries should consider when selecting investment options: performance, fees, liquidity, valuation, benchmarking, and complexity.

In EBSA’s view, fiduciaries who follow the six-step process should be granted a “presumption of prudence” and given “the discretion and flexibility to determine when designated investment alternatives, including those that contain alternative investments, offer the opportunity for participants to maximize risk-adjusted returns on their retirement assets net of fees.”

This check-the-box process does not give fiduciaries the tools they need to assess opaque, complex, illiquid, and largely unregulated investments. The proposal also does not address disclosures to plan participants, who would be even less prepared to make informed decisions.

The types of alternative investments listed in the proposal, by their nature, cannot be reliably evaluated according to the criteria in the process-based rule, even assuming fiduciaries have the skill and experience to understand complex structures and incentives.

Without additional disclosure requirements and regulatory oversight, for example, it is impossible to reliably assess risk and liquidity in private assets in order to choose a comparable benchmark.

ERISA lawyers warn that the regulatory “safe harbor” may give fiduciaries a false sense of security without shielding them from lawsuits.35 The proposed rule assumes that courts will defer to the agency in granting a “presumption of prudence” to fiduciaries, even though no such presumption exists in the statute and the U.S. Supreme Court recently ruled in Loper Bright that courts should exercise independent judgement in interpreting laws rather than deferring to agency interpretations.

EBSA assumes that diversifying across asset classes reduces risk.

EBSA emphasizes that ERISA does not restrict plan fiduciaries from considering any type of asset class, suggesting that all types should be made available to retirement savers. This is akin to arguing that since USDA dietary guidelines do not explicitly ban junk food, it should be part of every diet.

EBSA cites modern portfolio theory to argue that “the optimal constrained portfolio will have lower risk-adjusted returns than that of an unconstrained portfolio.” Modern portfolio theory is a highly abstract model that relies on unrealistic assumptions, including perfect information and perfectly liquid markets, that clearly do not describe private markets.

Though markets for crypto and other speculative assets can be highly liquid and do not depend on access to information, modern portfolio theory also assumes that investors are risk averse, and risk-averse investors do not engage in pure speculation.

Modern portfolio theory can be a useful approximation of reality, for example, in support of passive investment in publicly traded securities. But it cannot preclude the existence of overpriced assets designed to lure naïve investors into private markets where information is asymmetric and the “smart money” has no way to capitalize on better information through short selling.

Diversification across asset classes does not necessarily reduce risk, especially if the asset that is added is itself not diversified.

Diversification across asset classes can be a valid reason to expand the range of available investment options to retirement savers. However, whether an asset class will improve risk-adjusted returns depends on net returns, volatility, and correlation with stocks and other portfolio assets.

Alternative investments are often touted for their supposed low volatility and low correlation with stocks. But as Morningstar and others have pointed out, this reflects infrequent valuations and should not be mistaken for low risk: “With low disclosure and transparency, frequent use of leverage, and valuations that are both lower in scale and frequency than public markets, [private investments] should be considered one of the riskiest asset classes in an investor’s portfolio, despite often being sold as having lower risk profiles.”36

Private assets tend to be correlated with their public counterparts: private equity with stocks, private credit with bonds, etc. Speculative assets such as crypto may be less correlated with traditional investments, but the volatility in returns is essentially noise— adding risk without a risk premium since investors in these assets are not risk averse. EBSA’s narrow focus on asset class diversification ignores the fact that adding alternative assets can concentrate rather than spread risk if the assets themselves are not diversified.

A major concern is that indexing is generally not possible with private assets. A target date fund composed of broad market indices is more diversified than one that includes a 15% private equity fund with holdings in 10 companies selected and overseen by the same general partners.

There are important differences between pension funds and individual retirement savers.

The proposed rule implements a section of President Trump’s August 7, 2025 Executive Order, “Democratizing Access to Alternative Assets for 401(k) Investors,” which argues that that since most defined benefit (DB) pension funds invest in alternatives, participants in 401(k) and other defined contribution (DC) plans are being disadvantaged.37

This ignores key differences between DB pensions and DC plans, notably the fact that fiduciaries who select DB pension investments are employed by the party that bears the risk (the plan sponsor). In contrast, DC plan sponsors and their fiduciary advisors choose the investment options but the risk of losses falls on retirement savers.

Illiquid investments can trip up retirement savers who need to tap their savings earlier than planned due to unanticipated health shocks, job loss, or caregiving responsibilities. Firms marketing target date and asset allocation funds with limited private asset “sleeves” assure retirement savers that between the more liquid assets in the fund and incoming contributions, cashing out early will not be a problem. However, this assumes a stable market—no panic selling—and that investors who cash out will not be saddled with high fees with little to show for it.

Less often noted than the illiquidity issue is the fact that timing (or “sequence-of-returns”) risk should make retirement savers more risk averse than pension funds and other institutional investors with indefinite investment horizons even if they do not cash out early.38 Whereas pension funds and university endowments continuously buy and sell assets on behalf of overlapping generations of beneficiaries, retirement savers are more sensitive to poor investment performance over limited investment horizons, especially once workers have built up savings and are approaching retirement.

Retirement savers will be defaulted to high-cost and risky investments.

EBSA suggests that both direct and investments in alternative assets should be permitted, raising the possibility that retirement savers—including those close to retirement—could put all their retirement savings in crypto and other risky assets. However, EBSA suggests that “a more likely scenario…is that these alternatives would be included as one part of a menu option,” citing as examples target date funds and asset allocation funds with annuity or private equity components similar to those the industry has begun marketing to retirement savers. Target date and balanced asset allocation funds can be “qualified default investment alternatives” (QDIAs) into which participants can be defaulted unless they opt out.

The idea that alternative investments could be embedded in target date and similar funds is not reassuring. Retirement savers who are defaulted into QDIAs are generally unsophisticated investors who will need to rely on their investments to cover living expenses in retirement and have been led to believe that these defaults are relatively safe. DOL’s website describes default investments as investments “that generally minimize the risk of large losses and provide long term growth.”39

If the proposed rule takes effect, many workers could unknowingly invest 15% or more of their retirement savings in assets that DOL has previously characterized as high-cost, complex, illiquid, and difficult to evaluate, reversing what has been a welcome shift to low-cost passive investments.

401(k) investment options have improved in recent years with the widespread adoption of target date and balanced funds composed of low-cost stock and bond indices and similar broadly diversified passive investments. This has enabled retirement savers to lower costs, automatically rebalance portfolio allocations, adjust portfolio risk as workers approach retirement, and maximize diversification across publicly listed securities.

The rule would harm not only retirement savers, but also the broader economy.

The aggregate value of largely unregulated private funds, including both private equity and private credit, now approaches that of regulated public funds.40 While it is highly concerning that unregulated private markets are growing at the expense of public ones, the solution is extending disclosure requirements and other investor protections to private markets, not increasing the size of unregulated markets that expose investors and other economic actors to exploitation and excessive risk.

Private equity has often been a destructive force in the economy. It has a reputation for loading companies up with debt, stripping them of assets, and often driving them into bankruptcy, leaving workers, suppliers, and other stakeholders high and dry.41 Businesses destroyed by private equity often operate in sectors like hospitals and newspapers where the damage to communities extends far beyond workers and suppliers.

Private equity’s fee structure incentivizes risk because general partners reap a share of gains when gambles pay off but are largely insulated from losses, which are borne by lenders and other investors. This is exacerbated by the preferential tax treatment of general partners’ share of earnings. Experts have also expressed alarm over the rapid expansion of unregulated private credit, which poses a threat to financial stability.

The proposed rule comes at an especially bad time. Agency understaffing, weakened enforcement, federal legislation, and a Supreme Court decision in Anderson v. Intel could exacerbate the potential effects of the rule.

Experts warn that deregulation could fuel a speculative bubble like the one in the roaring 1920s.42 When the bubble pops, everyone will pay, whether they were playing or not. As University of Chicago Law School Professor William Birdthistle, the former director of the SEC’s Division of Investment Management, warns:

The administration is…encouraging individual retirees to vouchsafe their life savings to exotic financial offerings like private equity. Private equity is, as the name suggests, notoriously opaque, which means retirees would know little about what they’re investing in. The White House and the private fund lobby argue that this policy will “democratize” access to alternative assets and promote “better returns.” But such a plan, which comes with neither the information nor the protections needed to defend investors from serious economic risks, is as compelling as a plan to “democratize” brain surgery. 43

The proposed rule is supported by a financial industry seeking new investors and plan sponsors hoping to reduce litigation risk, not retirement savers.

Whether or not alternative investments have performed well in the past, market saturation, higher interest rates, and other factors will likely reduce future returns. A shrinking client base has made it hard for private equity funds to exit their investments and return funds to clients. Investors in private credit funds have also become skittish due to concerns about lending standards and valuations, prompting some firms to restrict redemptions.44

A survey conducted on behalf of AARP found that “Americans have little interest in adding private market investments and cryptocurrency to workplace retirement accounts.”45 As institutional and wealthy investors try to o􀆯load underperforming funds, retirement savers will be given access to the dregs even as overall quality declines. Retirement savers will be “buying a pig in a poke”—assuming they are even aware they are buying a pig.

We need to better regulate alternative investments, not to loosen regulations protecting retirement savers.

Financial regulations, including disclosure requirements and fiduciary rules, serve multiple purposes. They protect investors, prevent systemic risks such as bank runs, and disclose information needed for financial markets to direct capital to productive uses, rather than activities that do not promote economic growth but simply transfer wealth to insiders from those with less information like most retirement savers and small investors.

Without reliable and comparable information, it is difficult for even sophisticated investors to know whether alternative investments are worth their high cost. We need better regulations to help all investors make informed decisions and guard against conflicts of interest; to fix incentives that encourage value-destroying business practices by private equity and other underregulated financial industries; and to curtail abuse of tax-favored plans by wealthy investors, who have an incentive to load 401(k) accounts up with assets that are difficult to value in order to skirt contribution limits and take maximum advantage of tax subsidies tied to investment returns.

Rather than weakening protections for retirement savers, DOL should work with other agencies to regulate private markets to enable all investors to make informed decisions and protect the economy.

For these reasons, I urge EBSA to withdraw the proposal. Working families need retirement income security, not risky and costly investments ill-suited for small investors.

Thank you for considering my comment.

Respectfully submitted,

Monique Morrisey, Ph.D.
Senior Economist
Economic Policy Institute

1. AARP, “ERISA Litigation Reform: Myth vs. Fact,” accessed June 1, 2026. https://www.aarp.org/content/dam/aarp/politics/advocacy/2026/03/erisa-litigation-reform-myth-v-fact.pdf

2. DOL, “Fiduciary Responsibilities,” web page accessed May 25, 2026. https://www.dol.gov/general/topic/retirement/fiduciaryresp

3. Paul Samuelson, “Risk and Uncertainty: A Fallacy of Large Numbers,” Scientia, Vol. 98, pp. 108-113. https://www.casact.org/sites/default/files/database/forum_94sforum_94sf049.pdf. John Rekenthaler, “How Time Horizon Affects the Odds of Equity Investing,” Morningstar, October 19, 2023. https://www.morningstar.com/columns/rekenthaler-report/how-time-horizon-affects-odds-equity-investing

4. Louis J. Campagna, Information Letter 06-03-2020, EBSA, June 3, 2020. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/information-letters/06-03-

5. SEC Office of Compliance Inspections and Examinations, Risk Alert, June 23, 2020. https://www.sec.gov/files/Private%20Fund%20Risk%20Alert_0.pdf

6. DOL, “Supplement Statement on Private Equity in Defined Contribution Plan Designated Investment Alternatives,” December 21, 2021. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resourcecenter/information-letters/06-03-2020-supplemental-statement

7. DOL, “US Department of Labor Rescinds 2021 Supplemental Statement on Alternative Assets in 401(k) Plans,” August 12, 2025. https://www.dol.gov/newsroom/releases/ebsa/ebsa20250812

8. SEC, “Staff Statement on Meme Coins,” February 27, 2025. https://www.sec.gov/newsroom/speechesstatements/staff-statement-meme-coins

9. Gary Gensler, “Statement on the Approval of Spot Bitcoin Exchange-Traded Products,” January 10, 2024. https://www.sec.gov/newsroom/speeches-statements/gensler-statement-spot-bitcoin-011023

10. Board of Governors of the Federal Reserve System, “Federal Reserve Board announces the withdrawal of guidance for banks related to their crypto-asset and dollar token activities and related changes to its expectations for these activities,” April 24, 2025. https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250424a.htm

11. EBSA, “401(k) Plan Investments in “Cryptocurrencies,” Compliance Assistance Release No. 2022-01, March 10, 2022. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-andcompliance/compliance-assistance-releases/2022-01

12. SEC Division of Corporation Finance, “Staff Statement on Meme Coins,” February 27, 2025. https://www.sec.gov/newsroom/speeches-statements/staff-statement-meme-coins

13. SEC, “SEC Announces Dismissal of Civil Enforcement Action Against Coinbase,” February 27, 2025. https://www.sec.gov/newsroom/press-releases/2025-47

14. Caroline Crenshaw, Remarks at the Investment Company Institute’s 2025 Investment Management Conference, March 26, 2025. https://corpgov.law.harvard.edu/2025/03/26/remarks-by-commissioner-crenshaw-at-the-investmentcompany-institutes-2025-investment-management-conference/

15. Caroline Crenshaw, Remarks at the Investment Company Institute’s 2025 Investment Management Conference, March 26, 2025. https://corpgov.law.harvard.edu/2025/03/26/remarks-by-commissioner-crenshaw-at-the-investmentcompany-institutes-2025-investment-management-conference/

16. SEC, “SEC Enhances the Regulation of Private Fund Advisers,” August 23, 2023. https://www.sec.gov/newsroom/press-releases/2023-155

17. United States Court of Appeals for the Fifth Circuit, “National Association of Private Fund Managers et al. v. Securities and Exchange Commission,” June 5, 2024. https://www.govinfo.gov/content/pkg/USCOURTS-ca5-23-60471/pdf/USCOURTS-ca5-23-60471-0.pdf

18. American Federation of Teachers, Americans for Financial Reform Education Fund, and American Association of University Professors, “From Public Pensions to Private Fortunes: How Working People’s Retirements Line Billionaire Pockets,” July 2025. https://ourfinancialsecurity.org/resources/publicpensionsprivatefortunes; Stephen Deane, “Private Markets: Governance Issues Rise to the Fore,” CFA Institute Research and Policy Center, June 2024. https://rpc.cfainstitute.org/sites/default/files/-/media/documents/survey/private-markets-governanceissues-rise-to-the-fore.pdf; Alexander Ljungqvist, “The Economics of Private Equity: A Critical Review,” CFA Institute Research Foundation Literature Review, 2024. https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/rf-brief/economics-of-private-equity.pdf.

19. Holger Spamann, Indirect Investor Protection: The Investment Ecosystem and Its Legal Underpinnings, Journal of Legal Analysis, Volume 14, Issue 1, 2022, Pages 17–79, https://doi.org/10.1093/jla/laac003

20. Jeffrey Hooke and Michael Imerman, comment on proposed regulation RIN 1210 AC 20, April 13, 2026. https://www.regulations.gov/comment/EBSA-2026-0166-6564

21. Jeffrey Ptak, “Look Before You Leap When Investing in Private Funds,” Morningstar, July 29, 2025. https://www.morningstar.com/funds/look-before-you-leap-when-investing-private-funds; Linge Sun and Nicholas Reade, “Performance Dispersion in Alternative Asset Classes, CAIS, November 18, 2022. https://www.caisgroup.com/articles/performance-dispersion-in-alternative-asset-classes

22. Stephen Deane and Olivier Fines, “Cryptoassets: Beyond the Hype,” CFA Institute, January 2023. https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/industry-research/crypto-beyondthe-hype.pdf

23. SEC, “Staff Statement on Meme Coins,” February 27, 2025. https://www.sec.gov/newsroom/speechesstatements/staff-statement-meme-coins

24. Internal Revenue Service, “Retirement topics – Plan assets,” web page accessed May 25, 2026. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-plan-assets

25. In 2023, the Treasury Department and Internal Revenue Service (IRS) announced that they planned to issue guidance relating to the treatment of nonfungible tokens as collectibles. IRS, “Treatment of certain nonfungible tokens as collectibles,” Notice 2023-27, March 21, 2023. https://www.irs.gov/pub/irs-drop/n-23-27.pdf; David Block and Davide Levine, “IRS Announces Intention to Issue Guidance on NFTs,” Groom Law Group, March 29, 2023. https://www.groom.com/resources/irs-announces-intention-to-issue-guidance-onnfts/

26. Sharon LaFraniere and David Yaffe-Bellany, “How Prediction Markets and Crypto Firms Steamrolled a Watchdog Agency,” The New York Times, May 24, 2026. https://www.nytimes.com/2026/05/24/us/howprediction-markets-and-crypto-firms-steamrolled-a-watchdog-agency.html

27. Ludovic Phalippou, “An Inconvenient Fact: Private Equity Returns & The Billionaire Factory,” University of Oxford, Said Business School, Working Paper, June 10, 202. https://dx.doi.org/10.2139/ssrn.3623820; American Federation of Teachers et al., op. cit. July 2025.

28. Robert S. Harris, Tim Jenkinson, Steven N. Kaplan, and Ruediger Stucke, “Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds,” Journal of Corporate Finance, Volume 81, August 2023. https://doi.org/10.1016/j.jcorpfin.2023.102361.

29. American Federation of Teachers et al., op. cit. 2025; Dan Chung and Brad Neuman, “Debunking Private Equity Prestige,” Alger Insights, April 2024. https://www.alger.com/Pages/Content.aspx?pageLabel=Insights-Commentary-Debunking-Private-Equity-Prestige

30. Jean-Pierre Aubry, “Public Pension Investment Update: Have Alternatives Helped or Hurt?” Center for Retirement Research at Boston College Issue in Brief 22-20, November 22, 2022. https://crr.bc.edu/publicpension-investment-update-have-alternatives-helped-or-hurt/

31. Jean-François L’Her, Rossitsa Stoyanova, Kathryn Shaw, William Scott, and Charissa Lai, “A Bottom-Up Approach to the Risk-Adjusted Performance of the Buyout Fund Market,” Financial Analysts Journal, 72(4), 36–48, December 27, 2018. https://doi.org/10.2469/faj.v72.n4.1https://www.tandfonline.com/doi/abs/10.2469/faj.v72.n4.1

32. Angela M. Antonelli, “Has the Lack of Asset Diversification in DC Retirement Plans Been a Costly Missed Opportunity?” Georgetown University Center for Retirement Initiatives in Conjunction with CEM Benchmarking, June 2023. https://cri.georgetown.edu/wp-content/uploads/2023/06/GeorgetownCRI-CEm- Benchmarking_Lack-of-Asset-Diversification-CRI-paper.pdf

33. SEC, op. cit., August 23, 2023.

34. U.S. Court of Appeals for the Fifth Circuit, op. cit., June 5, 2024.

35. James Van Bramer, “Unpacking the DOL ‘Safe Harbor’ for Alternative Investments,” Plan Advisor, April 14, 2026. https://www.planadviser.com/unpacking-the-dol-safe-harbor-for-alternative-investments/

36. Amy C. Arnott, Christine Benz, David Reyna, and Jack Shannon, “2026 Diversification Landscape,” Morningstar, April 14, 2026. https://www.morningstar.com/content/csassets/v3/assets/blt9415ea4cc4157833/blta0fddf23ec4df239/69ddb33e160be843c15e5ad3/Diversification_Landscape_2026.pdf

37. United States, Executive Office of the President. Executive Order 14330: Democratizing Access to Alternative Assets for 401(k) Investors, August 7, 2025. https://www.whitehouse.gov/presidentialactions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/

38. Amy C. Arnott, “Sequence of Returns: What It Means and How to Deal,” Morningstar, August 9, 2021. https://www.morningstar.com/retirement/sequence-returns-what-it-means-how-deal

39. EBSA, “FAQs about Retirement Plans and ERISA,” web page accessed May 25, 2026. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/retirement-plans-anderisa

40. SEC Office of the Advocate for Small Business Capital Formation, Annual Report 2024. https://www.sec.gov/files/2024-oasb-annual-report-print.pdf

41. Eileen Appelbaum and Rosemary Batt, Private Equity at Work, The Russell Sage Foundation, May 2014. https://www.russellsage.org/publications/book/private-equity-work

42. Andrew Ross Sorkin, “The Rules of Investing Are Being Loosened. Could It Lead to the Next 1929?” The New York Times, October 13, 2025. https://www.nytimes.com/2025/10/13/magazine/investing-private-equitycrypto-crash-1929.html

43. William A. Birdthistle, “Trump Is Pushing Us Toward a Crash. It Could Be 1929 All Over Again,” The New York Times, November 7, 2025. https://www.nytimes.com/2025/11/07/opinion/donald-trump-great-gatsbyroating-20s-sec.html

44. Maureen Farrell, “New Limits on Investors and a Debt Downgrade Add to Private Credit Woes,” The New York Times, March 24, 2026. https://www.nytimes.com/2026/03/24/business/moodys-private-creditdowngrade.html

45. Bryan Miller, “Americans Have Little Interest in Adding Private Market Investments and Cryptocurrency to Workplace Retirement Accounts,” AARP, November 20, 2025. https://www.aarp.org/pri/topics/work-financesretirement/financial-security-retirement/private-market-and-cryptocurrency-investments/

2026 Q1 • Updated May 2026

Unemployment and Black-white racial inequality rose across states through the first quarter of 2026

By Kyle K. Moore 

EPI analyzes national and state unemployment rates by race and ethnicity, and racial/ethnic unemployment rate gaps on a quarterly basis to generate a consistent sample to create reliable and precise estimates of unemployment rates by race and ethnicity at the state level.

