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/

Does raising the minimum wage increase unemployment?

In brief: No. High-quality economic research finds increasing the minimum wage does not significantly impact employment.

In detail: The 90% of high-quality economic studies show that increasing the minimum wage boosts wages for low-wage workers without meaningfully increasing unemployment. These studies use statistical tools and empirical methods to measure what happens to workers before and after a minimum wage increase, controlling for other factors that can impact employment. The consistency of these findings across time, place, and level of increase is powerful evidence that increasing the minimum wage creates a healthier low-wage labor market.

An increase in the minimum wage raises the cost of labor for businesses by definition, but the economy can absorb these changes through channels of adjustment including decreased turnover, modest price increases (see Question 2), lower profits, and the reallocation of workers to more productive firms. Even if a minimum wage increase leads businesses to adjust their staffing levels, what workers are likely to experience are decreases in hours worked or increased time between jobs, not categorical unemployment. Higher hourly earnings can more than offset these reductions, leaving many workers with greater total income even if they are working fewer hours.

Will raising the minimum wage cause inflation?

In brief: No. Increasing the minimum wage does not meaningfully increase prices.

In detail: Economists do find that raising the minimum wage increases prices at affected businesses but only very modestly. For example, one study found that a 10% minimum wage increase was associated with a 0.14 percentage point increase in the Consumer Price Index. A study focused on the restaurant industry found a 10% increase in the minimum wage was associated with a 0.58% menu price increase. Even some of the most ambitious minimum wage policies, such as California’s $20 hourly wage floor for fast-food workers, only increased fast-food prices 2.1% (around 8 cents for a $4 item). 

The economic benefits of the minimum wage far exceed these price increases. For low-wage workers, the wage boost from the higher minimum wage more than compensates for increased prices of the goods and services they buy. These workers are in turn spending more in aggregate because of their additional income, which can boost the overall economy. It is also worth noting that modest price increases on things like restaurant menu items are redistributive. Higher-earning consumers pay higher prices, transferring income to low-wage workers receiving bigger paychecks.

Claims that increasing the minimum wage will dramatically increase prices in the economy are false. Low-wage labor is a small share of total business expenses. In restaurants, for example, total labor costs are around 30% of operating costs—which also include rent, food, utilities, and insurance—and the wage bill of the lowest paid workers is an even smaller amount. This, combined with the fact that minimum wage increases can be offset through reduced profits, lower turnover, and higher productivity, is why price increases are small.

Will businesses just relocate if a state or locality raises its minimum wage?

In brief: The best economic research suggests businesses do not move in response to minimum wage increases.

In detail: One way that economists try to understand the impact of minimum wage increases is to compare economic outcomes across jurisdictional borders where a minimum wage increase took effect on one side but not the other. An analysis of cross-state and county impacts of all local minimum wage differences between 1990 and 2006 found no evidence that employment decreased in the places where the minimum wage went up or that employment increased in the places without a minimum wage increase. More recent research supports these findings, strongly suggesting that businesses are not relocating or moving their workers in response to minimum wage changes.

Businesses commonly affected by minimum wage changes (such as restaurants and retail) want to locate where there are consumers with money to spend. Because raising the minimum wage boosts the spending power of low-income households, it can strengthen the local customer base for these direct-to-consumer businesses even as it raises their labor costs.

Is the minimum wage an effective way to fight poverty?

In brief: Increasing the minimum wage does reduce poverty and should be paired with a strong safety net.

In detail: Minimum wage increases do significantly reduce poverty by boosting household income, especially among low-income households. Research has found that a 10% increase in the minimum wage reduces nonelderly poverty by 2–4%. When EPI applied this research to the 2021 Raise the Wage Act (which would have gradually increased the minimum wage to $15 an hour), an estimated 1.8 to 3.7 million individuals would have been lifted out of poverty, including up to 1.3 million children.

The current weakness of the federal wage floor exposes workers to poverty-level wages. As of 2025, a full-time worker earning the federal minimum wage makes less than the poverty line. A stronger wage floor would generate more savings across critical safety net programs like Medicaid, SNAP, the Earned Income Tax Credit (EITC), and the Child Tax Credit (CTC), as fewer workers would need or be eligible for these programs due to their increased wages. The safety net would thus be more targeted toward the households that need assistance the most. Those public savings can and should be reinvested in those programs to make benefits more generous.