We report estimates for all states and subgroups, flagging those for which constructed unemployment rates are heavily weighted by national level data with an asterisk (*) (see methodological note). The following analysis contains data on the first quarter of 2026.

First-quarter 2026 state unemployment rates, trends, and ratios 

The first quarter of 2026 saw continued attacks on federal employment, elevated Black-white economic inequality, and increased affordability concerns due to the start of a war in Iran and a soft labor market.

The national unemployment rate for all workers was 4.3% in the first quarter of 2026, continuing 2025’s average unemployment rate—an elevated rate compared with the start of Trump’s second term. Twenty-seven states (and Washington, D.C.) had overall unemployment rates above 4% in the first quarter of 2026.

Washington, D.C., had the highest overall unemployment rate, and the only overall unemployment rate above 6% nationwide, at 6.4%. Six states (and Washington, D.C.) had overall unemployment rates at or above 5%. Five states had overall unemployment rates at or below 3%: in descending order, Alabama, North Dakota, Vermont, Hawaii, and South Dakota. South Dakota again had the lowest overall unemployment rate at 2.1%.

Attacks on federal employment continued through the first quarter of 2026, which contributed to sharply elevated unemployment in Washington, D.C., as well as worsening Black employment nationwide. Moreover, disruptions in the supply of oil, following from the administration’s instigation of a war in Iran and the subsequent closure of the Strait of Hormuz, have stoked concerns over rising gas prices throughout the country. The roots of U.S. workers’ affordability concerns, however, still lie with the softening labor market, which limits upward pressure on wages. Marginalized workers also no longer have the benefit of a  strong labor market, like in 2024, which helped push unemployment rates down across the board; as a result, Black-white unemployment gaps are widening.

Interactive Map

Click to view data

Interactive Map

First-quarter 2026 trends among white workers 

Every state (including Washington, D.C.) had a white unemployment rate below 5% in the first quarter of 2026. California had the highest white unemployment rate at 4.7%, while South Dakota had the lowest white unemployment rate at 1.4%. Seven states had white unemployment rates at or above 4%, while 21 states had white unemployment rates at or below 3%. White unemployment rates nationwide remained largely in line with 2025 trends in the first quarter of 2026.

First-quarter 2026 trends among Black workers 

Employment prospects for Black workers fell through the first quarter of 2026. Michigan (10.5%) and Washington, D.C. (10.1%) had the highest Black unemployment rates and the only rates above 10% across groups, for the first quarter of 2026. Alabama had the lowest unemployment rate among those states with a large-enough sample of Black workers for precise estimates, at 4.7%, while South Dakota had the lowest Black unemployment rate of all states irrespective of sample size at 3.5%. No state saw a Black unemployment rate below 3% in 2026 Q1; no state with a sample size that allowed precise estimates saw a Black unemployment rate below 4.5%. Only six states (in descending order: Nebraska, Alabama, Vermont, North Dakota, Hawaii, and South Dakota) had Black unemployment rates below 5% in the first quarter of 2026. The national unemployment rate for Black workers in the first quarter of 2026 was 7.2%, a significant increase compared with the 2025 trend (6.8% average for the year).

The national Black-white unemployment ratio for 2026 Q1 was 2.1-to-1—meaning Black workers were once again twice as likely as white workers to experience unemployment. Maryland had the highest Black-white unemployment ratio among states with large-enough sample sizes for precise estimates at 3-to-1. Among all states irrespective of sample size, Wisconsin had the highest Black-white unemployment ratio at 3.2-to-1. Massachusetts had the lowest Black-white unemployment ratio at 1.6-to-1. In the first quarter of 2026 there were thirty states (and Washington, D.C.) where Black workers were twice as likely or more than white workers to be unemployed.

First-quarter 2026 trends among Hispanic workers

Pennsylvania had the highest Hispanic unemployment rate in the country in the first quarter of 2026 at 8.3%. South Dakota had the lowest Hispanic unemployment rate at 2.5% but had a Hispanic worker sample size too small for precise estimates. North Carolina had the lowest Hispanic unemployment rate among states with large-enough sample sizes for precise estimates, at 2.9%. Only South Dakota and North Carolina had Hispanic unemployment rates below 3% in 2026 Q1. Twenty-eight states had Hispanic unemployment rates below 5% in 2026 Q1. The national Hispanic unemployment rate in the first quarter of 2026 was 5.1%, in line with the 2025 average.

In the first quarter of 2026 the nationwide Hispanic-white unemployment ratio was 1.5-to-1, meaning Hispanic workers were 50% more likely than their non-Hispanic white counterparts to experience unemployment. There were three states where Hispanic workers were twice as likely or more than white workers to experience unemployment:  Rhode Island (2-to-1), Louisiana (2.1-to-1), and Pennsylvania (2.4-to-1, the highest in the country). Florida and North Carolina had the lowest Hispanic-white unemployment ratios in the country, both at 0.9-to-1. This means Hispanic workers in those two states were less likely than white workers to face unemployment.

First-quarter 2026 trends among Asian American and Pacific Islander (AAPI) workers

The AAPI unemployment rate was highest in Washington, D.C., at 5.9%, though the district has a small AAPI worker sample and thus does not allow for precise estimates. Among states with a large-enough AAPI worker sample, New Jersey has the highest AAPI unemployment rate at 5.4%. Hawaii had the lowest AAPI unemployment rate among states with sufficient AAPI sample sizes in 2026 Q1 at 2%; among all states regardless of sample size, South Dakota had the lowest AAPI unemployment rate, at 1.9%. Only two states (and Washington, D.C.) had AAPI unemployment rates at or above 5% in 2026 Q1: Oregon (5.2%), New Jersey (5.4%), and Washington, D.C. (5.9%). The national AAPI unemployment rate for 2026 Q1 was 3.9%, slightly elevated compared with the 2025 trend (3.7% average for the year).

Table 1

Table 2

Methodology

The unemployment rate estimates in this report are based on the Local Area Unemployment Statistics (LAUS) and the Current Population Survey (CPS) from the Bureau of Labor Statistics (BLS). The overall state unemployment rates are taken directly from the LAUS. CPS 12-month ratios are applied to LAUS data to calculate the rates by race and ethnicity. For each state subgroup, we calculate the unemployment rate using the past 12 months of CPS data. We then find the ratio of this subgroup rate to the state (or national) unemployment rate, using the same period of CPS data. This gives us an estimate of how the subgroup compares with the state overall.

We also leverage national-level data to construct weighted unemployment ratios, utilizing a greater share of national-level data for states with a high amount of volatility in race/ethnicity sample sizes. This allows for more consistent reporting of unemployment rates for Black, Hispanic, and AAPI workers. For more detail on our methodology, see the technical report. 

Notes

1. Marokey Sawo and Daniel Perez, Detailing the New Methodology Behind EPI’s Quarterly State Unemployment Rates by Race and Ethnicity Series, Economic Policy Institute, December 2022.

Read more:

• State unemployment by race and ethnicity, 2025 annual summary
• State unemployment by race and ethnicity, 2025 Q3
• State unemployment by race and ethnicity, 2025 Q2
• State unemployment by race and ethnicity, 2025 Q1
• State unemployment by race and ethnicity, 2024 Q4
• State unemployment by race and ethnicity, 2024 Q3
• State unemployment by race and ethnicity, 2024 Q2
• State unemployment by race and ethnicity, 2024 Q1
• State unemployment by race and ethnicity, 2023 Q4
• State unemployment by race and ethnicity, 2023 Q3
• State unemployment by race and ethnicity, 2023 Q2
• State unemployment by race and ethnicity, 2023 Q1
• State unemployment by race and ethnicity, 2022 Q4
• State unemployment by race and ethnicity, 2022 Q2 & Q3

Key takeaways:

• Misclassification of workers as independent contractors is a pervasive and widespread problem. AAPI workers are overrepresented in three of the 11 commonly misclassified occupations: manicurists and pedicurists, home health aides, and personal care aides. Vietnamese, Bangladeshi, Filipino, Samoan, and other Pacific Islander workers are overrepresented within these occupations.
• Groups with lower median hourly wages also have larger shares of their working populations in the 11 commonly misclassified occupations.
• Federal protections against misclassification are limited and currently under attack by the Trump administration. The state and local landscape for curbing misclassification is varied, which leaves some workers less protected than others.

In March, EPI published updated research highlighting the cost to workers of being misclassified as an independent contractor for 11 commonly misclassified occupations. Asian American and Pacific Islander (AAPI) workers were overrepresented in three of those occupations—manicurists and pedicurists, home health aides, and personal care aides—relative to their share of the overall workforce.

Most federal, state, and local labor laws apply only to employees and not to independent contractors, so misclassification strips workers of key protections such as minimum wage laws or qualifying for employer-provided health insurance and retirement benefits. Additionally, both misclassified workers and social insurance funds lose out on income: the report conservatively estimates that for the three jobs in which AAPI workers are overrepresented, misclassification costs workers at least $7,000 annually and costs social insurance programs $600 to $800 per worker each year.

With the understanding that the umbrella term “AAPI” encompasses an immensely diverse population both in ethnic origin but also in economic outcomes, this piece goes beyond the narrow view that all AAPI workers are high-wage earners. Below, we provide more detail on which groups of AAPI workers are most likely to be employed in lower-wage commonly misclassified occupations.

Disaggregated data shed light on particular AAPI communities that may be vulnerable to misclassification

Across all occupations, AAPI workers comprise approximately 8% of the total workforce. For three of the 11 occupations highlighted in the report—manicurists and pedicurists, home health aides, and personal care aides—AAPI workers make up 67%, 13%, and 10% of employment, respectively, according to Current Population Survey (CPS) data.

Table 1 provides a detailed breakdown of the composition of the AAPI workforce for the three occupations in which AAPI workers are overrepresented. Here, we use the American Community Survey (ACS) as it offers detailed race definitions which the CPS does not offer due to sample size restrictions.

Asian Indian and Chinese populations combined make up over 40% of the working-age AAPI population, thus their relatively large shares of the AAPI workforce in these occupations are not surprising. However, several groups are disproportionately represented across these occupations compared with their share of the overall AAPI workforce.

For example, Bangladeshi workers make up 5.1% of AAPI workers employed as home health aides while only constituting 1.1% of the total AAPI workforce. Chinese workers represent almost half (47.7%) of AAPI home health aides while representing just over one-fifth of the overall AAPI workforce (20.9%). AAPI employment among manicurists and pedicurists is largely held by those of Vietnamese origin (71.4%).

Finally, a majority of AAPI personal care aides are either Filipino (32.8%) or Chinese (20.8%). Filipino workers, however, are overrepresented by twice their share of the overall workforce. While Samoans and other Pacific Islanders comprised a much smaller share of personal care aide employment, they are also overrepresented in this occupation by more than twice their share of the overall workforce.

Table 1

Figure A provides a more comprehensive picture of the share of each detailed group employed across all 11 commonly misclassified occupations, revealing that smaller communities—often overlooked because of their size relative to the aggregate AAPI workforce—may be among the most vulnerable to misclassification. Workers belonging to seven of those groups are more likely than the average U.S. worker to be employed in one of those occupations. Almost 20% of Vietnamese workers are employed in one of those occupations, with over half concentrated as manicurists and pedicurists.

Samoan, Hawaiian, and other Pacific Islanders have the next highest shares working in the 11 occupations, making up 15% or more of their total working-age population. These groups also earn lower median hourly wages than the national median and the aggregate AAPI median hourly wage. Their disproportionate representation in commonly misclassified occupations further exposes these workers to wage suppression due to misclassification.

Misclassification enforcement varies by state—meaning different AAPI populations can be disproportionately impacted

Federal protections from misclassification are limited and are currently under attack by the Trump administration, which has proposed a rule to weaken standards to determine worker classification under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Protection Act. The proposed rule narrows the definition of who is a covered employee under these statutes, encouraging employer schemes to reclassify their employees as independent contractors to evade those obligations.

Broadly, the Trump administration has been actively dismantling long-standing federal worker protections, leaving states to bear the responsibility of ensuring workers are given rights and protections and that they can exercise them. For most states, labor and employment protections only apply to workers classified as employees, meaning workers misclassified as independent contractors are denied their legal rights and protections.

EPI’s 2026 misclassification report outlines state and federal policy recommendations that ensure proper enforcement mechanisms to curb misclassification. One of the recommendations includes implementing the ABC test. Unlike the six-part “economic reality” test or the “common law” test, the ABC test presumes that a worker is an employee unless they can demonstrate they are an independent contractor based on three criteria. Placing the onus on the employer to determine the employment status of a worker provides protections against misclassification and extends proper protections to workers. Many states have adopted the ABC test for unemployment insurance programs and, to a lesser extent, for wage and hour orders and other employment applications.

As shown in Figure B, The AAPI population is highly concentrated across a handful of states. Almost half of the prime-age working Asian population is concentrated in California, New York, and Texas, and a majority of the Pacific Islander population resides in California, Hawaii, and Washington. Overall, 21 states have significant numbers of AAPI residents, and some are home to large shares of specific AAPI communities. For example, the Hmong community in Minnesota and the Burmese community in Indiana are concentrated in states that have smaller total AAPI populations.

The current landscape for state policy protections against misclassification is quite varied. For example, among the states with the largest AAPI populations, California is the only state to adopt the ABC test for both unemployment insurance and employment law, although certain occupations are exempt from the test—including app-based drivers. California also institutes penalties for misclassifying a worker, which can include restitution payments and, if the misclassification was willful, a penalty between $5,000 to $25,000 per violation.

Texas, on the other hand, has significantly less state enforcement. Apart from using the common law test for its unemployment insurance program and providing a definition of an independent contractor for workers’ compensation, Texas mainly relies on federal law for classifying workers as employees. In the last 15 years, Texas lawmakers have introduced several bills that would create penalties for misclassifying workers in the construction industry, but all have stalled or failed.

Figure B

Comprehensive protections are needed to protect workers from misclassification

AAPI workers are facing multi-pronged attacks from the Trump administration through the degradation of federal protections for workers, immigration, and equity. Occupational segregation and other labor market disparities lead women, people of color, and immigrants to be disproportionately represented in occupations that are commonly misclassified. These factors—in addition to historical and current geopolitical relations that shape the flow of labor to the U.S., immigration and citizenship status, and English language proficiency—can contribute to the concentration of AAPI workers in these occupations. Disaggregated data further identify which specific AAPI communities are overrepresented, revealing that smaller, less economically secure groups are often most exposed to the costs of misclassification. Strong policies at the federal, state, and local levels are needed to combat misclassification and to ensure workers can exercise their rights.

Brian D. Pasternak,
Administrator, Office of Foreign Labor Certification
Employment and Training Administration
Department of Labor
Room N-5311
200 Constitution Avenue NW
Washington, DC 20210

RE: Department of Labor, Employment and Training Administration, Improving Wage Protections for the Temporary and Permanent Employment of Certain Foreign Nationals in the United States, Notice of Proposed Rulemaking, DOL Docket No. ETA-2026-0001, RIN 1205-AC30 (March 27, 2026)

Dear Brian Pasternak:

The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank established in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers—regardless of immigration status—and assesses policies with respect to how well they further those goals. EPI submits these comments on the Department of Labor’s (DOL) Notice of Proposed Rulemaking (NPRM) regarding the updated four-tiered wage structure for H-1B, H-1B1, and E-3 nonimmigrant workers and DOL permanent labor certifications for employment-based permanent immigrant visas (i.e. green cards) in the second and third employment-based preference categories (EB-2 and EB-3). EPI has researched, written, and commented extensively on the U.S. system for labor migration, including in particular, the H-1B program and other temporary work visa programs and green cards. EPI has published extensively on H-1B wage levels and employer usage and abuse of H-1B and other visa programs.1

EPI generally supports the main substance of the NPRM and believes it is an improvement as compared to the status quo for the current four-tiered wage structure for H-1B, and will also improve H-1B1 and E-3 nonimmigrant visas, and permanent labor certifications in EB-2 and EB-3, because the NPRM will make incremental progress towards ensuring that the wages of U.S. workers are safeguarded and that the Labor Condition Application (LCA) and PERM programs are not hijacked by employers as a loophole to underpay migrant workers according to U.S. wage standards. The proposal will also help disincentivize firms from using H-1B visas as a primary tool to outsource professional jobs and send them overseas.

However, as we will detail in this comment, we believe DOL should go beyond what the NPRM proposes by setting the wage floor—i.e. the Level I wage—at the 50^th percentile so that no H-1B, H-1B1, E-3, EB-2, or EB-3 jobs are ever certified at a wage that is below the local median wage for the occupation. If DOL implements such a rule in the final version of the regulation, the rule would address a major critique EPI has long held about the program, and which Members of Congress from both major parties have attempted to address through repeatedly proposed legislation that was first introduced nearly two decades ago.

It must also be noted at the outset of these comments that recent actions taken by DOL with respect to wages for migrant workers in temporary work visa programs have been inconsistent and confusing. While DOL is considering action proposed in this NPRM that will raise wage rates closer to true market rates for migrant workers in the H-1B, H-1B1, and E-3 visa programs, as well as those with labor certifications for EB-2 and EB-3 green cards, it is important to note that in October of 2025, DOL issued a new wage rule for the H-2A program that will cut wages dramatically for the migrant farmworkers in that program and unfairly charge them for lodging2—which, as EPI has estimated—will lead to a pay cut of roughly $2 billion for H-2A farmworkers and $3 billion for U.S. farmworkers per year.3 DOL should issue regulations that lead to improved labor standards and fair wages for all work visa programs, and not treat workers differently based on their education levels, occupations, and nationalities. All temporary migrant workers deserve to be paid fairly for their work, and no work visa programs should operate as loopholes that allow employers to legally underpay migrant workers.

The NPRM is an improvement on the status quo but DOL should amend the proposal to better protect workers

In general, the NPRM improves upon the current wage structure but should be further enhanced to better protect workers and align the program with congressional intent and the goals of the H-1B statute. The principal change made by the NPRM is to update the four prevailing wage levels required in the H-1B, H-1B1, and E-3 visa programs—temporary work visa programs for college-educated migrant workers—setting levels at higher percentiles in the Occupational Employment and Wage Statistics (OEWS) survey distribution of wages, in order to more adequately reflect market wage rates in the U.S. labor market. The NPRM also applies the new wage rates/percentiles to the permanent labor certification requirements for employment-based (EB) green cards in the EB-2 and EB-3 preference categories (sometimes referred to as the PERM process).4

The current and newly proposed wage level percentiles are as follows:

Table 1

As we have detailed in published research,5 the two lowest wage levels in the current wage computation method are below the local median wage according to the occupation and local area based on DOL wage survey data in the OEWS, allowing employers to undercut U.S. wage standards. The NPRM sets the lowest wage level at the 34^th percentile, previously the Level II wage, thereby continuing to permit employers to pay H-1B workers at below-market wage rates—but not at the absurdly low levels allowed by the current Level I wage at the 17^th percentile.

DOL’s faulty prevailing wage computation has cost foreign-born workers at least $6.56 billion annually (see NPRM Exhibit 1). Even that is likely to be a serious underestimate for two reasons. First, it does not account for the losses suffered by U.S. workers and students who have had their wages, job opportunities, and career development suppressed and undermined as a result of the current wage methodology. Second, it does not estimate the costs incurred due to foreign-born workers’ weakened bargaining power vis-à-vis their employment through nonimmigrant visa programs. Employers exert much more control over visa workers than U.S. workers and permanent residents. Foreign-born workers on nonimmigrant visas have less opportunity to, and are far less likely to, switch jobs. Switching jobs, or the threat of switching jobs, is fundamental to any worker’s ability to demand higher wages and better working conditions. Professor George Borjas estimates that, in fiscal year (FY) 2024, visa holders had an annual separation rate of 9.4%, less than half of comparable U.S. workers.6 Workers also face dire circumstances should they be terminated. They must find a new job within 60 days or else leave the United States. All these conditions place foreign-born workers in the H-1B, H-1B1, and E-3 visa programs in a much weaker position than similarly situated U.S. counterparts when bargaining for wages and working conditions. Simply put, foreign-born visa workers have fewer employment rights than U.S. citizens and permanent residents, and employers rationally take advantage of their relatively weak position when setting employment terms. Further, the agency has never enforced the Labor Condition Application’s (LCA) Working Conditions attestation, where employers promise to “not adversely affect the working conditions of workers similarly employed,” so employers disregard it.

In addition, the ability of H-1B workers to become lawful permanent residents and remain in the United States is entirely up to the whims of their employers. Even after working for an employer for six years in H-1B status, the employer has the power to decide if an H-1B worker can remain in the country—in many cases after an H-1B worker has established firm roots in the United States. That power keeps H-1B workers from complaining and asserting their employment rights. That leaves H-1B workers in a difficult position where they might decide, rationally, to abandon any demands for higher wages and better working conditions in exchange for the possibility of being sponsored for lawful permanent residence.

Prevailing wages must be raised sufficiently to compensate for this government-created labor market distortion, to protect both foreign-born workers with nonimmigrant visas and U.S. workers who already reside in the United States. 

DOL’s proposal to increase the wage-level percentiles is the best approach. It is straightforward and understandable to implement. The effects are easily modeled. Employers can respond to it predictably and effectively. It will improve the quality and skill mix of the pool of workers who are issued visas, pay those workers fairer salaries, and have fewer adverse impacts on the domestic workforce and labor supply. Recent results reported by United States Citizenship and Immigration Services (USCIS), from the fiscal year (FY) 2027 H-1B lottery, the first to use the new wage-level weighting process, show that a large majority of H-1B registrations selected met at least the 34th percentile threshold, 82%, while also increasing the share of F-1 advanced degree graduates selected from 57% to 71.5%.7 The latter demonstrates that concerns about this proposal shutting off the foreign student pipeline are overblown and misguided.

However, as noted above, the increases don’t go far enough. We believe that the Level I wage should be set no lower than the median (50th percentile) to effectively adjust for the non-compensated effects of limited job-switching, an absent or ineffective labor market test, weaker bargaining position, and non-enforcement of the actual wage requirement. Recent college graduates, especially those earning degrees in computer science and computer engineering, are facing the highest unemployment rates amongst all majors according to analysis by the New York Federal Reserve Bank, and the worst job market in recent memory according to dozens of media accounts.89 Most analysts and executives predict that artificial intelligence (AI) will only make that labor market segment even worse. Major firms have laid off thousands of workers, citing AI the reason they need fewer workers. Many of those same firms employ thousands of H-1B workers. AI is predicted to reduce labor demand especially of recent graduates, the very U.S. workers competing for Level I jobs. The rules should ensure that workers assigned at Level I wages have truly special skills and will not undercut opportunities for recent university graduates.

Analysis of the NPRM: “Improving Wage Protections for the Temporary and Permanent Employment of Certain Foreign Nationals in the United States”

1. Raising wages for H-1B workers and permanent labor certifications will benefit migrant workers and protect wage standards for U.S. workers

For years, H-1B employers have been allowed to pay their H-1B workers at wage rates that do not reflect local market rates, by having an option to pay them at the two lowest permitted wage levels. Our 2020 report discusses the available data, the mechanics of the current rule, and why it is important to modify the H-1B wage levels to adequately reflect market wages and ensure that H-1B workers are paid fairly, and to preserve U.S. wage standards.10 In the report, we recommend that DOL prohibit any H-1B job from being certified at a wage that is below the local median for the occupation and region. In that respect, by proposing to set the lowest wage level (Level I) at the 34^th percentile, DOL’s NPRM fails to do enough to protect wage standards in H-1B jobs. In the report we also recommend that DOL prohibit downward pressure on wages at the national level by requiring that every H-1B job be certified at a wage that is no lower than the national median wage for the occupation.

Many commentators on this NPRM, especially from the business community, including universities, are likely to claim that raising wages for migrant workers and safeguarding U.S. wage standards will harm the U.S. economy. When the misleading rhetoric is stripped away, the employers who oppose higher wage percentiles for H-1B, H-1B1, and E-3 visas, and EB-2 and EB-3 green cards, are simply claiming, in essence, that employers will only hire workers in the LCA and PERM programs if they are underpaid relative to similarly situated U.S. workers, and portray higher wages as an obstacle to migration or to the hiring of adequate talent that will prevent them from being successful and innovating.

Accepting this argument leads to a race to the bottom in terms of labor standards and excuses the co-optation of the immigration system in order to pad corporate profits. And such a line of argumentation is not supported by the available evidence. In fact, many advocates on all sides of the current H-1B debate now agree that the current H-1B wage rules are undercutting U.S. wage standards and should be updated. Even previous staunch defenders of the status quo, such as those representing or funded by the tech industry, as well as representatives of major employer associations, now admit that U.S. wages and U.S. workers are being undercut via the current prevailing wage rule.11

Adequate labor standards are never a barrier to migration or economic success—instead, they are a prerequisite to fair treatment for the migrant workers who are recruited by employers into the U.S. labor market and similarly situated U.S. workers.

Under the current rule, the wages of H-1B workers are being kept artificially low. The higher wage levels in DOL’s NPRM are more reasonable and closer to reflecting market wages in particular occupations and specific geographic regions. In other words, DOL’s proposal will push wage levels toward market wages, meaning it will increase labor market efficiency. It will also improve the quality and skill mix of the pool of foreign-born workers who are hired, increasing the productivity and innovation spillovers that skilled immigration promises.

2. DOL should raise the wage percentiles so that Level I is set no lower than the 50^th percentile of total wages surveyed in an occupation and region and prohibit any LCA or PERM approval for a wage that is lower than the national average for the occupation

The purpose of the H-1B and related programs is to “help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce.”12 Specialized skills should command high wages; such skills are typically a function of inherent capability, education level, and experience. It would be reasonable to expect that these workers should receive wages higher than the local median wage. One would therefore expect most H-1B positions to be assigned as Level IV (the only current wage level above the median), but as DOL and USCIS data show, H-1B employers as a whole assign only a very small minority of H-1B positions as Level IV, usually roughly 15% or less in recent fiscal years, while as DOL notes in the NPRM, 63% of H-1B positions were assigned at Levels I and II. For all LCA programs, DOL notes in the NPRM that in FY 2024, 16% of all LCA positions were certified at Level IV. At the USCIS petition level, Level IV wages are even less common: data disclosed by USCIS shows that in 2019 and 2020, only 4% of approved petitions for new employment under the regular cap were assigned at Level IV and only 2% of approved new H-1B petitions under the advanced degree exemption cap were assigned at Level IV.13 We also know from more recent data from DHS that the five-year average of H-1B registrations at Level IV was just 5% over the FY 2020 to 2024 period.14

The data presented in our reports over the past decade and a half and more recently, the data reported by USCIS on the distribution of H-1B petitions by wage level, all point to the obvious fact that nearly all H-1B employers, but especially the largest employers, use the H-1B program either to hire relatively lower-wage workers (relative to the wages paid to other workers in their occupation) who possess ordinary skills or to hire skilled workers and pay them less than the true market value of their work. Either possibility raises important policy questions about the use and allocation of H-1B visas.

By setting two of the H-1B prevailing wage levels so low relative to the median and not requiring that firms pay at least market wages to H-1B workers, DOL has incentivized firms to earn extraordinary profits by legally hiring much-lower-paid H-1B workers instead of workers earning at least the local median wage. The fact that firms earn those profits through poorly crafted wage rules and by underpaying H-1B workers—instead of by offering a better or more innovative product or service—means DOL has, in effect, made wage arbitrage a feature of the H-1B program. And as the wage-level data we have reported on and cited here clearly shows, nearly all H-1B employers are exploiting these H-1B wage rules in order to pay below-median wages.15 We believe the evidence is clear that these firms are not using the H-1B program sparingly to hire truly specialized workers, nor are they using it only when U.S. workers are unavailable. Given the business models and occupations, it is likely that the H-1B1 and E-3 programs are being abused similarly.

So how should DOL set a wage rule that guards against this and complies with the statutory requirement to prevent adverse effects on wages and working conditions?

The existing statutory language that sets out the H-1B prevailing wage requires four H-1B wage levels, but it does not prescribe specific percentiles, and no law requires DOL to set any of these prevailing wage levels below the local median wage. To ensure that H-1B workers possess specialized skills and are fairly paid, and to protect local wage standards and eliminate wage arbitrage as a feature of the H-1B program, DOL should issue a final rule that sets the lowest (Level I) wage for the LCA programs and EB-2 and EB-3 green cards at the 50th percentile for the occupation and local area, at least, and require that wage offers to workers in the LCA and EB-2 and EB-3 programs never be lower than the national median wage for the occupation, in order to prevent downward pressure on wages nationwide.

Requiring and enforcing above-median wages for H-1B and other LCA and PERM program workers would disincentivize the hiring of workers with nonimmigrant visas and green cards as a money-saving exercise, ensuring that companies will use the program as intended—i.e., to bring in workers who have special skills—instead of using them as a way to hire underpaid indentured workers for jobs that require at least a college degree.

3. DOL should set the updated wage percentiles at the 50^th, 62^nd, 75^th, and 90^th percentiles according to the total surveyed wages for the occupation and local area in the OEWS

As noted and discussed above, the lowest wage level, Level I, should be set no lower than at the 50^th percentile. Instead of the proposed four wage levels in the NPRM, DOL should set the lowest wage level, Level I, at the median wage (at the 50^th percentile), Level II at the 62^nd percentile, Level III at the 75^th percentile, and Level IV at the 90^th percentile—according to the overall distribution of OEWS wages for each occupation and region. (See table below.)

Table 2

These levels would ensure that no LCA or EB-2 or EB-3 positions are certified at a wage that is below the overall local median wage for an occupation, which in turn will prevent downward pressure on U.S. wage rates in such occupations. An additional benefit of using the 50^th, 62^nd, 75^th, and 90^th percentiles, as DOL points out, is “that they are close to dividing the upper half of the distribution equally.”16

4. DOL’s experience benchmarking proposal is inferior to the NPRM’s core proposal on wage levels and should not be implemented

The NPRM requests comments on ‘experience benchmarking’ as an alternative computational method to the core proposal of Level I at the 34^th percentile, Level II at the 52^nd, Level III at the 70^th, and Level IV at the 88^th percentile, based on the overall OEWS wages by occupation and region. We believe that this experience benchmarking alternative is significantly inferior to the core proposal and urge DOL to reject it for four main reasons. First, the methodological description is insufficient to evaluate, with just two pages of text. This is especially troublesome since it is an entirely novel method of setting prevailing wages that has never been rigorously tested or examined. It will impact literally millions of workers and hundreds of thousands of employers. To our knowledge, Mincer equations have never been used to this large an extent for setting wages in any government program. Second, the data necessary to calculate prevailing wages do not exist; they must be synthesized through estimation procedures after marrying two distinct surveys that were never designed for these purposes. Are the sample sizes sufficient? There’s no exploration of these potential flaws in the NPRM. Third, the method biases against women. The method does not directly measure experience; instead, it estimates experience by the age of the candidate. Women are more likely than men to have gaps in their labor force participation. The agency does not provide a method for adjusting the calculations based on gender. Fourth, this method would surely fuel age discrimination by allowing firms to legally pay younger H-1B workers less than U.S. workers doing the same job. Professor Norman Matloff, one of the leading scholars of the H-1B program, has repeatedly expressed concerns that firms prefer to hire H-1B workers because they are younger, and therefore lower-paid, than equivalent Americans.17 The government would be endorsing such behavior by adopting experience benchmarking.

More broadly, adopting benchmarking to set prevailing wages rests on the assumption that labor markets are highly segregated by age and educational attainment. Is it true that a 28-year-old does not compete with a 35-year-old? Is it true that someone with a master’s degree does not compete with someone with a bachelor’s degree? The DOL provides no evidence to test this hypothesis with a single occupation or example, let alone whether it would hold across the roughly 400 occupations eligible for visa programs covered by this NPRM.

The example provided in the NPRM, of an accountant working in Dayton, Ohio, illustrates the difficulty for anyone to assess the accuracy of the procedure.

If ACS data and Mincer wage equation estimated that U.S. accountants with 10 years of experience and a master’s degree typically earn 20 percent more than the median accountant nationwide, the Experienced Benchmarked ratio for that education-experience combination in accounting would be expressed as a wage premia factor of 1.2. Then, to compute the Level I prevailing wage for an employer seeking visa labor certification to employ an alien worker as an accountant in Dayton, Ohio, with 10 years of experience and a master’s degree, the Department would take the OEWS 50th percentile for accountants in the Dayton MSA (currently $78,710) and multiply it by 1.2, yielding an experience-benchmarked Level I prevailing wage of $94,452. The Level II prevailing wage would apply the same 1.2 ratio to the OEWS 62nd percentile; Level III to the 75th percentile; and Level IV to the 90th percentile.18

This hypothetical example presents several shortcomings.

First, we encounter problems with identifying the data. The NPRM reports the OEWS 50^th percentile wage in Dayton MSA of $78,710. We are unable to validate this wage using the OFLC Wage Search page.19 The OEWS 50^th percentile wage (current Level III) for the occupation is shown below, with the results listed for three different years of data available in the database:

Occupations: SOC 13-2011.00 – Accountants and Auditors
Location: Dayton OH BLS Areas Montgomery County
Series: All Industries

7/2023-6/2024 Level III Wage: $77,251.00
7/2024-6/2025 Level III Wage: $82,576.00
7/2025-6/2026 Level III Wage: $86,403.00

Further, based on the absence of data and sparse description of the methodology, there’s no way for us, or anyone else, to test or examine the method used to calculate the wage premia/discount using the Mincer equations. The “hypothetical” example claims a premia of 20%, but it is unclear whether this result comes from real calculation or if it’s a fabrication created to illustrate a point. If it is the latter, that raises serious questions about the agency’s ability to implement experience benchmarking across hundreds of occupations, thousands of locations, four skill levels, and a half-dozen educational levels.

More importantly, is the example, and its wage outcomes, representative of the universe of covered workers and the U.S. workers they compete with? The evidence shows that this hypothetical example is neither typical of H-1B workers nor their U.S. counterparts. The description of experience benchmarking does not investigate its implications, but such testing is fundamental to validating the method across occupations, locations, and skill levels. The hypothetical worker has 10 years of experience, which, if they had no gaps in labor force participation, would put them at 34 years old. A 34-year-old worker is older than most new H-1B workers approved for initial employment, ranking near the 68^th percentile by age.20 We also know that this worker is not typical of U.S. accountants. Most practicing accountants hold no more than a bachelor’s degree, 59%, and are older—with a median age of 45—than this candidate.21 The example raises many more questions than it answers.

The median age of all H-1B workers approved for initial employment is approximately 31, whereas the median age of an American worker in an H-1B eligible occupation is approximately 40, even in STEM occupations.22 H-1B workers are generally significantly younger than the typical U.S. worker with whom they compete. Experience benchmarking would favor H-1B workers by offering them a significant wage discount, based on the Mincer method, over the U.S. workers with whom they compete. The upshot is that experience benchmarking would surely fuel age discrimination in these labor markets.

It is likely that experience benchmarking would yield substantial wage discounts (premia ratios <1.0) for H-1B workers, compared with the NPRM’s core approach. But we simply do not know because DOL has not compared the wage outcomes between experience benchmarking and raising the wage level percentiles. DOL has not published experience benchmarking wage tables for every occupation, geography, skill level, experience, and education.

One think tank, the Institute for Progress (IFP), a supporter of the experience benchmarking alternative, attempted to simulate the method using FY 2024 approved petitions and found that experience benchmarking wages for most H-1B workers are substantially lower than the NPRM’s core proposal. Contrary to IFP, we believe experience benchmarking should be rejected, in part for that reason. See its report, specifically the scatterplot chart “Blind Benchmarking misses underpaid H-1B workers” on page 20, where the number of red dots (i.e., experience benchmarking yields a lower prevailing wage than NPRM core proposal) far outnumbers the green dots (i.e., experience benchmarking yields a higher prevailing wage than NPRM core proposal).23 Even these analysts admit they don’t know whether their calculations are consistent with DOL’s sparse description of experience benchmarking. If this think tank’s analysis is roughly correct or on the right track, then experience benchmarking will yield much lower prevailing wages than the core NPRM proposal. If this is true, then the experience benchmarking method undermines the goals of this rulemaking.

In its justification for considering experience benchmarking, the NPRM states that “the methodology employed under the current rule may allow positions to be classified at wage levels that are less comparable to the actual education and experience of the alien worker.” Experience benchmarking, on the other hand, would “address this limitation by comparing the sponsored alien worker’s wage to the wages earned by U.S. workers with comparable education and experience…”24

But elsewhere, the NPRM undermines the case for experience benchmarking by noting that educational attainment is often a poor determinant of wages:

an examination of the top end of the wage distribution within the H–1B program shows that, for H–1B nonimmigrants with graduate and bachelor’s degrees, the association between education and income level begins to break down to some extent. An analysis of the highest earners within the H–1B program reveals that H–1B workers—particularly those with bachelor’s and graduate degrees—can be among the most skilled and capable in their fields. Interestingly, at this top end of the wage distribution, the typical link between education level and income begins to weaken. Among the most highly compensated H–1B workers, the higher the income level, the more likely the alien worker only has a bachelor’s degree.25 (Emphasis added.)

While skill-level misclassification is a major problem, experience benchmarking is the wrong solution because it creates new, unnecessary loopholes. Instead, as we describe below, we recommend that you require employers document their Prevailing Wage Determination (PWD) aligned with the National Prevailing Wage Center (NPWC) guidance and provide it for inspection.

The NPRM’s core proposal—the 34^th, 52^nd, 70^th, and 88^th percentiles based on the overall OEWS wages by occupation and region—coupled with skill classification oversight and accountability, better achieves the program goals than the experience benchmarking proposal discussed in the NPRM.

5. DOL should calculate an additional amount of compensation based on available data on the cost of benefits for workers in private industry and add a reasonable amount to the required prevailing wage

While we believe utilizing the OEWS data set and wage percentiles within the distribution is reasonable and preferable to other data sources and methods, the OEWS falls very short in terms of providing a holistic and realistic picture of what U.S. workers earn in H-1B occupations, as well as those in other LCA programs and PERM programs, by virtue of not including fringe benefits. We urge that DOL also calculate an additional amount of compensation based on available data on the cost of benefits for workers in private industry. If employers do not have to provide fringe benefits to the college-educated migrant workers they recruit or reasonable compensation that accounts for those fringe benefits, that will result in employers underpaying or undercompensating workers with visas vis-à-vis their U.S. worker counterparts, thereby causing adverse effects on workers in occupations covered by H-1B and the other LCA programs. The fissuring of the U.S. workforce has been abetted in part by employers practicing benefits’ arbitrage—in other words, employers seeking a workforce they do not need to provide benefits for—the H-1B, H-1B1, E-3, EB-2, and EB-3 program should not facilitate it.