Can increasing the minimum wage harm workers by pushing them over a “benefits cliff”? 

In brief: The minimum wage does reduce safety net program eligibility, but the wage gains almost always outweigh the loss of benefits.

In detail: Most income-tested safety net programs are not characterized by “cliffs” but rather gradual phase outs. Nevertheless, when a worker’s income increases because of a minimum wage increase, they can lose eligibility to programs like Medicaid, EITC, CTC, SNAP, and housing assistance. Research on the interaction between the minimum wage and safety net eligibility finds that benefit reduction is significantly outweighed by the increase in income from the minimum wage. Benefit reductions offset around a third of the income increases for low-income families caused by the minimum wage—meaning that on net they still benefit overwhelmingly.

Higher minimum wages also help low-wage workers increase their access to medical coverage. While minimum wage increases can lift workers out of income eligibility for Medicaid, they simultaneously increase the take-up of employer-based health insurance plans by many low-wage workers, since those workers can more easily afford those plans. Many workers who lose Medicaid eligibility also can receive heavily subsidized private health care through the Affordable Care Act (ACA) exchanges. Researchers estimate that the $20 fast-food minimum wage in California could push almost 60% of Medi-Cal eligible workers in the industry off Medi-Cal and onto alternative health insurance. The wage benefits of the wage floor increase far outweigh the annual premium contributions workers must pay for ACA marketplace healthcare, even accounting for the Trump administration’s choice to let expanded subsidies for the ACA expire.

The reduction in public benefit usage created by higher minimum wages generates substantial savings for federal and state government. These savings should be reinvested in the safety net by expanding program eligibility or otherwise strengthening programs.

There are some safety net programs, which have cliff-like characteristics, like child care assistance, although states are required to provide a graduated phase-out. In rare cases where changes in program eligibility from a minimum wage increase does reduce a family’s total income, this indicates that the design of these programs’ eligibility criteria needs reform, not that the minimum wage increase should be abandoned.

Should lower cost of living in the South and Midwest mean a lower wage floor in those states?

In brief: Even accounting for differences in the cost of living, the minimum wage is far too low in many states across the South and Midwest.

In detail: Cost of living does vary between states and regions across the country, but the minimum wage is still too low across the South and the Midwest. According to EPI’s Family Budget Calculator, even under conservative assumptions of what constitutes a living wage, there is almost no county in the U.S. where a single adult worker can achieve a modest but adequate standard of living earning less than $15 an hour. In fact, many metro areas in the South and Midwest are much more expensive to live in. The living wage in Austin, Atlanta, and Charlotte exceeds $20 an hour. Affordability is still a pressing issue across these regions, even if on average the cost of living is lower. Notably, voters in Florida, Missouri, and Nebraska passed ballot referenda to raise their state minimum wages to $15.

Low wage floors in Southern and Midwestern states hurt workers by suppressing their pay. Most of the states that use the $7.25 federal minimum wage are in the South and Midwest, meaning the effective wage floor in these states is a poverty-level wage (see Question 5). Compounding the problem, many states in these regions preempt localities from passing their own minimum wage policies, preventing policymakers in these jurisdictions from setting wage floors that meet the needs of workers. The use of preemption to dismantle higher labor standards like the minimum wage in the South and Midwest has a long history of being used to reinforce anti-Black racism and white supremacy in these regions.

Can employers ever pay less than the minimum wage?

In brief: Most U.S. minimum wage laws do exempt some groups of workers (such as farmworkers) or set lower minimum wages that apply in certain circumstances (such as for workers who customarily receive tips). Unfortunately, these exemptions can be deeply harmful to workers; in some cases, they were originally adopted to exclude workers of color from minimum wage protections.

In detail: Federal and state labor standards make several groups of workers either ineligible for minimum wage protections or subject to a separate “subminimum wage.”

The FLSA exempts a variety of occupations and types of workers from minimum wage protections. Agricultural workers are excluded from the federal minimum wage entirely and workers who customarily receive tips may be paid a subminimum wage (sometimes called the “tipped minimum wage”) as low as $2.13 an hour (see Questions 8–11). Both of these exemptions originated as ways to exclude Black workers from New Deal economic policies in order to appease Southern lawmakers. Originally, the FLSA also excluded domestic workers, another group of workers with a high concentration of Black workers, but lawmakers extended coverage to them in 1974.

The FLSA also allows employers who have been granted a certificate from the U.S. Department of Labor to pay less than the minimum wage to employees with disabilities (see Question 14).

Another category of federal exemptions and subminimum wages impact young workers. Youth under 20 can be paid as little as $4.25 per hour for their first 90 calendar days of employment. Full-time students, apprentices, and student-learners can also be subject to subminimum wages. And specific occupations typically held by young workers, like babysitters and seasonal amusement workers, are exempt.

Workers misclassified as independent contractors, such as gig economy workers and other wrongly classified employees are not eligible for FLSA protections, including the minimum wage. Also, despite the fact around half of incarcerated people work full-time, these individuals are also excluded from the minimum wage.

State and local policymakers in many states have made efforts to close many of these gaps in minimum wage coverage, but states that do not go beyond the federal standards maintain these exemptions.

Does raising the tipped subminimum wage hurt the restaurant industry?

In brief: Tipped workers are low-wage workers who need wage increases just as much as any other type of worker. Economic research does not find that boosting the minimum wage for tipped workers hurts the restaurant industry.

In detail: There is no inherent economic reason why tipped workers should be paid a lower minimum wage than other workers. The fact that U.S. law allows this can be traced directly back to racist economic practices following the abolition of slavery. Seven states do not have a separate subminimum wage for tipped workers yet still have strong restaurant and hospitality industries. Economic research on the restaurant industry finds that tipped minimum wage increases boost wages for workers without affecting employment. Similarly, when the District of Columbia increased its tipped minimum wage, the restaurant industry did not suffer in terms of employment growth or number of establishments when compared with the U.S average or nearby counties.

Don’t tipped workers earn enough to earn a living wage?

In brief: Tipped workers, including restaurant servers and bartenders, are overwhelmingly low-wage workers. Many struggle to make ends meet, especially those in states where they can be paid less than the minimum wage.

In detail: Tipped workers are more than twice as likely as non-tipped workers to be in poverty. Poverty rates of tipped workers who live in states that use the federal tipped minimum wage of $2.13 are substantially higher than poverty rates of tipped workers in states that use the same minimum wage for all workers, regardless of tips.

The subminimum wage for tipped workers exacerbates economic insecurity for many workers. Employers are legally required to ensure that on a weekly basis, tipped workers’ tips cover the gap between the tipped minimum wage and the regular minimum wage for all hours worked that week, on average. If they do not, employers are responsible for making up the difference. In practice, this requirement is exceptionally difficult to enforce, as it is largely left to workers themselves to track their hours and tips, make the relevant calculations, and then confront their employer if something seems amiss. As a result, tipped workers—who are already paid low wages—are particularly vulnerable to wage theft.

Will raising/eliminating the tipped minimum wage lead to fewer tips or force restaurants to end tipping?

In brief: Tipping is deeply embedded in U.S. culture. Even in places with no separate tipped subminimum wage, workers still receive tips and typically have higher overall take-home pay than their peers in places with a separate tipped subminimum wage.

In detail: In the seven states that do not have a tipped subminimum wage, tipped workers continue to receive tips. According to the Toast platform, California (a state where tipped workers receive the full minimum wage) had the lowest tipping rate (i.e., the average percentage tip on a bill) in the country at 17.2%. This is less than 5 percentage points less than Delaware, the highest tipping state (21.8%). By contrast, the effective minimum wage for tipped workers in California ($16.90) is more than seven times greater than in Delaware ($2.23). EPI research finds that tipped workers in states without a lower tipped subminimum wage earn, on average, 17% more per hour in total take-home pay (base wages plus tips) than tipped workers in states that use the federal $2.13 tipped subminimum.

There is nothing wrong with workers receiving tips for their work in service jobs, but formalizing tipping in minimum wage law allows employers to shift responsibility for paying their workers onto customers. This in turn means workers are more vulnerable to harassment, discrimination, and other forms of abuse. Restaurant workers, particularly women, are subject to the highest rates of sexual harassment of any industry. Research has also found that racial discrimination leads to Black workers receiving fewer tips than their white counterparts. Relying on tipping means workers have less ability to avoid or protect themselves from harmful interactions in the workplace.

Does the so-called “no tax on tips” deduction eliminate the need to raise the tipped minimum wage?

In brief: The 2025 budget tax bill did create a temporary tax deduction for tipped income, but for most tipped workers the benefits are modest and pale in comparison to the benefits of increasing the wage floor.