Davis Bacon and Service Contract Act wage determinations—which are both valid wage sources for determining H-1B wage rates under current H-1B rules—include an additional hourly monetary value that is owed to the worker in “fringe benefits.” Under both Acts, the employer must pay the fringe benefits either in the form of a permissible fringe benefit listed by the applicable Act, or any combination of benefits thereof, or with an equivalent cash payment.26 The lack of any fringe benefits in OEWS prevailing wage determinations27 constitutes a severe deficiency in the OEWS wage data that conflicts with and undermines the statutory requirement that the H-1B prevailing wage will not adversely affect the wages and working conditions of similarly employed U.S. workers. 

Reliance on the OEWS to determine prevailing wages—without an adjustment for fringe benefits—is not an adequate method to set prevailing wages for LCA and PERM programs. If the prevailing wages and benefits for a particular occupation in a particular Metropolitan Statistical Area (MSA) are, for example, $30 per hour plus $10 per hour in leave, pension, and health benefit costs, but DOL determines the prevailing wage to be simply $30, U.S. workers will be adversely impacted. Employers will be encouraged to hire H-1B workers instead of U.S. workers, saving themselves $10 in benefit costs per hour and putting downward pressure on the locally prevailing compensation. Hiring H-1B workers at $30 an hour for example, with no benefits, would allow employers to underprice labor by 30%—which is the average benefit share of total compensation costs for private industry workers28—and it could encourage employers to replace U.S. workers with H-1B workers, or hire H-1B workers instead of U.S. workers, since employers are not required to recruit and hire U.S. workers before hiring H-1B workers. H-1B workers and those employed through other LCA programs cannot be expected to complain about this or have the bargaining power to negotiate adequate fringe benefits, because their employers control and have near-total power over their immigration status, and some workers will be also willing to accept the lower compensation, because it will likely be far more than they could earn in their country of origin.

BLS already collects the necessary data to determine the appropriate amount of fringe benefits that should be required as a supplement to the OEWS wages used to set a prevailing wage. The Employer Costs for Employee Compensation (ECEC) report from the Bureau of Labor Statistics (BLS) “provides the average employer cost for wages and salaries as well as benefits per employee hour worked” for workers in the civilian economy.29 The ECEC reports the total average wages and benefits paid by employers and lists these data as they correspond to broad occupational employment categories. These data are also differentiated according to the average amount paid for the major categories of fringe benefits: paid leave, supplemental pay, insurance, retirement and savings and legally required benefits. The ECEC also reports the average total compensation, wages and salaries, and total costs of fringe benefits paid by employers, broken down by geographic region, census division, and locality.30

Using the aforementioned data sets from the ECEC, DOL can determine the appropriate level of fringe benefits that must be offered and paid to LCA and PERM program workers. The ECEC provides data on health and retirement benefits, and wages and wage-related pay such as paid leave and supplemental pay. The wages reflected in the OEWS survey capture the wages and wage-related parts of total compensation. Employers paying wages will already be paying the ‘legally required’ payroll taxes. Therefore, the compensation missing from the OEWS wage rates is the cost of retirement and health benefits, which are about 11% of private sector compensation. The amount of pay reflecting these benefits that employers of LCA and PERM program workers should pay can easily be determined by taking the ratio of the sum of health and retirement benefits to the wages paid (the sum of wages, paid leave and supplemental pay). This can be determined for a broad occupational grouping and perhaps done at a regional level as well. This ratio when multiplied by the OEWS wage shows the amount of benefits that would be comparable to that earned in the private sector or civilian sector.

Although the occupational groups and geographic areas listed and reported in the ECEC are not as numerous and detailed as those in the OEWS’s occupational categories and geographical areas, this should not deter the DOL from utilizing these data to calculate the percentage of wages that should be added on as fringe benefits to the OEWS wage. Only a percentage to be added on must be determined – not an exact dollar amount. 

Thus, the ECEC data are sufficient to provide DOL–by region and broad occupational group–an average level of insurance and retirement benefits received by employees in that job and in that area. Following precedent from the DBA and SCA, the fringe benefits could be paid by the employer through any combination of a variety of options, such as paid leave, health and life insurance, retirement and savings accounts, etc., or the employer could simply pay the benefits in cash.

Unfortunately, there is very little transparency regarding whether employers using the H-1B, H-1B1, E-3, and EB-2 and EB-3 programs are offering fringe benefits, or to what extent. A requirement that these fringe benefits be offered to LCA and PERM program workers would ensure that the wages and working conditions of similarly employed workers are not adversely impacted. 

The current DOL compliance guidance on benefits for H-1B workers encourages benefits arbitrage through outsourcing and fissuring. The Wage and Hour Division fact sheet on the subject (#62L) reads, “The employer must offer benefits to H-1B workers on the same basis, and in accordance with the same criteria, as the benefits the employer provides to similarly employed U.S. workers.”31 By defining similarly employed workers as restricted only to those directly employed by the H-1B employer, DOL is encouraging benefits arbitrage by outsourcing firms, which can offer substandard benefits to all its employees and still comply with this interpretation of the H-1B rules.

6. DOL should prohibit employer-provided private wage surveys from being used as alternative sources of wage data to set prevailing wages

Under the main H-1B prevailing wage regulation language at 20 C.F.R. §655.731, an employer has a number of options at their disposal to determine a prevailing wage for an LCA. In other words, the OEWS wage levels are just one of the available options. The employer may use one of the following sources to establish a prevailing wage: the OEWS wage, the wage set in an applicable Collective Bargaining Agreement, an applicable wage set by the Davis-Bacon Act or McNamara-O’Hara Service Contract Act, an Office of Foreign Labor Certification National Processing Center prevailing wage determination, or a wage set by an independent authoritative source or another legitimate source of wage data. However, if the employer is paying a higher wage to similarly situated U.S. workers that it already employs, then it must pay the H-1B worker same higher “actual wage,” that it is paying the U.S. worker. (Specifically defined as “the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”)

Therefore, employers do not need to use the OFLC’s calculated levels from OEWS data to determine a prevailing wage for an LCA or permanent labor certification application. The NPRM would improve the longstanding problems in how the prevailing wage is determined when using the OFLC-generated OEWS wage rates, but in the NPRM, DOL states that it considered whether to prohibit—but ultimately decided to permit—the continued use of an independent authoritative source or another legitimate source of wage data, which includes private wage surveys provided by employers and accepted by DOL. Standards for such alternative sources of wage data are described in 20 CFR § 655.731. In our 2020 report, we showed in Table 1 that in 2019, at least 9% of all certified wages for H-1B positions on LCAs were set by a private wage survey or other source accepted by the OFLC as legitimate.32

We strongly urge DOL to eliminate the use of private wage surveys provided by employers for setting wage rates in the LCA programs or for EB-2 and EB-3 green cards. While the share of LCAs approved with wages set by private wages surveys is relatively small at the moment, it is likely that the use, and abuse, of private wage surveys will expand substantially after publication of a final rule that is consistent with the wage level percentiles proposed in the NPRM. This will occur because employers will be motivated to use private surveys as a loophole to avoid paying the new higher wage percentiles.

DOL’s justification for continuing to allow private wage surveys is based on an analysis that is confusing. On the one hand, the agency claims that private surveys yield a wage 20% higher on average than the OEWS equivalent, but also says that wage surveys are necessary for niche or very specialized markets where, “occupations [are] not well represented in OEWS datasets.”33 The two claims are in contradiction. If a private wage survey is used to establish a wage in a niche job market, presumably not covered by the OEWS, then how can DOL feasibly calculate the differences? Footnote 211 in the NPRM does not provide sufficient detail to test this claim.

If DOL does not immediately eliminate the use of private surveys, it should at least ensure that usage of such surveys are rare and approved in only exceptional cases. Employers should be required to provide extensive documentation and justification for why the OEWS is an inadequate data source for determining the prevailing wage.

The recent history of the use of private wage surveys to set wages in the H-2B visa program—a temporary work visa program for lower-wage jobs outside of agriculture including in landscaping, forestry, hospitality, and construction—is instructive and should inform DOL’s review of wage surveys and other sources of wage data for setting H-1B wages. The evidence is clear in the H-2B context that when employers use private wages surveys, they primarily use them to pay lower wages than would otherwise be required.

In 2013 when DOL raised the minimum H-2B prevailing wage from the 17^th wage percentile to the mean wage for the occupation and local area, H-2B employers immediately and en masse, shifted their business model to use private wage surveys to set H-2B wage rates at below-average wage rates. Evidence revealed in federal litigation clearly suggests that the shift to the use of private wage surveys was a systematic response to higher wage rates, and one that was clearly successful. Specifically, in the nine months beginning soon after the H-2B wage rule was updated—between July 1, 2013, and March 31, 2014—employers increased their submissions of private wage surveys for H-2B prevailing wage determinations by 3,182%, as compared with the 12 months leading up to the federal court decision that invalidated the previous H-2B wage rule. In 21.1% of those prevailing wage determinations set by private wage surveys, the certified H-2B wage was lower than the previous prevailing wage system where the Level I H-2B prevailing wage was set at the 17th percentile wage by occupation and local area, according to OFLC-generated OEWS wage survey data, and 94.4% of the determinations were for a wage that was lower than the Level II wage, at the 34th percentile.34 Despite the fact that the H-2B prevailing wage has been set at the local average wage and DOL restricted the use of private wage surveys in 2015, they are still commonly used and successful at lowering wages for H-2B workers. One clear example of this which has been detailed, is a group of H-2B workers employed as crabpickers in Maryland—they earned roughly 25% less per hour than they should have been paid according to the local corresponding OEWS wage.35

The downside risk of continuing to allow private wage surveys—creating loopholes and administrative burdens—outweighs the risk to workers that the OEWS prevailing wage results in lower wages. If DOL’s calculations are accurate, employers should welcome the elimination of private wage surveys because the OEWS provides lower wage requirements and reduced costs in terms of purchasing survey data and/or conducting entirely new surveys.

7. If DOL considers permitting the use of employer provided private wage surveys, it should first conduct a detailed analysis of their usage and impact on H-1B wage rates, make the findings public, and issue a separate NPRM focused solely on private wage surveys

In order to promote transparency and comport with the statutory requirement that H-1B employers “will provide working conditions for [H-1B workers] that will not adversely affect the working conditions of workers similarly employed,”36 DOL should immediately prohibit the use of private wages surveys. However if DOL wishes to still consider their usage, DOL should conduct a study to benchmark the use of alternative wage data and especially private wage surveys against the OFLC-generated OEWS prevailing wages, to identify whether there are any systematic biases in such sources. If such biases are found, DOL could propose a new NPRM with additional guidance and safeguards to ensure that the alternative wage sources are not undermining U.S. wage standards. DOL should also conduct an analysis on the occupations that have been approved for wage setting with private wages surveys, to examine which occupations employers are claiming to be so unique that they do not fit within the definitions of over 800 occupations available in BLS’s Standard Occupational Codes, as well as analyze whether private wage surveys have negatively impacted conditions for H-1B workers and similarly situated workers.

It is important to note that, while in the aggregate, the use of private wage surveys is roughly 6.5% according to the NPRM, we know from our own reviews of LCA disclosure data that some firms rely on private wage surveys extensively. DOL should examine how private wage surveys vary across firms, industries, and occupations. Firms that rely on private wage surveys for more than 3% of the positions in their LCAs should be scrutinized and audited to ensure they are not being utilized to undercut the standards set by OEWS wage data. 

8. DOL must put measures in place that would prevent employer misclassification of H-1B workers at the wrong wage levels

As noted earlier, the NPRM requires that minimum H-1B, H-1B1, E-3, EB-2, and EB-3 salaries are set at more realistic wage rates that reflect the local market rates for the jobs they fill. While each wage level is intended to correspond to the position description, in practice the employer has substantial discretion choosing the skill level and DOL does not verify that a prevailing wage is appropriate unless a lawsuit or a complaint is filed by a worker. Such complaints are unlikely since it would require a migrant worker to blow the whistle on their own employer, the same employer that controls the worker’s visa status and ability to remain in the United States. We are unaware of any cases in which DOL has investigated an LCA-stage misclassification of an H-1B wage level, but there have been reports of, for example, H-1B employers receiving approval for LCAs that certify they will pay employees at the same prevailing wage level despite having job titles that clearly warrant different wage levels.

Simply put, employer selection of skill levels should be anchored to the actual duties of the position and verified by DOL and USCIS. There is no reason to allow employers to identify a skill level on a whim. If DOL does not fix this obvious problem, then the NPRM’s core objective of eliminating wage arbitrage will be undermined.

Skill level misclassification and inconsistencies undermine good governance of the H-1B program. Even a cursory examination of the LCA and I-129 data shows that such misclassifications, whether purposeful or inadvertent, are common. For example, positions with job titles leading with ‘senior’ are frequently misclassified as Level I. And even within the same employer, identical job titles are classified under different skill levels.

Yet the effectiveness of this NPRM hinges on ensuring that employers properly and consistently classify their positions at the correct skill level. DOL should take two actions. First, it should update and expand the NPWC’s Prevailing Wage Determination Policy Guidance.37 Second, it must hold employers accountable for their skill level selections.

The policy guidance should be rewritten and expanded so that it not only serves PWD adjudicators but also all employers, whether they use the OEWS or a private wage survey to determine the prevailing wage. The document should clarify skill level classification and serve as compliance guidance for all employers. The most recent NPWC policy guidance, published in 2009, is obviously inadequate and outdated. Employers are not effectively or consistently interpreting and identifying skill levels. The description of each skill level, Levels I through IV, consists of a single paragraph of ambiguous language. For example, how many years of experience should Level II consist of? Can an employer’s position that requires two to three years of experience ever be classified as Level I (Entry-Level)? If a worker with a master’s degree is filling a position that typically requires only a bachelor’s degree, can they be bumped up in skill level?

All employers should be required to follow the five-step Prevailing Wage Determination process outlined on pages 9 through 13 to identify the position’s skill level. Employers should be required to document and retain those records for inspection by USCIS when the I-129 petition for the LCA is filed. This will ensure consistent skill level identification within and across companies whether the firm uses the OEWS, private wage survey, a CBA, or requests a PWD.

Then USCIS should ensure that the worker being placed in the position is not overqualified in terms of education and experience for the position’s skill level.

Consider this example: A well-known firm received approval for two different LCAs at the same wage level (Level II), even though one LCA had the job title Senior Software Engineer and the other had the job title Software Engineer.38 The firm, a major employer of H-1B workers, is not accounting for differences in skill levels as evident from its own job titles when selecting the wage level for the LCA. Both engineers and senior engineers are receiving the exact same salary and wage level, and they are approved by DOL with zero scrutiny. Using the DOL Prevailing Wage Determination Policy Guidance, the LCAs in this case should be instantly flagged by identifying keywords such as senior, head, chief, and lead in job titles, and should be checked to determine whether the prevailing wage levels are appropriate. This example underscores a broader need for DOL to create a more robust compliance system to ensure employers do not misclassify workers at inappropriate wage levels. Our own cursory review has found hundreds of similar examples.

As a result, the LCA and petition process should be updated so that DOL reviews the qualifications of individual workers before USCIS approves a petition, to ensure that wage levels match up with the age, education, and experience of the workers being hired through the LCA and PERM programs. While USCIS currently performs this role to some extent, its adjudicators lack expertise in wage-and-hour issues and do not have the same mandate to protect labor standards as DOL staff. Therefore, these functions should be undertaken by the proper agency. DOL and USCIS already have a mandate to cooperate on H-1B applications and enforcement; a memorandum of understanding between the Secretaries of Homeland Security and Labor could detail a process where DOL plays a prominent role in ensuring that H-1B workers are classified at the appropriate wage levels. Published guidance from DOL on skill levels that is more detailed, clearer, and more realistic would also be helpful for everyone involved—employers and adjudicators alike.

9. DOL has failed to enforce the “actual wage” component of the H-1B prevailing wage rule and should begin enforcing it immediately

Under the prevailing wage statute, although an employer has several options at their disposal to determine a prevailing wage for an LCA, they must offer the higher of either the prevailing wage or the “actual wage,” which the corresponding regulation at 20 C.F.R. §655.731 defines as “the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”

DOL has not exercised its authority to enforce the actual wage requirement. This is a wasted opportunity for one of the most important tools DOL has at its disposal to hold employers accountable for required wages. In order to ensure that H-1B employers are not undercutting the wage rates they pay H-1B workers, DOL should immediately begin enforcing this requirement.

In late 2021, we published a report detailing how thousands of skilled migrants with H-1B visas working as subcontractors at well-known corporations like Disney, FedEx, Google, and others appear to have been underpaid by one firm to the tune of at least $95 million in one single year.39 The victims likely included not only the H-1B workers but also the U.S. workers who were either displaced or whose wages and working conditions were degraded when employers were allowed to underpay skilled migrant workers with impunity. The workers in question were employed by HCL Technologies, an India-based IT staffing firm that earned $11 billion in revenue in 2020. HCL is consistently one of the top 20 H-1B employers and appears to have engaged in the systematic and strategic wage theft of its H-1B workers by exploiting the lax to nonexistent enforcement of the actual wage requirement. According to its own internal documents, HCL targeted its new H-1B hires expressly based on the spread between what it paid its own U.S. employees versus what it pays its own H-1B workers.

The report discusses our analysis of an internal HCL document, released as part of a whistleblower lawsuit against the firm. The document suggests that HCL—and perhaps other firms with similar business models—are not paying the legally required amount that corresponds to what is being paid to U.S. worker employees at HCL. The HCL document revealed that the large-scale illegal underpayment of H-1B workers that appears to be occurring is a core part of the HCL’s competitive strategy, and likely facilitated $95 million in stolen wages from HCL’s H-1B employees in just one year. Such abuses are surely widespread among H-1B employers because DOL has done virtually nothing to ensure program integrity by enforcing the H-1B wage rules, in particular the actual wage rule.

DOL could easily begin enforcing the actual wage provision by requiring H-1B employers to submit evidence documenting the wage rates paid to U.S. workers who are similarly employed in occupations for which the employer is also hiring H-1B workers. Employers must already “keep records for how they calculate the actual wages.” To our knowledge, DOL has never initiated an investigation regarding compliance with the “actual wage” provision of the law. The DOL Secretary should exercise their authority to inspect the actual wages paid by H-1B employers. The Secretary can do so without a complaint from a worker, under their authority to certify investigations, and should do so if presented with credible evidence of violations. DOL should provide clear compliance guidance for the actual wage provision and then require that H-1B employers attest to the wage rates they pay similarly situated U.S. workers and include them in the LCA documentation, and DOL should conduct audits of employers on a regular basis to ensure compliance. The audits could begin with the employers that hire large numbers of H-1B workers, for example, those that employ more than 25 H-1B workers, as well as H-1B dependent firms.

Secondary employers should also be required to submit LCAs and evidence documenting the wage rates paid to U.S. workers in the occupations that H-1B workers will be hired for through an outsourcing firm. Otherwise, some H-1B outsourcing firms—which almost exclusively pay H-1B workers at the two lowest wage levels, and employ H-1B and L-1 workers almost exclusively—will be able to game the system by using the actual wage paid to their own employees to meet the requirement, and not the employees of the secondary employer, where the H-1B workers will be placed—and where wages paid to the U.S. workforce are likely to be higher.

10. DOL should require secondary employers of H-1B workers to attest that they will not adversely affect wages and working conditions

Outsourcing companies are using the H-1B program to underpay H-1B workers, replace U.S. workers, and send tech jobs abroad. Typically, in this scenario, H-1B workers do computer and engineering work at the office of a U.S. employer but are employed by an outsourcing company, some of which are based abroad or have major operations abroad.40 The many reported cases of U.S. workers being laid off and replaced by H-1B workers have all been facilitated by this arrangement. In multiple incidents, the H-1B workers have been hired with annual wages of around $30,000 to $40,000 less than the workers they have replaced. Before they are laid off, the U.S. workers are often forced to train their own H-1B replacements as a condition of their severance packages; this is euphemistically known as “knowledge transfer.” Major, profitable U.S. employers like Disney and Toys “R” Us—as well as public employers and institutions like the University of California and Southern California Edison—have laid off thousands of U.S. workers who were forced to train their own replacements. Eventually, many of the outsourced jobs filled by H-1B workers get moved offshore.41

Contrary to the popular narrative proffered by corporations that support expanding and deregulating the H-1B visa program—the staffing firms that use H-1B visas are not using them to keep technology jobs in the United States—instead they are using them precisely to facilitate the offshoring of as many of those jobs as they can. That is in fact, the business model of those firms. News reports, including from the New York Times and Bloomberg, have shown that outsourcing companies “game the system” in order to obtain a high share of H-1B visas, which leaves fewer available for the firms that directly employ H-1B workers.42

The outsourcing/staffing model of employment generally may increase the incidence of labor and employment law violations by separating the main beneficiary of the labor provided by H-1B workers—the third-party firm that hires the outsourcing firm, i.e. the “lead” employer—from the H-1B workers who perform the work. Firms that rely on outsourced H-1B workers are a textbook example of what former DOL Wage and Hour administrator David Weil calls a “fissured” workplace, where the relationship between the worker and the lead employer is fissured, or broken, via the use of a temp agency or subcontractor43 (in this case the temp agency or subcontractors are the H-1B outsourcing firms). Research shows that fissuring leads to a wage penalty for workers who are subcontracted, employed as temps, and work for staffing firms,44 in part because the subcontractor keeps a percentage of the wages earned by the workers. It is also common knowledge that employers use this model to avoid paying for benefits like health care, retirement funds, and to avoid liability for labor violations. Because the staffing and outsourcing model contributes to the fissuring of the labor market, it should not be allowed as part of the U.S. immigration system—not in H-1B or in any other temporary or permanent immigration programs.