In detail: The 2025 Republican budget bill created a new, temporary federal income tax deduction for tipped income. This policy does little to address the precarity of tipped work and the benefits to most tipped workers pale in comparison to the gains they would receive through a significant minimum wage increase. The tax deduction encourages employers to rely more on tipped jobs and avoid raising base wages, exacerbating the low wages and challenging conditions of most tipped jobs (see Questions 9 and 10). Many tipped workers earn too little to qualify for the benefit, and those that do will likely see modest tax benefits. Whereas the average annual benefit for an eligible tipped worker will be around $1,700 a year for the three remaining years the deduction is in place, a minimum wage increase to $15 per hour would boost earnings by $3,200 a year for a full-time worker, in perpetuity.

Aren’t most minimum wage workers teenagers?

No, the vast majority of workers impacted by the minimum wage are not teenagers. Low-wage work is a widespread problem and not just isolated to younger workers. EPI’s analysis of the 2025 Raise the Wage Act found that only 14% of the workers that would be impacted by the policy were younger than 20 years old.

Will raising the minimum wage hurt young workers in their first jobs? 

In brief: Higher minimum wages cause little to no employment changes for teenagers.

In detail: The majority of studies find little to no evidence that the minimum wage causes employment losses for teen workers. Instead, their incomes increase as they earn higher pay. It is also worth keeping in mind that teen workers are a minority of low-wage workers, and a shrinking share of the workforce overall as the cultural and economic emphasis on education has grown. To that end, minimum wage increases can support young workers’ educational attainment, particularly for low-income teens. Minimum wage increases significantly improve high school graduation rates for low-income students, a vital investment that can have large long-term consequences for those workers’ lifetime earnings.

Do workers benefit from the FLSA’s subminimum wage for workers with disabilities?

In brief: The federal subminimum wage for disabled workers does not provide real wage protections and is out of step with the most effective ways to boost employment for workers with disabilities.

In detail: Under Section 14(c) of the Fair Labor Standards Act, employers can apply for special certificates with the Department of Labor that allow employers to pay workers with mental or physical disabilities less than federal minimum wage. Employers can only apply for certificates if the worker’s disability actually impairs the worker’s earning or productive capacity. An overwhelming share (96%) of 14(c) employees work in so-called “sheltered workshops” which put workers with developmental disabilities in isolated, noncompetitive environments.

These certificates apply to a small number of workers (less than 37,000 nationally) but also produce exceedingly low pay for workers with disabilities. Nearly half of 14(c) workers were paid less than $3.50 an hour, exacerbating the economic precarity experienced by disabled workers. Disabled adults are 24.1% more likely to live in poverty than other adults. The low pay permissible under 14(c) perpetuates these workers’ struggle to make ends meet. This measure is also unnecessary for providing well-paying employment opportunities to workers with disabilities.

Researchers studying state repeals of 14(c) have found that the change has not hurt disabled workers’ employment. In Maryland, eliminating the provision caused no significant change to disabled worker employment, while in New Hampshire, employment increased. An analysis of the federal AbilityOne program, which is composed of nonprofits that primarily employ workers with disabilities, found that state and local minimum wage increases did not impact the employment of those workers. Employers also do not appear to shift more workers to 14(c) certificates in response to minimum wage increases.

Overall, the use of 14(c) certificates has been declining over time. Across the country, 27 states and D.C. have eliminated or restricted the use of the provisions, reflecting that the policy does not offer real wage protections for disabled workers and that there are superior models of employment for workers with developmental disabilities. Respecting the dignity of workers with disabilities requires prioritizing real pay and inclusion in supportive, but integrated employment opportunities.

Many cities and states already have minimum wages above $15 an hour. Is increasing the federal minimum wage still important?

In brief: Yes, tens of millions of workers still earn less than $15 an hour. In many states and cities, higher wage floors are needed to provide meaningful economic security.

In detail: In the last decade, dozens of cities and states have responded to federal minimum wage inaction by enacting stronger wage floors, in many cases reaching or exceeding $15 an hour. As of 2026, more workers work in a state with at least a $15 minimum wage than in a state using the federal minimum wage. However, there are still 20 states that use the federal $7.25 wage floor and around 14 million workers earn less than $15 an hour.