One way to address the abuses of the outsourcing/staffing firms, which operate as secondary employers, would be to issue policy guidance and update the appropriate DOL ETA application forms so that secondary employers to which H-1B workers are outsourced will be required to file Labor Condition Applications with DOL. Such guidance, which was considered in 2021 but then abandoned,45 would close the loophole that allows firms like Disney and Southern California Edison to replace its U.S. employees with H-1B workers by employing them through an outsourcing firm.46 Using Disney as an example, implementing this rule would require client firms like Disney—that benefit and profit from hiring outsourcers—to acknowledge their employment relationship with H-1B workers who are employed by outsourcers like Infosys and Tata, by requiring Disney to file its own LCA. By doing so, Disney would attest that hiring the H-1B worker through the outsourcer is not adversely affecting the wages and working conditions of the Disney workforce.

11. DOL should publish Labor Condition Application and permanent labor certification data in real-time on a central database

DOL publishes detailed LCA and permanent labor certification (PERM) disclosure data, but it is typically lagged by at least one quarter, and often much longer. The agency should publish LCA and PERM public access file applications in real-time to enable U.S. workers to apply for these positions. This would enhance the integrity of the programs and better align them to their purposes by ensuring that workers hired with temporary visas and green cards are filling true labor shortages.

U.S. workers have long complained loudly that employers hide job openings from them, reserving them for visa holders and PERM applicants. Even when those jobs are advertised, as is required by the PERM labor certification process, they are often placed in obscure locations. Workers call such job advertisements “fake job postings.” A recent ProPublica investigation has referred to the practice as “The Tech Recruitment Ruse.”47

The agency already collects the data and publishes it regularly on the OFLC disclosure data. But even a one-quarter year lag time renders it useless for job seekers. Publishing it in real-time would unlock enormous value for workers at little or no cost to the government or employers.

12. DOL had the requisite legal authority to update the H-1B prevailing wage levels

As discussed in detail in our 2020 report, DOL has the requisite legal authority to change the H-1B prevailing wage levels to an appropriate rate that protects wage standards and prevents adverse effects on U.S. workers in H-1B occupations. No analyst or commentator has credibly argued otherwise. For far too long, the H-1B wage levels have been set at an artificially low level that undercuts U.S. wage standards, therefore, it is reasonable for DOL to increase the minimum wage levels so that Level I is no lower than the local median wage.

13. DOL should expand the LCA process to include a front-end screening process that reviews the labor and employment law records of employers; those that have violated certain laws in the previous five years should be prohibited from hiring through the H-1B program

In a previous comment to the Department of Homeland Security (DHS), regarding the 2023 H-1B “modernization” rule,48 we recommended that DHS should expand the H-1B Registration System to include a front-end screening process that reviews the labor and employment law records of employers. If employers have violated certain laws, they should be prohibited from hiring through the H-1B program. We further recommended that DHS should consult with DOL to develop a list of key applicable laws and operate the system jointly with DOL, and ideally, also operate the updated registration process jointly, with DOL screening employer records through the LCA process. We reiterate that recommendation here and urge DOL to take steps to exclude lawbreaking employers that violate labor, employment, and immigration laws. While we realize our comment will only be read by DOL, we nevertheless include our discussion about DHS’s role in this process because we believe DOL and DHS should work in tandem to reduce labor and employment violations in the H-1B program.

In the 2023 proposed rule, Modernizing H-2 Program Requirements, Oversight, and Worker Protections,49 DHS proposed to create or expand several additional bars to approval of new petitions filed by H-2 petitioners who have previously committed legal violations related to the H-2 programs. EPI submitted comments generally supporting the proposed changes, which were adopted as a final rule.50 Although they fail to go far enough on their own, if adequately implemented the provisions will help curb abusive employers’ exploitation of the H-2 programs and will level the playing field for employers that obey the law. EPI additionally commented that employers that commit serious violations repeatedly should be permanently banned from the H-2 programs, as they have demonstrated their inability or unwillingness to comply with the programs’ requirements.

In those comments EPI further recommended that the DHS strengthen section 214.2(h)(10)(iii)(3), which addresses violations of “any applicable employment-related laws and regulations” by expanding it to include a number of other violations and making denial of petitions mandatory—rather than discretionary—if employers have violated any of those laws in the preceding five years.51 

We believe DHS should consider similar provisions for employers seeking to hire through the H-1B program because there have been numerous credible accusations of lawbreaking against H-1B employers, as well as investigations and litigation, finding that H-1B employers and recruiters that have been guilty of wage theft, financial bondage, and even human trafficking. The reality is that DOL has limited resources and has interpreted its authority to investigate H-1B employers as constrained, and it is difficult in practice for H-1B workers to come forward and complain themselves about employer lawbreaking—because they could face retaliation and lose their status, and possibly the opportunity to become lawful permanent residents—which means DOL likely receives fewer complaints than they otherwise would. And even when DOL does receive complaints, as numerous reports have shown, DOL often lacks the resources to investigate and take action against lawbreaking employers.52

Thus, at a minimum, to keep lawbreaking employers out of the H-1B program, DHS should have its own list of legal violations and deny any petition for an employer that has violated any of the laws on the list in the preceding five years. That would act as a backstop to prevent lawbreaking employers from hiring through the H-1B program. At present, as DHS rightly points out in the November 2023 Modernizing H-2 Program NPRM, even some of the worst violators of the law are allowed to recruit and hire H-2 workers. We know that this is also the case in the H-1B program. In fact, in the H-1B program, some of the biggest users of the program are also the most egregious violators, receiving thousands of H-1B petition approvals per year. And then after they violate the law, H-1B employees are afraid to complain to authorities because their immigration status is tied to their employer, and even if they are brave enough to lodge a complaint, as noted above, DOL may lack the resources to investigate violations and hold the employer accountable.

As EPI also recommended in the H-2 NPRM, DHS should go further to implement this by also cooperating with DOL to develop a front-end screening process that takes place at the labor condition application (LCA) stage, to vet the labor and employment law records of employers before they can be allowed to hire through the H-1B program. In multiple EPI reports and in comments in response to NPRMs, EPI has made a similar proposal—namely, that a front-end screening process should be created to prohibit employers with track records of wage and hour, labor, immigration, and other legal violations from hiring through the H visa programs.

To make a front-end screening process a reality, ideally, DOL should require employers to register for eligibility to use the H-1B program at the LCA stage, so employer records on compliance with labor and employment laws can be screened up front, before getting to the registration or petition stage. DOL could set up a registration process in which employers list basic information about their business and the purported need for H-1B workers (as is already done via the DOL temporary labor certification forms). As part of that new process, employers could be required to attest, under penalty of perjury and of being banned from hiring through the H-1B and other visa programs, that they have not been found to have violated any of the listed labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking, or anti-discrimination laws during the past five years. DOL could then attempt to verify by cross-referencing enforcement data and other relevant records—and could cooperate with other worker protection agencies like the NLRB and EEOC—and ultimately certify employers that have not violated the applicable laws.

To break established patterns of abuse, employers that have violated any labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking or anti-discrimination laws should be prohibited from submitting an LCA (or having their LCA approved) and ultimately not be allowed to hire H-1B workers. Employers that have clean records and an LCA approved by DOL could then continue on with the petition process at USCIS.

Given the present and likely future reality that WHD and other worker protection agencies will continue to be vastly underfunded and understaffed,53 such a screening process on the front end of the H-1B application process could act as a useful and efficient tool to prevent legal violations without WHD having to go through lengthy and costly investigations on the back end, after workers have arrived in the United States and been robbed or otherwise exploited.

At the petition level, if a new screening process at DOL is not created that takes place before or as part of the LCA process, DHS should, at a minimum and as noted above, build on proposed section 8 C.F.R. 214.2(h)(10)(iii)(B) for H-2 petitions by creating a list of key labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking, and anti-discrimination laws, the violation of which would establish strong evidence that an employer does not treat their employees well and is unlikely to follow employment and immigration laws with respect to their H-1B employees. Although this would work best in tandem with a front-end screening process at the LCA stage, DHS could make significant progress in keeping lawbreaking employers out of the H-1B programs by mandating that any employer that has violated any of the listed laws will be prohibited from having a petition approved for hiring H-1B workers.

Another option would be for DHS to modify the existing H-1B Registration System so that it also screens the records of employers. That way DHS could use it to both manage the annual cap and to assess and certify whether employers are eligible to hire through H-1B based on their past legal violations. Employers could be required to attest, under penalty of perjury and of being banned from hiring through the H-1B and other visa programs, that they have not been found to have violated any of the listed labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking, or anti-discrimination laws during the past five years. USCIS could work to verify the employer attestation, although ideally DOL should partner with to do this, by cross-referencing DOL enforcement data and other relevant records—preferably also in partnership with other worker protection agencies like the NLRB and EEOC—and would then ultimately certify employers that have not violated the applicable laws, allowing them to continue with the registration process.

Conclusion

The H-1B visa program is the largest temporary work visa program in the United States and an important pathway into the U.S. labor market for skilled migrants from around the world—but a pathway that has serious deficiencies when it comes to the workplace rights of migrant workers and for preserving U.S. labor standards. While less is known about the other LCA programs, H-1B1 and E-3, they have even fewer applicable rules in place to protect workers, which likely means they are having similar impacts on worker rights and labor standards. By issuing this NPRM, DOL has taken an important first step towards reversing decades of artificially depressed wage rates for H-1B workers, and for making the prevailing wage methodology rules consistent across the other LCA programs and for EB-2 and EB-3 green cards. This will benefit other similarly situated workers and simplify and streamline the prevailing wage determination process. Nevertheless, as our comment recommends, more must be done—in this rulemaking and other executive actions—to improve the effectiveness of the updated prevailing wage rates and on enforcement in the LCA and PERM programs, in order to safeguard U.S. wages and labor standards.

Daniel Costa
Director of Immigration Law and Policy Research
Economic Policy Institute
Washington, DC

Ron Hira, Ph.D., P.E.
Associate Professor
Department of Political Science
Howard University

Endnotes

1. See for example, Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020; Ron Hira and Daniel Costa, New evidence of widespread wage theft in the H-1B visa program: Corporate document reveals how tech firms ignore the law and systematically rob migrant workers, Economic Policy Institute, December 9, 2021.

2. Employment and Training Administration, Adverse Effect Wage Rate Methodology for the Temporary Employment of H-2A Nonimmigrants in Non-Range Occupations in the United States, Interim Final Rule, request for comments, U.S. Department of Labor, 20 CFR Part 655, DOL Docket No. ETA-2025-0008, RIN 1205-AC24 (October 2, 2025).

3. Daniel Costa and Ben Zipperer, “Trump’s new H-2A wage rule will radically cut the wages of all farmworkers: New estimates show farmworkers stand to lose $4.4 to $5.4 billion annually under DOL’s updated Adverse Effect Wage Rate,” Working Economics blog (Economic Policy Institute) November 26, 2025; for additional discussion and background, see Daniel Costa, “EPI comment on DOL’s 2025 Interim Final Rule modifying the AEWR methodology for H-2A farmworkers,” Public Comments, Economic Policy Institute, December 1, 2025.

4. PERM stands for Program Electronic Management Review, and is the first step for employers who wish to sponsor an employee for permanent residence in the United States through the EB-2 and EB-3 categories.

5. See for example, Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020.

6. George Borjas, The H-1B Wage Gap, Visa Fees, and Employer Demand, NBER working paper 34793, March 2026. See pages 3-4.

7. USCIS, X.com post, May 21, 2026 at 1:37 PM, https://x.com/USCIS/status/2057561453373399339

8. https://www.newyorkfed.org/research/college-labor-market#–:explore:outcomes-by-major

9. Here are just a sample of some of the recent news accounts in major media outlets: Katherine Bindley, “The ‘Great Hesitation’ That’s Making It Harder to Get a Tech Job,” Wall Street Journal, May 18, 2025; Christopher Rugaber, “Unemployment among young college graduates outpaces overall US joblessness rate,” Associated Press, June 26, 2025; Sydney Ember, “Young Graduates Face the Grimmest Job Market in Years,” NY Times, March 24, 2026.

10. Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020.

11. See for example, Connor O’Brien, Jeremy Neufeld, and Amy Nice, A Prescription for Fixing the Prevailing Wage System: Replacing Blind Benchmarking with Experience Benchmarking, Institute for Progress, March 27, 2026.

12. See Overview section in Wage and Hour Division, “H-1B Program,” web page on the U.S. Department of Labor website.

13. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, June 8, 2021.

14. See Table 12 in Department of Homeland Security, Weighted Selection Process for Registrants and Petitioners Seeking To File Cap-Subject H–1B Petitions, Notice of proposed rulemaking, CIS Docket No. 2820-25, DHS Docket No. USCIS-2025-0040, RIN: 1615-AD01 (September 24, 2026).

15. See for example, Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.

16. NPRM at 15490.

17. Norman Matloff, “H-1B Visas Are Transforming America,” Compact, October 8, 2025; Norman Matloff, Are foreign students the ‘best and brightest’? Data and implications for immigration policy, Economic Policy Institute, Briefing Paper #356, February 28, 2013.

18. NPRM at 15490.

19. Office of Foreign Labor Certification, OFLC Wage Search, last visited on May 23, 2026.

20. United States Citizenship and Immigration Services, Characteristics of H-1B Specialty Occupation Workers, Fiscal Year 2024 Annual Report to Congress, October 1, 2023 – September 30, 2024, U.S. Department of Homeland Security, April 29, 2025.

21. U.S. Bureau of Labor Statistics, Table 5.3 Educational attainment for workers 25 years and older by detailed occupation, 2022–23 (Percent), Employment Projections, U.S. Department of Labor, retrieved May 23, 2026; U.S. Bureau of Labor Statistics, Table 11b. Employed people by detailed occupation and age, Labor Force Statistics from the Current Population Survey, U.S. Department of Labor, retrieved May 23, 2026.

22. U.S. Bureau of Labor Statistics, Table 11b. Employed people by detailed occupation and age, Labor Force Statistics from the Current Population Survey, U.S. Department of Labor, retrieved May 23, 2026.

23. Connor O’Brien, Jeremy Neufeld, and Amy Nice, A Prescription for Fixing the Prevailing Wage System: Replacing Blind Benchmarking with Experience Benchmarking, Institute for Progress, March 27, 2026. PDF available here: https://ifp.org/wp-content/uploads/IFP_Prevailing_Wage_Experience_Benchmarking_.pdf

24. NPRM at 15490.

25. NPRM at 15474.

26. For the Davis-Bacon Act, see 40 USC §3141(2); and the Service Contract Act at 41 USC §351(a)(2).

27. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Wage Statistics, Frequently Asked Questions, at Section C, Number 8.

28. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2025, March 20, 2026.

29. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2025, March 20, 2026.

30. See tables, Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2025, March 20, 2026.

31. Wage and Hour Division, “Fact Sheet #62L: What benefits must be offered to H-1B workers,” U.S. Department of Labor, Revised July 2008.

32. Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020.

33. NPRM at 15479.

34. See discussion of the 2013 Interim Final Rule setting the H-2B prevailing wage methodology in Daniel Costa, The H-2B temporary foreign worker program: For labor shortages or cheap, temporary labor? Economic Policy Institute, January 19, 2016.

35. Daniel Costa, “H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage,” Working Economics (Economic Policy Institute blog), May 26, 2017.

36. 8 U.S.C. 1182 (n)(1)(A)(i)(II).

37. Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, U.S. Department of Labor, Revised November 2009.

38. Ethan Baron, “H-1B: Uber snatches up more foreign-worker visas as it lays off hundreds of employees,” Mercury News, October 17, 2019.

39. Ron Hira and Daniel Costa, New evidence of widespread wage theft in the H-1B visa program: Corporate document reveals how tech firms ignore the law and systematically rob migrant workers, Economic Policy Institute, December 9, 2021. See also, news coverage of our report, for example, Lauren Kaori Gurley, “Analysis Claims Migrant Tech Workers Have Been Underpaid by Tens of Millions,” Vice News, December 9, 2021.

40. See for example, Senator Richard Durbin, “How American Jobs are Outsourced,” YouTube.com video, April 16, 2016.

41. See for example, Stef Kight, “U.S. companies are forcing workers to train their own foreign replacements,” Axios, December 29, 2019; Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015; Julia Preston, “Toys ‘R’ Us Brings Temporary Foreign Workers to U.S. to Move Jobs Overseas,” New York Times, September 29, 2015; Michael Hiltzik, “How the University of California Exploited a Visa Loophole to Move Tech Jobs to India,” Los Angeles Times, January 6, 2017; Patrick Thibodeau, “Southern California Edison IT Workers ‘Beyond Furious’ over H-1B Replacements,” Computerworld, February 5, 2015.

42. Eric Fan, Zachary Mider, Denise Lu, and Marie Patino, “How thousands of middlemen are gaming the H-1B program,” Bloomberg, July 31, 2024; Julia Preston, “Large Companies Game H-1B Visa Program, Costing the U.S. Jobs,” New York Times, November 10, 2015.

43. David Weil, The Fissured Workplace: How Work Became So Bad for So Many and What Can Be Done to Improve It, Harvard, 2014.

44. A number of studies show a wage penalty for subcontracted/outsourced workers. For example, see Arindrajit Dube and Ethan Kaplan, “Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards,” Cornell University ILR Review. January 1, 2010); Deborah Goldschmidt and Johannes Schmieder, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), 2017, pages 1165-1217; Andres Drenik, Simon Jäger, Pascuel Plotkin, and Benjamin Schoefer “Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data,” Econometrics Laboratory, University of California, Berkeley, September 2020.

45. Employment and Training Administration, U.S. Department of Labor, “U.S. Department of Labor revises interpretation, issues new guidance clarifying filing, compliance requirements in H-1B visa program,” Press Release Number 21-97-NAT, January 15, 2021.

46. Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015.

47. Alec MacGillis, “The Tech Recruitment Ruse That Has Avoided Trump’s Crackdown on Immigration,” ProPublica, June 3, 2025.

48. Daniel Costa and Ron Hira, “EPI comments on DHS’s “Modernizing H-1B” proposed rule,” Public Comments, Economic Policy Institute, December 22, 2023; commenting on U.S. Department of Homeland Security, Modernizing H-1B Requirements, Providing Flexibility in the F-1 Program, and Program Improvements Affecting Other Nonimmigrant Workers, Notice of proposed rulemaking, CIS No. 2745-23, DHS Docket No. USCIS-2023-0005, RIN: 1615-AC70, 88 Fed. Reg. 72870 (October 23, 2023).

49. U.S. Department of Homeland Security, Modernizing H-2 Program Requirements, Oversight, and Worker Protections, Notice of Proposed Rulemaking, CIS No. 2740-23 and DHS Docket No. USCIS-2023-0012, RIN: 1615-AC76, 88 Fed. Reg. 65040 (September 20, 2023).

50. U.S. Department of Homeland Security, Modernizing H-2 Program Requirements, Oversight, and Worker Protections, Final Rule, CIS No. 2740-23; DHS Docket No. USCIS-2023-0012, RIN 1615-AC76, 89 Fed Reg. 103202 (December 18, 2024).

51. See EPI comment on the H-2 programs in the comment submitted to DHS in November 2023; Daniel Costa, EPI comments on DHS’s proposed rule on “Modernizing H-2 Program Requirements, Oversight, and Worker Protections,” Economic Policy Institute, November 20, 2023.

52. See for example, Rebecca Rainey, “Inadequate Labor Department Resources Stymie Enforcement Efforts,” Bloomberg Law, November 7, 2023.

53. See for example, AFL-CIO, Workers’ Rights Ice’d Out, February 25, 2026; Rebecca Rainey, “Trump’s Federal Workforce Cuts Hit Labor Department Enforcement,” Bloomberg Law, Feb. 24, 2025; Daniel Costa, Josh Bivens, Ben Zipperer, and Monique Morrissey, The U.S. benefits from immigration but policy reforms needed to maximize gains: Recommendations and a review of key issues to ensure fair wages and labor standards for all workers, October 4, 2024 (see Figure J); Daniel Costa and Philip Martin, Record-low number of federal wage and hour investigations of farms in 2022: Congress must increase funding for labor standards enforcement to protect farmworkers, Economic Policy Institute, August 22, 2023; Ihna Mangundayao, Celine McNicholas, and Margaret Poydock, “Worker protection agencies need more funding to enforce labor laws and protect workers,” Working Economics blog (Economic Policy Institute), July 29, 2021.

Key takeaways:

• The federal minimum wage is at its lowest real value in 77 years. Frozen at $7.25 since 2009, the federal minimum wage has lost 30% of its purchasing power during this 17-year freeze.
• Setting the federal minimum wage at two-thirds of the national median wage would raise pay for 39.6 million workers in 2030, about 1 in 4 of the wage-earning workforce.
• The policy would move the federal floor meaningfully toward one definition of a living wage, meeting EPI’s Family Budget Calculator thresholds in half of U.S. counties for a single adult working full time. But it falls short for many families, meaning that policies to strengthen unionization, provide a more robust safety net, and keep unemployment low remain essential.
• Decades of economic research support this two-thirds benchmark, finding little to no employment loss from ambitious minimum wage increases.
• Indexing the federal minimum wage to median wage growth would lock in these gains. Median wages typically outpace prices, so median wage indexing would prevent the kind of decades-long slide that has eroded the current floor.

Introduction

The federal minimum wage, frozen at $7.25 since 2009, is now at its lowest real value in 77 years and a major driver of the affordability crisis facing low-wage workers. For over a decade, the senior Democrats on the House and Senate’s labor committees have consistently introduced and championed the Raise the Wage Act, which would significantly raise the federal level (most recently, to $17 an hour in 2030) and index it to median wage growth going forward. But Congress as a whole has failed to take action on the legislation. In the absence of federal movement, states have moved on their own: Thanks in large part to the Fight for $15 campaign, 21 states and the District of Columbia, home to half of all U.S. wage earners, will have a minimum wage of at least $15 by 2028. But that patchwork still leaves 20 states—home to about 55 million workers—at $7.25, and updating the federal floor to a modern benchmark is the only way to reach these workers.

Raising the federal minimum wage to two-thirds of the national median wage would lift pay for nearly 40 million workers, about a quarter of the workforce. Two-thirds of the median—equivalent to roughly $17.70 today, a projected $20 in 2030, and a projected $25 in 2038—matches the benchmarks used in other high-income countries and tracks the direction of recent minimum wage research. Indexing to median wage growth thereafter would keep the floor from losing ground to inflation or falling behind the broader economy.

A federal minimum at two-thirds of the national median would eliminate poverty wages and move the floor meaningfully toward a living wage in much of the country: A single adult working full time could cover modest expenses in half of U.S. counties under EPI’s Family Budget Calculator thresholds. Maintaining the two-thirds minimum-to-median ratio would lock in those gains, improving affordability for U.S. workers and their families. It would also durably narrow the gap between low-wage workers and the typical worker, with Black workers and women seeing the largest benefits.

The two-thirds benchmark is also well-supported by economic research. Decades of studies of state and federal minimum wages find that higher floors raise pay for low-wage workers with little to no effect on employment, and a smaller but growing body of work on minimum wages approaching two-thirds of the median reaches the same conclusion. Setting the federal floor at two-thirds of the median, and updating it annually, would raise incomes at the bottom and prevent the kind of decades-long slide that has left the current minimum at its lowest real value in 77 years.

The outdated federal minimum wage and extent of low pay

The federal minimum wage is now at its lowest real value in 77 years. Stuck at $7.25 since 2009, it is in its longest stretch without an increase since the federal wage floor was established in 1938 (Figure A). Inflation has eroded 30% of its purchasing power over those 17 years, gradually cutting real pay for the lowest-wage workers in states still tied to the federal floor. Simply indexing the 2009 wage to inflation, a far weaker standard than this report proposes, would put the federal minimum at about $10.60 today.

The minimum wage was once meaningfully higher in real terms. Civil rights organizers in the late 1960s pressed Congress not only to raise the wage floor but also to extend its coverage to service industries that had previously been excluded because they disproportionately employed Black workers. By 1968, the federal minimum wage reached $1.60 per hour, equivalent to $12.62 in 2026 dollars and roughly 61% of the national median wage at the time, close to the two-thirds benchmark this report proposes. Even a federal minimum wage of $12.62 today would raise the wages of about 12 million workers.

Because Congress has not raised the federal floor in 17 years, states and localities have moved on their own. Thirty states, the District of Columbia, and dozens of cities and counties have raised their minimum wages, many in response to the Fight for $15 campaign (EPI 2026a). By the end of 2028, more than half of the U.S. workforce, about 74 million workers, will live in a state with a minimum wage of at least $15.

The state-by-state patchwork has delivered real successes but also left tens of millions of workers behind. Roughly 55 million people work in the 20 states still tied to the $7.25 federal floor, and they are nearly twice as likely as workers elsewhere to earn less than $15 per hour. Nationally, almost no one is paid exactly $7.25 anymore: The floor is so low it rarely binds. Yet 14 million workers, about 9% of the workforce, still earn less than $15. Closing that gap and preventing the federal floor from eroding further requires a national standard pegged to a modern benchmark.

A new standard: Two-thirds of the median wage

The federal minimum wage suffers from two related deficiencies: Its level is too low, and it does not adjust as the economy grows. Both can be solved by tying the federal minimum to two-thirds of the national median wage. Congress would first raise the floor to that level, and each subsequent year the minimum would adjust to maintain the same ratio.

First, the new benchmark replaces a poverty-level federal floor (Hickey and Cid-Martinez 2025) with one that pushes the minimum wage toward a living wage. As Oakford (2026) argues, two-thirds of the median is “a realistic stepping stone to living wages,” and standards below that ratio leave too large a gap between earnings and the cost of necessary expenses. A federal minimum at two-thirds of the median also better fulfills the original promise of the federal standard, which Congress described in 1937 as protecting “this Nation from the evils and dangers resulting from wages too low to buy the bare necessities of life” (U.S. Congress 1937).

Second, maintaining the two-thirds ratio guarantees automatic increases as the economy grows, ending the recurring erosion that comes from a frozen federal floor. Because median wages typically outpace prices, median wage indexing produces real gains, not just inflation protection. In 2025, two-thirds of the national median wage was $17.11 per hour (Figure B), and today, it is estimated to be $17.70. By 2030, applying Congressional Budget Office (2026) Employment Cost Index projections, it would reach $20.02. A federal minimum tied to two-thirds of the median would likely reach or exceed $25 by 2038, four years sooner than if a $17.11 wage in 2025 had been indexed only to the cost of living going forward.1

Nineteen states and the District of Columbia index their minimum wages to inflation, but Connecticut goes further by indexing to average wage growth and capturing the real gains that wage growth typically delivers above prices. Congress should follow Connecticut’s lead and link the federal minimum to the national median wage. Of course, indexing to price inflation would be an enormous improvement to current federal minimum wage policy and to state and local minimum wage policies that have also failed to implement automatic increases. Tying the minimum wage to median wages—i.e., indexing the minimum to typical workers’ wage growth—would yield even larger increases over time.

Tying the federal minimum to two-thirds of the median would also durably narrow inequality in the bottom half of the wage distribution. Whenever the minimum wage fails to keep pace with economy-wide wage growth, the gap between low and median earners widens. But a substantial increase in the minimum to a fixed ratio of the median shrinks and bounds that gap by construction. The gains disproportionately affect Black workers and women, who are overrepresented in low-wage jobs due to persistent racism and sexism (Banks 2019). Minimum wages are a major determinant of Black-white wage gaps (Derenoncourt and Montialoux 2020; Wursten and Reich 2023), and the long erosion of the federal minimum was a leading driver of widening pay inequality among women (Autor, Manning, and Smith 2016).

The state of minimum wage research and new policies

Minimum wages and job losses

A federal benchmark of two-thirds of the national median would significantly raise wages, and recent research strongly supports the conclusion that ambitious minimum wage targets work as intended, with little to no employment downsides. Across more than three decades of modern economic research, the median estimated employment effect is small; among studies that look at all low-wage workers rather than narrow subgroups, the effect is essentially zero (Zipperer 2024). The recurring scare stories about job losses are not borne out by the body of evidence.

Businesses adjust to higher minimum wages through what Dube (2026b) and Bernstein (2013) call the “Three P’s”: productivity, prices, and profits.2 Take productivity first. Higher wages reduce the rate at which workers quit, particularly in high-turnover sectors like restaurants and retail. That lowers hiring and training costs and means employment levels can hold steady even as new hiring slows. Better-paid workers, and workers with longer tenure, are also typically more productive, further offsetting the cost of the wage increase.

The minimum wage also redistributes income to low-wage workers when employers cover higher labor costs through reduced profits or modestly higher prices. Vergara (2026) and Coviello, Deserranno, and Persico (2022) both find that minimum wage increases shrink profits in low-wage industries. Price pass-through is small in aggregate terms because low-wage workers’ earnings are only a fraction of total labor costs, which are themselves a fraction of total business expenses. California’s $4 overnight increase in the fast-food minimum generated a one-time increase in fast-food prices of 2.1% to 3.6% (Sosinskiy and Reich 2026; Clemens et al. 2026). To put that in context: The price of a $6.00 hamburger would have risen to about $6.17.

How high is too high?

A common way to measure the level of a given minimum wage is to use the minimum-to-median wage ratio. Sometimes called the Kaitz index, the minimum-to-median wage ratio compares the minimum with the underlying distribution of wages by measuring the share of the typical wage that the floor reaches. This report proposes setting that ratio at about 67%. Most of the U.S. evidence base reflects periods when the ratio sat well below that level, because until recently, U.S. minimum wages were rarely considered high by today’s standards. But a growing body of recent research, together with recent state and local policies, has pushed the evidence into higher ratios—and the results are the same: There is substantial room for higher minimums without large employment losses.

Cengiz et al. (2019) found no negative employment effects at minimum-to-median ratios up to 59%. Dube and Lindner (2021), studying city-level minimum wages with ratios averaging 58% to 64%, found small and statistically insignificant effects. Godoy and Reich (2022) found no employment effect across localities with ratios ranging from 56% to 82%. And the 1968 federal minimum, which reached roughly 61% of the median,3 has been reexamined in two recent studies that likewise found small or no employment effects (Bailey, DiNardo, and Stuart 2021; Derenoncourt and Montialoux 2021).

The most direct evidence that the floor can go meaningfully higher comes from California’s $20 fast-food minimum wage. In April 2024, the state raised the wage for fast-food chain workers from $16 to $20, pushing the ratio of that minimum to the state’s median wage to about 74%, well above most U.S. precedents.4 One might worry that customers would substitute toward lower-priced independent restaurants exempt from the policy, generating job losses at the chains. The actual evidence shows otherwise. Despite the large wage increase, research finds little to no employment effect of the policy (Bivens and Zipperer 2026), and the median employment effect in Dube (2026a) is essentially zero. Evaluations of the UK minimum wage through 2019, when it reached nearly 60% of the median wage, also find small, statistically insignificant effects on the employment of low-wage workers (Giupponi et al. 2024).

A federal benchmark set at two-thirds of the national median will push some states above two-thirds of their own median wage. There is good reason to be optimistic about employment changes there as well. The studies above already span a wide range of Kaitz ratios, from the high 50s through the low 80s, and consistently find little or no employment effect. California’s $20 fast-food minimum extends this evidence to a 74% state-level ratio with essentially no employment losses, and only five states would have a minimum-to-median wage ratio above that threshold under the proposed federal benchmark. And while the minimum wage would be at a higher level relative to the state median in those states, it would still be less than a “living wage” for many families in those areas, as I discuss later.

Even if some employment loss does occur, that is not the right test of policy success. Low-wage labor markets are dominated by job-to-job churn, so reduced employment in response to a higher minimum typically shows up as longer gaps between jobs rather than workers permanently shut out of the labor market (Cooper, Mishel, and Zipperer 2018). On net, low-wage workers come out ahead in annual earnings when significantly higher hourly pay more than offsets a modest increase in unemployment.

Policymakers and organizers campaigning for minimum wage increases have considerable room to maneuver above the current federal floor before needing to worry about job losses. To assuage concerns about employment impacts, a federal proposal could be structured to limit annual increases of the federal minimum wage so that they never exceed two-thirds of the national median wage. States and localities, of course, can and should continue to push for higher minimum wages, as many will have higher median wages and costs of living than the national average.

Existing proposals and policies reaching two-thirds of the median

Some recent federal proposals already target or are consistent with the two-thirds benchmark. The recent Give America a Raise Act would raise the federal minimum to $20 by 2029, close to this report’s projection of two-thirds of the 2029 median wage ($19.44). The Living Wage for All Act names the two-thirds benchmark explicitly and locks in indexation in statute: “once the minimum wage equals two-thirds of the national median hourly wage, it shall thereafter be automatically adjusted each year to maintain that ratio.” The Bold Economic Program for America (Reich 2026) likewise proposes $20 by 2030, and Oakford (2026) embeds the two-thirds target in a broader portfolio that includes just cause protections and stronger wage theft enforcement.

The benchmark also aligns U.S. policy with international practice. The UK Low Pay Commission has targeted two-thirds of the median for the National Living Wage since 2024, and in the EU, 17 of 22 countries benchmark their statutory minimum wages to a ratio of the median or average wage. The 2022 European Union Minimum Wage Directive obligates member states to use “indicative reference values”—such as 60% of the gross median wage—to assess adequacy of their wage standards (Luebker and Schulten 2026).

Some of these international benchmarks may look numerically lower than two-thirds, but they are usually defined against a different denominator. Germany, for instance, benchmarks against the median wage of full-time workers. In the United States, the full-time median is about 10% higher than the overall median, so 60% of the full-time median is roughly equivalent to two-thirds of the overall median that this report proposes.

Implementing a minimum wage equal to two-thirds of the median wage

Any federal legislation will need a phase-in period, but it must specify two things: a clear path to the target and an explicit guarantee that automatic median wage indexing kicks in once the floor reaches two-thirds of the median.

Implementing the benchmark also requires choosing a wage source. Legislation should designate the Department of Labor (DOL)—which already publishes median wage estimates through the Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics (OEWS)—to publish the official median wage each year. DOL has two ready sources: OEWS, an establishment survey, and the Current Population Survey (CPS), the household survey already used to produce the unemployment rate, which collects detailed wage and hours data.

Each source has tradeoffs. The CPS is timelier, with wage data available at a one- to two-month lag, but smaller samples, the difficulty of computing hourly earnings for salaried workers, and respondents’ tendency to round wages all introduce noise. OEWS uses an established BLS hourly wage methodology and median wage calculation that may be less volatile, but it is published with a one-year lag and pools data from earlier, lower-wage years. DOL could pick one source or use a weighted average; recent data show only about a $1 difference between the two surveys.5 Either way, expanding resources at BLS and the Census Bureau would strengthen the underlying data and support further refinements to the methodology.

Once DOL has a baseline median, indexing requires projecting that median forward to the year the new minimum takes effect. The UK Low Pay Commission, which recommends a two-thirds median target to the UK government, offers a useful template: It estimates a midyear median wage by combining lagged historical data with timely indicators and short-run forecasts (Low Pay Commission 2024). A concrete schedule illustrates the approach. To set the minimum for January 1, 2030, DOL would announce the new wage on July 1, 2029, six months in advance, based on its best projection of the July 2030 median, the midyear point representative of the median wage workers will face on average throughout 2030. The projection would proceed in three steps: compute the 2028 median from CPS or OEWS data; roll it forward to early-to-mid-2029 using a combination of available data—like the Current Employment Statistics, the Consumer Price Index, and the Employment Cost Index (ECI); and then roll it forward one more year using short-run wage projections like those in the CBO Budget and Economic Outlook (2026).

National and state effects of a federal minimum wage at two-thirds of the median

To estimate the economic benefits of a federal minimum wage set at two-thirds of the median wage, I model how many low-wage workers would see higher pay under this policy. I assume the policy is phased in over five years, so that if it went into effect today, the federal minimum would reach two-thirds of the median in 2030 and then automatically adjust each year to maintain that ratio.

Concretely, I assume the federal minimum rises to $12 immediately in 2026 and then increases incrementally to $20 in 2030, which is about two-thirds of the projected national median wage.6 Legislation should build in a path adjustment if 2030 median wages come in higher or lower than projected.

I focus on the effects in 2030. I assume the same phase-in path and automatic indexing applies to the federal tipped minimum wage, which has been frozen at $2.13 per hour since 1991.7 Wages elsewhere are assumed to grow in line with CBO ECI projections from 2026 to 2030, and the model incorporates the effects of scheduled state-level minimum wage increases (see the appendix for details).

In 2030, a federal minimum wage equal to two-thirds of the national median would raise pay for 39.6 million workers, about 1 in 4 of the wage-earning workforce (Table 1).8 Annual earnings would rise substantially, and the gains would be largest for Black workers: A full-time, full-year Black worker affected by the increase would earn about $5,000 more per year, compared with $4,400 for all affected workers. In line with other minimum wage increases, women would gain more than men, with 31% of women seeing higher pay compared with 23% of men.

Adults ages 20 and over would make up 9 in 10 affected workers (teens would have the largest share of affected workers of any age group, but they make up a small share of total employment). The problem of low pay is far from limited to the youngest workers.

Although several states with scheduled minimum wage increases will see the gap between their minimum wage and the new federal floor shrink, workers in every state would still be affected (Figure C). With the exception of D.C., no state’s scheduled 2030 minimum wage reaches $20. The largest gains go to workers in the 20 states still tied to $7.25: 1 in 3 (33%) would see a raise, and annual pay for those affected would rise by about $6,200 on a full-time, full-year basis.

Figure C

Beyond who gets a raise and how much, a related question is whether the raise is enough to cover a family’s basic costs. Setting a target of two-thirds of the median would push the federal floor much closer to a living wage for many families. What counts as a living wage varies across the country, depending on local costs and on family size and composition. EPI’s Family Budget Calculator thresholds make this concrete: They calculate the income a given family type needs in a given place to afford a “modest but adequate” standard of living. For example, in 2025 a two-adult, one-child family in Los Angeles County, California, needed about $118,000 in annual pretax earnings to pay for housing, food, child care, transportation, health care, taxes, and other necessities. In more rural Early County, Georgia, a similar family needed about $74,000. These budgets are minimal by design, with no allowance for savings, emergencies, retirement, college, or entertainment.

Of course, other business income and government provided social benefits can lower the amount of labor market earnings a family needs to maintain the same standard of living. Gould, Mokhiber, and deCourcy (2024) report that, according to Congressional Budget Office data, about 81% of a middle-income family’s budget is met by labor market income.

Applying that 81% adjustment to EPI’s Family Budget Calculator thresholds gives a more useful benchmark for what wages need to deliver. Under this adjusted measure, the Los Angeles County family would have needed about $96,000 in earnings to meet their 2025 budget, equivalent to both adults working full time, year round at about $23 per hour. The Early County family would have needed about $60,000, equivalent to both adults working full time, year round at $15 per hour.

The implications for everyday affordability are significant. After inflating these adjusted thresholds to 2030 dollars using CBO Consumer Price Index projections, a federal minimum at two-thirds of the median substantially closes the gap between full-time annual earnings and necessary expenses for low-wage workers and their families. A single adult working full time at the 2030 minimum of $20 would cover modest but adequate expenses in half of U.S. counties. Two full-time working parents with two children would meet their family budget in roughly a quarter of U.S. counties. Using similar thresholds, Oakford (2026) finds that a federal minimum at two-thirds of the national median in 2025 would be “90% to 99% of the median living wage of a single adult without children in 16 states.”

A federal minimum tied to two-thirds of the national median would therefore make enormous progress in increasing affordability and helping families make ends meet. Closing the remaining gaps will require a broader set of policies, including strengthening other labor standards like overtime protections and their enforcement, a more robust safety net, expanded public goods like universal health insurance, fewer barriers to unionization, and a renewed commitment to full employment.

Conclusion

The federal minimum wage is at its lowest real value in 77 years, and tens of millions of low-wage workers are paying for that erosion every paycheck. Pegging the federal floor to two-thirds of the national median wage, and maintaining that ratio, would correct the two flaws that have left the floor unfit for purpose: a level too low to function as a meaningful wage standard and a structure that does not adjust as the economy grows.

A federal minimum at two-thirds of the median would raise pay for nearly 40 million workers in 2030, deliver the largest gains to Black workers and to women, and bring the floor close to a living wage in much of the country. Decades of research, recent state and local experience, and California’s $20 fast-food minimum all point to the same conclusion: The labor market can absorb minimum wages of this size with little to no employment cost. The benchmark also brings U.S. policy into line with the UK and most of the EU, where two-thirds-style targets are now standard practice.

A higher floor cannot, on its own, guarantee economic security for working people. That will require a broader agenda: a stronger safety net, expanded public goods, fewer barriers to unionization, and a renewed commitment to full employment. But updating the federal minimum to a modern, indexed benchmark is the single most direct step Congress can take to raise wages at the bottom, and the only step that reaches the 55 million workers in the 20 states still stuck at $7.25.

Appendix

State benefits

Methodology

Underlying wages are based on the 2025 Current Population Survey and between 2025 and 2030. I assume wages increase at the rate of CBO (2026a) ECI projections and because of future state-level minimum wages. Due to the Trump administration’s immigration policies and the possibility of continued labor market weakening, how the baseline level of employment grows over the next five years is very uncertain. For simplicity, I hold the estimated employment level constant between 2025 and 2030 instead of making additional assumptions about either employment rates or population growth. In terms of total population growth, this assumption may not be too far off the mark of current projections; CBO (2026b), for example, estimates that between 2025 and 2030, the civilian population ages 16 to 64 will only grow by 0.06%, or 130,000 people.

Affected workers include those “directly” affected, whose wages would otherwise be less than the new federal minimum wage, as well as “indirectly” affected workers who earn up to 115% of the new minimum (Cooper, Mokhiber, and Zipperer 2019). These particular estimates may overstate the number of workers affected because while they incorporate already scheduled state-level increases, they exclude city-level minimum wage increases, and some cities will have higher than $20 minimum wage standards in 2030. On the other hand, if the labor market continues to weaken, low-wage workers will, in the absence of minimum wages, face slower than usual wage growth because their wage growth slows disproportionately when unemployment is higher (Bivens and Zipperer 2018).

Notes

1. These projections follow CBO ECI and CPI projections from 2025–2036, and for subsequent years assume 2026–2035 annual growth rates of 2.26% for CPI and 2.94% for ECI. 

2. For additional discussion, see Dube and Lindner (2025), Schmitt (2013), and Zipperer (2023).

3. OECD (2026) estimated the U.S. minimum-to-median wage for full-time workers was 55.05% in 1968. Assuming a 10% premium for the full-time median wage relative to the overall median wage results in a minimum-to-median wage ratio of 60.56%.

4. In April 2024, the state raised the wage for fast-food chain workers from $16 to $20, pushing the ratio of that minimum to the state’s median wage to about 74%, well above most U.S. precedents.

5. The 2024 OEWS national median wage (which is the latest available data) was $23.80 (BLS 2025). The EPI State of Working America Data Library (EPI 2026b), which uses CPS wage data and which we use for wage levels throughout this paper, reports a 2024 median wage of $24.87.

6. The exact schedule simulated below is $12 in 2026, $13.50 in 2027, $15.50 in 2028, $17.50 in 2029, and $20 in 2030.

7. Ideally other subminimum wages would be phased out, including those for some workers with disabilities and youth workers. I do not model the effects of those changes due to data constraints.

8. I concentrate on the effects in 2030. Were low-wage workers’ wages to grow slower (or faster) than median wages, these estimates would understate (or overstate) the effects in later years.

References

Banks, Nina. 2019. “Black Women’s Labor Market History Reveals Deep-Seated Race and Gender Discrimination.” Working Economics Blog (Economic Policy Institute), February 19, 2019.

Bernstein, Jared. 2013. “If Increasing the Minimum Wage Doesn’t Cost Jobs, How Does It Get Absorbed?” Huffington Post, August 14, 2013.

Bivens, Josh, and Ben Zipperer. 2018. The Importance of Locking in Full Employment for the Long Haul. Economic Policy Institute, August 2018.

Bureau of Labor Statistics (BLS). 2025. “Occupational Employment and Wage Statistics (OEWS) Tables, May 2024” [Excel file], Occupational Employment and Wage Statistics. Accessed May 13, 2026. 

Clemens, Jeffrey, Olivia Eduwards, Jonathan Meer, and Joshua D. Nguyen. 2026. “The Effects of Calfornia’s $20 Fast Food Minimum Wage on Prices.” National Bureau of Economic Research Working Paper no. 34990, March 2026.

Congressional Budget Office (CBO). 2026a. The Budget and Economic Outlook: 2026 to 2036. February 11, 2026.

Congressional Budget Office (CBO). 2026b. The Demographic Outlook: 2026 to 2056. January 7, 2026.

Cooper, David, Zane Mokhiber, and Ben Zipperer. 2019. Minimum Wage Simulation Model Technical Methodology. Economic Policy Institute, February 2019. 

Coviello, Decio, Erika Deserranno, and Nicola Persico. 2022. “Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer.” Journal of Political Economy 130, no. 9: 2315–2360.

Derenoncourt, Ellora, and Claire Montialoux. 2021. “Minimum Wages and Racial Inequality.” Quarterly Journal of Economics 136, no. 1 (February): 169–228.

Dube, Arindrajit. 2026a. “Labor Market Effects of California’s $20 Fast-Food Minimum Wage.” National Bureau of Economic Research Working Paper no. 35171, May 2026.

Dube, Arindrajit. 2026b. The Wage Standard: What’s Wrong in the Labor Market and How to Fix It. New York: Penguin Random House.

Dube, Arindrajit, and Attila S. Lindner. 2024. “Minimum Wages in the 21st Century.” In Handbook of Labor Economics, Volume 5, edited by Christian Dustmann and Thomas Lemieux. 

Economic Policy Institute (EPI). 2026a. Minimum Wage Tracker. Accessed May 5, 2026.

Economic Policy Institute (EPI). 2026b. State of Working America Data Library. Accessed May 5, 2026. 

Giupponi, Giulia, Robert Joyce, Attila Lindner, Tom Waters, Thomas Wernham, and Xiaowei Xu. 2024. “The Employment and Distributional Impacts of Nationwide Minimum Wage Changes.” Journal of Labor Economics 42, no. S1: S293–S333.

Hickey, Sebastian, and Ismael Cid-Martinez. 2025. “The Federal Minimum Wage is Officially a Poverty Wage in 2025.” Working Economics Blog (Economic Policy Institute), April 28, 2025.

Low Pay Commission. 2024. “What Will the Minimum Wage Be Next Year?” (blog post). April 19, 2024.

Oakford, Patrick. 2026. Federal Employment Standards as the Foundation of Economic Security: Revisiting Minimum Wage, Just Cause, and Tools to Combat Wage Theft. Roosevelt Institute, May 2026.

Organisation for Economic Co-operation and Development (OECD). 2026. OECD Data Explorer. Accessed May 5, 2026.

Reich, Michael. 2026. The Unexpected Effects of a $20 Federal Minimum Wage. Center on Wage and Employment Dynamics, February 2026.

Reich, Michael, and Denis Sosinskiy. 2026. “Effects of a $20 Minimum Wage: Evidence from Granular Data on Wages, Employment, and Prices.” Institute for Research on Labor and Employment Working Paper, April 1, 2026.

U.S. Congress. Senate. Committee on Education and Labor. 1937. Fair Labor Standards Act of 1937. S. Rep. No. 884, 75th Cong., 1st Sess. Washington, DC: Government Printing Office.

Wursten, Jesse, and Michael Reich. 2023. “Racial Inequality in Frictional Labor Markets: Evidence from Minimum Wages.” Labour Economics 82, 102344.

Key takeaways

• The depressed overall hires rate is a key driver of new labor market weakness for young college graduates, as it makes it harder for them to break into the labor market. This is true across industries, not just in those that disproportionately employ young college graduates—suggesting the culprit is not a structural change in the economy like AI but a labor market in which employers are hiring less and workers are holding onto the jobs they have.
• The information sector—posited to be more AI-exposed—has experienced recent job losses but employs only 2.3% of young college graduates.
• High-tech industries, which employ about 1 in 10 college workers, expanded at a historically rapid pace in the early 2020s but have shown signs of softening over the last three years.

The early 2020s labor market for young college graduates was strong. But, as we showed in this series’ first blog post, the Class of 2026 is graduating college into a labor market that has notably weakened in the past two years. A growing share of young college graduates are looking for jobs, but their employment rates have not kept pace—meaning unemployment is rising faster for young graduates than for the overall workforce. While their outcomes remain better than those of their noncollege counterparts, the uptick in unemployment has been a rising concern.

In this blog post, we delve deeper into the industries where young college graduates are likely to work,1 examining whether it has been relatively more difficult to secure employment in these fields as the labor market has weakened. Our analysis first examines employment changes, then turns to labor market flows, including hires and separations rates. We also scour the data for signs of contraction in the tech sector that may disproportionately affect the prospects for young college graduates as they enter the labor market.

In the third blog post in the series, we will examine the occupations where young college graduates work with particular attention to occupations that may have grown or shrunk, as well as to those most exposed to AI.

Young college graduates work in industries with strong growth in this business cycle

Over half of young college graduates work in private education and health services, professional and business services, or public-sector jobs. Figure A displays the share of employment in each industrial sector or sector grouping for young college graduates ages 22 to 27, all college graduates, and young workers without a four-year college degree. Industries in the figure appear in order of the share of young college graduates they employ, from largest to smallest.

The types of jobs where young college graduates work look similar to those of college graduates generally. Young workers without a college degree (i.e., noncollege) are far more likely to work in trade, transportation, and utilities; mining, construction, and manufacturing; or leisure and hospitality. All groups of workers are least likely to work in the information sector, closely watched for signs of AI-induced displacement.

Figure A

Figure B shows the change in employment in each sector between 2019 and 2026 and between 2023 and 2026, arranged in the same order as Figure A for comparison. The two fastest growing sectors since the last business cycle peak occurred in the two largest sectors for young college graduates: private education and health services and professional and business services.

Since the rollout of ChatGPT, many have looked at industries and occupations likely to be exposed to AI to see whether this has led to weaker job growth. Among the most closely watched of these industries is the information sector, which has seen an 8.5% employment decline since 2023.2 While these losses are notable—and especially relevant to understanding AI’s fingerprints on the labor market for young college-educated workers—it cannot be overemphasized just how small this sector is in the overall economy. Less than 2% of overall employment is in the information sector, including only 2.3% of young college graduates. Further, the sector saw a rapid employment expansion between 2019 and 2023—the employment loss between 2019 and today is just 2.0%.

Figure B

High-tech sectors have relatively more college graduates but haven’t experienced large AI-induced employment losses

In recent years, the Census Bureau has created an experimental data series on high-tech industries to better understand business dynamics. These include both manufacturing and service sector components of high tech.3 We translate their NAICS classification for high-tech industries into Census Industry Classifications used by the Current Population Survey (CPS) to determine the likelihood of young college graduates working in these sectors.

In the 2026 economy, about 5.6% of workers were employed in what the Census considers high-tech industries. Just about 1 in 10 (9.9%) of the college-educated workforce works in the tech industry. Young college graduates are similarly represented: 10.3% work in tech.

Overall, the Current Establishment Survey tells us that tech industry employment tracked changes in overall private employment in the prior business cycle (between 2007 and 2019) but expanded sharply in the early 2020s and has softened a bit in the last three years. Since 2023, the tech sector has fallen by 0.7%. While overall employment using CPS does show modest growth, neither shows large swings that suggest a large impact for young college graduates.4

Weak hires may be the biggest culprit to labor market weakness for young college graduates

The Job Openings and Labor Turnover Survey (JOLTS) can shed light on the question of whether entry-level workers—with or without college degrees—are facing a harder labor market to break into. While JOLTS doesn’t include demographic characteristics, it presents jobs openings as well as rates of hiring, layoffs, quits, and other separations. Today’s economy has substantially less churn than during the recovery from the pandemic, when millions of workers reentered the labor market after mass layoffs—many quit soon after as they searched for, and generally found, better opportunities.

Figure C shows the hires and separation rates. The lighter colors represent the monthly seasonally adjusted data for each series while the darker colors represent a 12-month moving average that provides a better overall picture of recent trends, smoothing out some data volatility. Over the last five years, the hires rate has steadily fallen and now sits at levels last seen in 2013 and 2014, when the labor market was still struggling to recover from the Great Recession.

The total separations rate includes quits, layoffs and discharges, and other separations.5 As with the hires rate, the separations rate has been declining over the last few years and now sits about where it was in 2014. Much of this is due to reductions in quits. Quits are higher when workers feel confident that they will find better job opportunities. Right now, workers are sitting tight, more so than any point in the past 10 years. Taken together, there is simply less churn in the labor market. But reduced churn is not inherently bad. If the frantic labor market of the early 2020s led to many workers and employers finding satisfactory matches, it could make sense that the following years would see less churn than normal. But for young workers looking to enter the job market, a reduction in hiring can make it harder to find a job.

Figure C

Table 1 breaks down the change in the hires and separations rate over the last three years, again using 12-month moving averages to smooth some volatility in the data. The industries are listed in order of the share of young college graduates they employ, similarly to Figure A. Overall, the hires rate fell 0.8 percentage points and the separations rate fell 0.6 percentage points between 2023 and 2026. The industries where young college graduates are more likely to work saw smaller reductions in both hires and quits than the overall. Industries where young workers without a college degree are more often found—over a quarter are in trade, transportation, and utilities—saw greater losses. Finally, leisure and hospitality, where young noncollege are more than twice as likely to work as young college graduates, saw the largest declines in hiring.

It does not appear that the industries where young college graduates tend to work are experiencing more weakness than other industries. Job gains are just as strong, if not stronger, and hiring hasn’t fallen as far in other industries. In short, there does not seem to be any profound structural change in the economy affecting the industry composition of employment—AI or anything else—that would easily explain the softening of the labor market for young college graduates in recent years. What it does appear to be is a harder labor market for young workers to break into when employers are less likely to hire and workers are more likely to sit tight in the job they have.

1. Throughout this blog post, we define young college graduates as people between the ages of 22 and 27 with only a four-year college degree. Unlike similar analyses of young workers, we do not exclude young college graduates that are currently enrolled in school, but the results here are robust either way. Unless otherwise noted, data for 2026 represent a 12-month average from April 2025 through March 2026 for the most up to date and reliable estimates, which removes seasonality and increases sample sizes.

2. ChatGPT was first introduced in November 2022 but took several months for more widespread usage.

3. High tech industries: Computer and Peripheral Equipment Manufacturing, Communications Equipment Manufacturing, Semiconductor and Other Electronic Component Manufacturing, Navigational, Measuring, Electromedical, and Control Instruments Manufacturing, Aerospace Product and Parts Manufacturing, Software Publishers, Data Processing, Hosting, and Related Services, Other Information Services, Architectural, Engineering, and Related Services, Computer Systems Design and Related Services, and Scientific Research and Development Services.

4.  It’s not unusual for the CPS and CES to display small differences in employment levels or trends considering nontrivial differences in their methodologies. 

5. Other separations include separations due to retirement, death, disability, and transfers to other locations of the same firm.

Our decisions about whom and how to tax are decisions about which community needs we have the capacity to address and at what scale. Progressive taxes like personal, investment, and corporate income taxes generate more revenue from those who have the greatest ability to pay, and for whom the cost of losing the next dollar is small, relative to the last dollar of a family struggling to make rent and afford groceries. On the other hand, regressive revenue strategies like non-strategic tariffs, fees and fines, and an overreliance on sales taxes, especially when combined with cuts to social programs, heighten the sense that the system is unfair. Where progressive revenue strategies can bind a community together in mutual support and expand capacity to meet needs through good governance, regressive strategies erode people’s trust in the public sector.

H.R. 1 presents a vision of public finance that is unsustainable and erodes trust in government

Much of the federal tax code is in fact progressively structured, but for decades conservatives have weakened and attacked that progressivity. H.R. 1 (which the White House has referred to as the “One Big Beautiful Bill Act” or “OBBBA”) is the latest Republican-led effort toward breaking down trust in the public sector and social contract. H.R. 1 provides a suite of tax breaks to households across the income distribution; however, the wealthiest households and corporations see a far bigger tax cut from the package than the typical household does. In service to these tax breaks, the bill introduces devastating cuts to Medicaid, SNAP, and critical government agencies designed to help workers and their families thrive. Despite their size and the pain they will cause, these drastic cuts in the federal government’s capacity to serve and support working families are not enough to cover the costs of the corporate tax breaks; the Tax Policy Center estimates that H.R. 1 could increase the federal deficit by between $3.7 trillion and $5.1 trillion by 2034.

But unlike the federal government, states and localities cannot run budget deficits; their budgets must be balanced yearly. When major federal cuts happen, states and localities that rely on federal dollars to maintain critical services are forced to curtail and eliminate services, dive into emergency savings where they exist, or else shift to revenue generation strategies that often fall disproportionately on Black, brown, and poor households. The combination of directly hampering public services working people rely on while shifting more of the burden of raising revenue toward Black, brown, and poor workers and their families weakens worker power and exacerbates racial disparities.

H.R. 1 combines a shift toward regressive revenue strategies with massive tax breaks to corporations and the wealthiest households, in service to the Trump administration’s overarching goal: reasserting white, wealthy, and corporate privilege through tax cuts, deregulation, and the defunding of public institutions.

Regressive revenue strategies: Taking from the poor to give the rich even more breaks

The Trump administration has floated using tariffs as a replacement (either in full or part) for the federal income tax. This is not a new Republican strategy: Tariffs are a kind of consumption tax (on imported goods, along with the intermediate products businesses need to create goods and provide services domestically), and Republican-led state governments tend to rely more on consumption taxes1 (like sales taxes) and less on income taxes to increase revenue. Because poorer households spend a larger share of their income purchasing goods and services than the rich do, consumption taxes are inherently more regressive. The current federal income tax is progressively structured, in spite of the ways conservatives have attempted to weaken that progressivity over time. While tariffs can be a sensible part of a larger industrial policy strategy, governments place too large a burden on low- and moderate-income households when they try to use consumption taxes as a primary source of revenue. 

States and localities may turn to fines and fees to raise revenues in the absence of adequate federal support. These penalties are a poor substitute for progressive taxes. Fines and fees historically have only been able to cover a small fraction of state and local budget costs. And this is baked into the design: If the point of a fine or fee is to deter behavior, the best-case scenario (ending the behavior) would result in no revenue.

Even so, fines and fees cause significant economic pain for working-class families in the Black communities that are most affected by them. On an ethical level, a modern idiom applies: “If the penalty for a crime is a fine, that crime only exists for the poor.” The criminal justice system can trap poor folks in a cruel cycle of penalization for being unable to pay traffic tickets, court fees, and even their own surveillance through ankle monitors. Fines and fees increase the economic burden on those with the least ability to pay, all for a low return, making them a poor substitute for broad, progressive taxes.

Faux-progressive revenue strategies are ineffective and distract workers, their families, and policymakers from the need for real change

Ineffective tax gimmicks like temporary deductions on overtime and tipped income distract from the need for real reform around worker pay and scheduling. The point of requiring businesses to pay time-and-a-half for overtime is to discourage pushing workers to work beyond what we have collectively decided is a full and reasonable period of labor. Tipping is an outdated practice with racist roots, designed to shift the cost of maintaining a workforce onto consumers, rather than having employers properly compensate employees. Instead of cynically gesturing toward affordability through encouraging bad business practices, we should empower workers to fight for better wages and consistent scheduling.

Conservatives may also try to balance budgets by allowing progressive tax expenditures to expire (e.g., the recent expiration of the ACA premium tax credits or the expiration of the expanded child tax credits passed as pandemic relief). Temporary tax breaks themselves are not the most effective means of addressing structural economic issues; if health care or health insurance is persistently inaccessible to wide swaths of the population, we should seek to remedy that by making access universal—or, at the very least, making the credits that allowed greater access in the first place permanent. Allowing tax breaks implemented to address structural inequities to expire without an alternative solution to the problem being addressed is negligence. There are ways to balance budgets that do not involve reversing hard-won progress toward equity.

Progressive ways to generate revenue: Worker-centered tax policies can reduce inequality and expand the tax base

There are better ways of raising revenue that will support workers and their families, rebuild public trust in government, and get us the public goods and services we want and need. Since most Americans earn their living through selling their labor, it makes sense to keep some progressive tax on income to ensure people remain invested in the social contract. But with so much wealth and income concentrated amongst a few individuals, a necessary step is shifting more of the tax burden toward extremely high earners, wealth, and investment income. This will generate more revenue to improve public services and infrastructure, while tamping down on inequality. Adding tax brackets for the highest earners, adopting a legitimate tax on wealth holdings, and taxing the income made from investments at a rate closer to that of income from wages and salaries progressively raise revenues without increasing the burden on most U.S. households.

Proper enforcement of the current tax code would go a long way toward improving both our ability to raise funds and the public’s trust in public finance. The tax code is rife with opportunities for wealthy individuals and corporations to evade paying their fair share of taxes, allowing them to skirt holding up their end of the social contract. The IRS is also critically underfunded and recovering from recent staff reductions from the Trump administration. With enough resources to enforce existing tax law effectively, the IRS could go after the largest tax evaders and see returns that matter, as opposed to disproportionately targeting Black households without the funds to instigate a drawn-out legal battle over an audit.

Table 1

We need a tax code that supports states and localities and promotes full economic participation, not temporary tax gimmicks and handouts to the wealthiest

Taxpayers (literally) cannot afford to accept the conservative propaganda that all taxation is a burden on households. Taxes are one way of binding a democratic community together and allowing us to share in the costs of creating collective prosperity and community. Especially at the state and local levels, tax revenues are essential to providing the services people need to thrive. When federal funding gets pulled back and states and localities turn to regressive revenue strategies, it is working-class families who pay the price.

If we are going to rebuild a sense of trust in the social contract, we need to structure the tax code such that it becomes more progressive, tapping into a greater portion of the massive amounts of wealth and income that have pooled at the top. We can use that revenue to fund programs and new infrastructure that allow more people to fully participate in the economy:

• improved funding for public schooling, increasing teacher pay and quality of education
• a fully funded federal food assistance program, and/or adequate funding to states to support their own cash-assistance programs more comprehensive than Temporary Assistance for Needy Families (TANF)
• expanded access to and adequacy of Medicaid, or Medicare for All

Each of these initiatives could improve affordability and remove the need for state and local governments to pursue revenue regressive strategies that do more harm than good (like fines and fees). We won’t solve every structural inequality and eliminate all disparities through reforming the tax code; but building the resources and will to collect taxes in a progressive way are steps toward a fairer economy and a government that earns the public’s trust.

1. Consumption taxes have some potential uses. Carbon taxes, for example, tax the consumption of goods whose production intensively uses greenhouse gas-emitting inputs; if consumers look to avoid these goods by switching to others whose production involves fewer greenhouse gas emissions, we achieve an important social good.

Every month, the Bureau of Labor Statistics releases a report on the employment situation for the previous month. Their release includes data on job growth, unemployment, and wage growth, which gives us a snapshot of the health of the economy and whether it’s working for ordinary Americans.

 

Charting jobs and unemployment

Current Employment Statistics Charts

The Current Employment Statistics (CES) program, also known as the establishment survey, is a monthly survey administered by the Bureau of Labor Statistics (BLS) which provides estimates of employment, hours, and earnings based on payroll records of approximately 131,000 businesses and government agencies.

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Current Population Survey Charts

The Current Population Survey (CPS), also known as the household survey, is sponsored jointly by the Census Bureau and the Bureau of Labor Statistics (BLS). Each month, it provides data on the labor force, employment, unemployment, persons not in the labor force, hours of work, earnings, and other demographic and labor force characteristics. 

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Economic indicators

Longer-term labor market trends

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Past employment reports

News from EPI › Jobs report shows more than 25 million workers are directly harmed by the COVID labor market: Congress must pass the full $1.9 trillion relief package immediately

March 5, 2021 By Elise Gould Economic Indicators

News from EPI › The U.S. labor market remains 9.9 million jobs below pre-pandemic levels

February 5, 2021 By Elise Gould Economic Indicators

News from EPI › December jobs report provides a clear picture of Trump’s failed handling of the economy

January 8, 2021 By Elise Gould Economic Indicators

News from EPI › Recovery continues to wane: Expiring unemployment relief means more trouble around the corner

December 4, 2020 By Elise Gould Economic Indicators

News from EPI › October jobs report: Next president inherits a devastated economy with millions out of work

November 6, 2020 By Elise Gould Economic Indicators

News from EPI › Slowdown in jobs added means we could be years away from a full recovery

October 2, 2020 By Elise Gould Economic Indicators

News from EPI › Six months into the recession and a 11.5 million jobs deficit remains

September 4, 2020 By Elise Gould Economic Indicators

News from EPI › The bounceback deflates: Job gains slow considerably in July

August 7, 2020 By Elise Gould Economic Indicators

]]> https://www.epi.org/blog/class-of-2026-young-college-graduates-face-a-weaker-labor-market-but-a-more-mixed-picture-than-the-headlines-suggest/ Thu, 07 May 2026 12:00:22 +0000 https://www.epi.org/?post_type=blog&p=321109

Key takeaways:

• The unemployment rates for young college graduates and young noncollege workers have risen slightly faster than the overall unemployment rate.
• But the rise in young college graduate unemployment in particular was mostly due to higher labor force participation: The employment-to-population ratio for young college graduates has held steady since 2024.
• Certain demographic groups, such as Black and Hispanic workers, face higher unemployment and lower hourly wages, even for young people with limited work experience.
• In the long run, the college degree is losing its edge: Unemployment for young college graduates has risen in historical terms, and the college wage premium has been flat or falling in recent years.

Over the last couple of years, the overall labor market has slowly weakened—with many arguing that the weakening is most pronounced for young college graduates (whom we define as young workers ages 22–27 with only a college degree).1 The evidence is actually pretty mixed—by some measures the young college graduate labor market is notably weaker, but their outcomes are largely no worse than those of noncollege young people or the labor market writ large.

In this first blog post of our series on young college graduates, we examine the labor market the college graduates of the Class of 2026 are entering. We look at unemployment rates and employment-to-population (EPOP) ratios for young workers with and without a college degree and examine wages for young college graduates by demographic characteristics. We also explore longer-term trends in unemployment driven by rising educational attainment, as well as changes in the college wage premium—the pay advantage college graduates earn over their high school graduate peers. In the next post, we will analyze trends in the industries and occupations young college graduates tend to work in, and take a closer look at the tech sector and any fingerprints of AI on labor market outcomes.

Unemployment on the rise for young college graduates—but mostly because of higher labor force participation

Over the last couple of years, the labor market has shown some signs of weakening, though some often reported measures are overstating it. For example, payroll employment growth has slowed significantly, but this is largely driven by much slower population growth over the past year and a half as net immigration has collapsed. The unemployment rate has slowly increased, though the share of the prime-age population—those 25 to 54 years old—with a job has remained high. Of most concern is the hires rate—the number of hires as a share of total employment—which has been steadily falling over the last three years. The hires rate is now at the same levels seen in 2013 and 2014, a period during the prolonged recovery from the Great Recession that saw unemployment rates 3.0 percentage points higher than they are today. Focusing just on unemployment rates, the softening of the overall labor market appears to be hitting young college graduates more acutely.

Figure A shows the overall unemployment rate, as well as the unemployment rate for young college graduates and young workers without a four-year college degree. Since 2023, the overall unemployment rate has risen from 3.6% to 4.3%, a slow and measured increase of 0.7 percentage points. The unemployment rate for young college graduates has increased from a low of 4.0% in July 2023 to its recent high of 5.3% in March 2026, a faster increase of 1.3 percentage points. Young workers without a college degree also experienced a rise in unemployment, though their rise began a little later than the other groups. Their unemployment rate has risen by 1.2 percentage points since March 2024, up from 5.9% to 7.1% by March 2026.

Figure A

Some have pointed to this disproportionate rise in young college graduates’ unemployment rates as evidence that AI is beginning to substitute for the white-collar jobs young graduates typically enter. But this conclusion is premature for several reasons. First, while the rise in the unemployment rate in the most recent period is faster for college graduates than for all workers, the same is true for other young workers without a college degree (see Figure A). This suggests that there isn’t anything particularly damaging to young college graduates happening today, such as AI specifically destroying their labor market prospects.

Further, the increase in the unemployment rate for young college graduates over the last two years appears to be driven by an increase in labor force participation rather than a declining probability of having a job. The EPOP for young college grads has held steady over the last two years as the unemployment rate rose. Nearly all (98%) of the increase in the unemployment rate between 2024 and 2026 for young college graduates was driven by the increase in the labor force—meaning more young workers are entering the labor market in search of opportunities as opposed to giving up and leaving the labor force or never entering it at all. This would actually fit a historic pattern in which labor force participation rates tend to respond with a surprisingly long lag to labor market developments. The historically strong labor markets of the early 2020s likely are still pushing up the labor force participation rates of young college graduates today.

When we look at EPOPs since 2019, shown in Figure B, we see that young workers, college and noncollege alike, fall in line with the overall trend. Not surprisingly, given the industries and occupations hit the hardest, young noncollege workers fared the worst in the pandemic recession, but now are faring similarly to their college-educated counterparts. Prime-age EPOPs have remained the most resilient through this business cycle.

Figure B

Data from the Job Openings and Labor Turnover Survey provide useful insights into job openings, hires, quits, layoffs, and other separations, but they are not broken down by demographic, limiting our ability to analyze young workers. However, the depressed hires rate suggests that it is more difficult for new entrants to get a foothold in the labor market. The quits rate is down, signaling a reduction in the overall churn in the labor market as workers and employers sit tight through this period of economic uncertainty—likely related to chaotic policy decisions and implementation around tariffs, deportations, and the conflict with Iran. If the layoffs rate ticks up now, the unemployment rate is likely to spike quickly and could spell even more trouble for young people who tend to experience larger swings in unemployment with the business cycle.

Finally, there is no evidence that young college graduates are sheltering in school—i.e., going on to graduate school—to weather out the weakened labor market. In fact, enrollment rates among young college graduates have been falling slightly over the last couple of years, from 19.1% in 2024 and 18.8% in 2025 to 18.5% in 2026. Even though opportunities in the labor market are weaker, it’s perhaps not surprising that enrollment rates are on the decline. The Trump administration’s attacks on higher education have reduced available funding at colleges and the ending of student loan forgiveness and caps on borrowing make it increasingly difficult for students to make those educational investments.

Wages remain unequal across demographic groups

Real (inflation-adjusted) median wages of young college graduates rose slightly over the last year, up just 0.4% since 2025, consistent with the slowdown in wage growth for workers overall. Since 2019, young college graduate wages have grown 7.4% after adjusting for inflation.

Despite this positive wage growth, racial and gender wage gaps remain large even among young college graduates who are just starting their careers. Figure C shows that women are paid $4.18 less per hour than their male counterparts. At 85.9% of men’s pay, a young woman working full time with a college degree is paid $8,700 less over the year.

Young Asian American Pacific Islander (AAPI) college graduates are paid more than white, Hispanic, or Black workers. The demographic categories shown in Figure C are mutually exclusive: AAPI, white, and Black workers are non-Hispanic, while Hispanic workers can be of any race. Young white college graduates are paid $2.76 per hour less than their AAPI counterparts, while Black and Hispanic workers are paid $5.36 and $5.05 less, respectively. For a full-time worker, this translates into more than $10,000 in lower earnings over the year for Black and Hispanic workers. Not only are wages lower for these historically disadvantaged groups, but the unemployment rates of young Black college grads in particular are also higher. Therefore, their ability to secure employment at all—at any wage—is diminished.

Figure C

Young college grads are competing against a wider labor force that is more educated 

As educational attainment has risen across the broader workforce, the advantage that young college graduates once enjoyed relative to the rest of the labor force in terms of lower unemployment and higher wages has steadily declined.

The young college graduate unemployment rate recently surpassed the overall unemployment rate, meaning a greater share of young college graduates are now out of work than workers writ large. The erosion of the unemployment advantage for young college grads, however, isn’t a sudden shift; as shown in Figure A, the trend has been building since 1979, when young college graduates had an unemployment rate of 4.0%, 1.9 percentage points below the national average. Over the following four decades, that advantage eroded. By February 2020, young college graduates had an unemployment rate of 3.8%, 0.2 percentage points above the overall rate, a slow but complete reversal of the historic edge. In recent years, the historic trend has continued—now the young college graduate unemployment rate is a full 1.0 percentage point above the overall. And the young college graduate unemployment rate is at historically high absolute levels today, currently sitting higher than it was during the worst of the 1990 and 2001 recessions.

The shift is not explained by young college graduates faring worse relative to their noncollege peers, as that gap has held relatively stable at around 2.0 percentage points. Instead, as the educational attainment of the overall workforce increased, young college graduates became less advantaged compared to the overall labor force. Further, as a greater share of young adults now attend college and are likely from a wider range of socioeconomic backgrounds, a college degree for somebody in their early 20s today is likely a less reliable marker of general economic privilege than it used to be.

Figure D displays educational attainment over time for young workers and all workers. From 1980 to 2026, the share of the workforce with a bachelor’s degree increased from 12.5% to 26.1%, more than doubling as a share of total employment. The overall level of college attainment for young adults rose from 18.0% in 1979 to 31.6% in 2026. If we include those with bachelor’s and/or an advanced degree in the overall workforce, the increase in educational attainment is even more stark, rising from 18.4% to 41.9%.

Figure D

The democratization of college degrees carries some clear upsides for productivity and the overall health of the U.S. economy. A more diverse set of people have accessed higher education and benefited from the advantages of being a degree holder in recent decades. This rise in college attainment has obviously not been costless, as many of these degrees could only be obtained by taking on large amounts of student debt, which may well provide some constraints on labor market opportunities and options for young adults.

Young college graduates used to be more male, white, and likely to come from higher-income families—all characteristics rewarded (fairly or not) in labor markets. This growing diversity of college graduates may well mean that young grads are less likely to exit (or not enter) the labor force when job prospects are bad. In prior decades, it is possible that young college graduates were more likely to have resources to fall back on during periods of unemployment, and they clearly had less student loan debt. Now, with fewer fallback options and greater debt levels, the cost of being jobless may weigh more heavily on this group, leading people to continue actively searching for work instead of staying out of the labor force even when jobs are scarce, driving the unemployment rate higher.

The long-term rise in educational attainment may also have helped squeeze the wage advantage college graduates hold over those with just a high school degree. Some of the same reasons discussed above—the college-educated population becoming more economically diverse and more workers attaining advanced degrees—may also have eroded the measured earnings edge that once came with just a bachelor’s degree.

A useful way to measure this is the college wage premium. The college wage premium is the percentage boost in wages associated with holding a college degree, after controlling for demographic factors like race, gender, age, and geography. As Figure E shows, this premium peaked around 2015 and has declined slowly since. Today, the overall college wage premium stands at 55.2%, roughly where it was in the late 1990s. For younger workers ages 22–27, the premium is slightly lower, but follows the same pattern, also peaking around 2015 before flattening or trending downward.

Figure E

The labor market is weakening and young workers’ prospects seem worse-off than they did just a couple of years ago. But young college graduates are facing a weakened labor market only slightly worse than that experienced by other workers. Their unemployment rate has risen faster, though similarly to noncollege young workers, while their employment-to-population ratio has remained generally strong. A depressed hires rate may make it even harder for these young workers to get a foothold in the labor market. Much of these short-term trends of higher and rising unemployment are the continuation of a decades-long trend of worsening outcomes as the overall population increases their educational attainment.

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1. Throughout this brief, we define young college graduates as people between the ages of 22 and 27 with only a college degree. Unlike similar analyses of young workers, We do not exclude young college graduates that are currently enrolled in school, but the results here are robust either way. Unless otherwise noted, data for 2026 represent a 12-month average from April 2025 through March 2026 for the most up to date and reliable estimates, which removes seasonality and increases sample sizes. Analysis for smaller demographic groups uses a 36-month average to improve reliability.

]]> https://www.epi.org/blog/a-snapshot-of-black-employment-trends-under-trump-2-0-black-workers-particularly-men-are-experiencing-lower-employment-compared-with-a-year-ago/ Mon, 04 May 2026 12:00:14 +0000 https://www.epi.org/?post_type=blog&p=320938

Key takeaways:

• Black unemployment rose and employment fell in Q1 2026, reflecting a deterioration in labor market conditions. In the first quarter of 2026, the Black unemployment rate (7.6%) was 1.2 percentage points higher than in the first three months of the second Trump administration.
• Black men’s employment-population (EPOP) ratio decreased by 1.7 percentage points (from 60.5% to 58.8%) since the first quarter of 2025, with noncollege graduates driving this decline.
• Black women’s EPOP ratio was the same in Q1 2026 as in Q1 2025 (56.4%), with gains among noncollege graduates offsetting losses among college graduates.

The rising Black unemployment rate and big employment losses among Black women made major news headlines in 2025. In a February 2026 analysis, I examined the nature of those losses, noting the large impact on Black women who were college graduates and public-sector workers. With so much of the Trump policy-induced 2025 labor market decline appearing to land first on Black workers who typically have relatively secure employment, the longer-term significance of those losses is of continuing interest. This post provides an update for the first quarter of 2026, examining changes in the overall Black unemployment rate and gender-specific employment trends for Black women and men relative to the first quarter of 2025. For consistency with the prior analysis, I apply the same mutually exclusive race and ethnicity categories used in EPI’s State of Working America Data Library and include all people age 16 or older when examining outcomes by gender. While these estimates differ slightly from those reported by the Bureau of Labor Statistics (BLS), they lead to similar conclusions.

In the first quarter of 2026, the Black unemployment rate (7.6%) was 1.2 percentage points higher than in the first three months of the second Trump administration. While a rise in the unemployment rate can sometimes be for “good” reasons—workers getting drawn into the labor force because of strengthening job opportunities—that was not the case here: the rise in the Black unemployment rate reflected a decline in employment. The Black employment-population ratio (EPOP)—the share of working-age people who are employed—declined 0.8 percentage points over the same period, from 58.3% in Q1 2025 to 57.5% in Q1 2026 (see Figure A).

Figure A

Looking more closely at changes in employment for Black women and men separately, Black women’s first quarter EPOP was the same in 2026 as in 2025 (56.4%), while employment among Black men was 1.7 percentage points lower (from 60.5% to 58.8%). BLS published estimates by race—limited to the sample of people age 20 or older and not exclusive of ethnicity—show a similar decline for Black men (-1.5 percentage points), but a 0.4 percentage point increase for Black women.

Figure B shows that among Black women, Q1 2026 employment was lower than Q1 2025 for college graduates but higher for noncollege graduates, resulting in essentially offsetting effects. The opposite was true among Black men, for whom the decline in employment was driven by lower employment among noncollege graduates and higher employment for college graduates.

Figure B

These first quarter 2026 estimates incorporate annual population adjustments applied to Current Population Survey (CPS) data each January to reflect updated population estimates from the U.S. Census Bureau. Since the previous year’s data are not adjusted, monthly data across the two years are not strictly comparable. This year, shifts in the demographic composition of the population also resulted in larger than usual discontinuities in labor force measures by race, ethnicity, and gender between December 2025 and January 2026—which is why this analysis is focused on a comparison between the first quarters of 2025 and 2026, when the population controls are the most up to date.

Based on this analysis, we can conclude that overall, labor market conditions for Black workers were not better in the first quarter of 2026 compared with the early months of the Trump administration. Black men’s employment is lower than what was reported in the first quarter of 2025, and while Black women’s employment is unchanged overall, employment among college-educated Black women is lower than first quarter 2025 estimates.