Even places with recent minimum wage increases might need higher wage floors. The first $15 minimum wage was enacted in 2013. Prices have risen substantially since then, and consequently, the value of targets like $15 an hour has declined significantly. According to EPI’s Family Budget Calculator, $15 is not a living wage almost anywhere in the country. Many cities and states have at least partially protected their wage floors by adopting automatic annual adjustments to account for inflation, but if the initial value is too low, this inflation-indexing only locks in an unlivable floor.

Very few workers earn the federal minimum wage of $7.25 an hour. Is the minimum wage even relevant anymore?

In brief: The fact that so few workers earn the federal minimum wage is a policy failure, not a reason to abandon the policy. The minimum wage is a vital tool for lifting wages and addressing systematic power imbalances between workers and employers. The failure to adequately raise the minimum wage over time has left millions of workers being paid less today than they could have been earning.

In detail: It is true that a small fraction of the labor force earns exactly the federal minimum wage, but this is a policy failure that has left tens of millions of workers with lower wages. Had Congress simply raised the federal minimum wage to keep pace with inflation since the late 1960s, it would be over $12.50 today. According to EPI’s Low Wage Workforce Tracker, 14 million workers earn less than $15 an hour, while 42 million earn less than $20 an hour. The minimum wage does not just impact workers at the very bottom of the wage distribution; it exerts upward pressure for low-wage workers in general. Minimum wage increases create “spillover effects,” where workers above the new minimum wage threshold also see wage increases as employers keep wage ladders and seniority consistent in their firms.

It is important to recognize that without leveraging policy tools like the minimum wage, the low-wage labor market gives employers excess power to set low wages. Workers have limited information about the wages and work policies at alternative employers and can be constrained in their job choices by limited transportation options or the need to maintain specific schedules for child care and other family needs. These economic “frictions” add up, providing leverage for employers to pay lower wages than is optimal for the economy. In short, the longstanding failure to increase the federal minimum wage suppresses worker pay, leaving low-wage workers worse off every year there is no increase.

Does raising the minimum wage lead to automation of low-wage jobs?

In brief: The minimum wage is not a primary cause of automation of low-wage work, but automation is changing the tasks and occupations of some low-wage workers.

In detail: Increasing the cost of low-wage labor can encourage businesses to invest in automation. This can lead to disruption for specific low-wage jobs, or changes in the roles in those occupations. Since we see that the minimum wage does not increase unemployment for low-wage workers (Question 1), the effects of automation on these low-wage jobs are either limited or counterbalanced by expanding employment in other occupations. Evidence suggests that while in recent years automation is taking over a growing number of routine tasks from low-wage workers, the minimum wage has a limited contribution in driving that adoption. Researchers with access to extensive data on McDonalds franchises nationwide found that, while the adoption of touch-screen ordering kiosks grew significantly between 2017 and 2019, there was no evidence that uptake was driven by minimum wage increases. So far, the overall employment impact of automation on low-wage workers has been insignificant, as reductions in occupations with high amounts of routine tasks have been replaced with greater demand for jobs with interpersonal tasks.

Technology is a tool, but the balance of labor market power determines who it helps. Automation has been a feature of our economy since the industrial revolution, boosting productivity in our economy. Technological change can disrupt employment for specific sectors or professions, but in aggregate the economy benefits. Workers benefit from these productivity increases when there are strong labor institutions like access to unions, a strong minimum wage, and policies that support full employment. When those institutions are weak, the gains from technological advancement are not shared widely and contribute to increased inequality.

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

A new Economic Policy Institute report proposes tying the federal minimum wage to two-thirds of the national median wage, an evidence-backed benchmark that would deliver meaningful pay increases to the largest number of workers without the job losses critics typically predict. A complementary report also released today from the Roosevelt Institute—a think tank and professional network working to balance power in the economy—provides evidence for this higher wage rate and argues that greater worker protections, including universal just-cause protections and stronger enforcement against wage theft, are foundational to families’ economic security. 

The federal minimum wage—frozen at $7.25 since 2009—is at its lowest real value in 77 years, having lost 30% of its purchasing power over the 17-year freeze, according to EPI’s report. Setting the minimum wage at two-thirds of the median—equivalent to roughly $17.70 today and a projected $20 in 2030—would lift pay for nearly 40 million workers in 2030, about a quarter of the workforce. It would also durably narrow the gap between low-wage workers and the typical worker, with Black workers and women seeing the largest benefits. Indexing the federal minimum wage to median wage growth–which typically outpaces price growth–would lock in these gains, preventing the kind of decades-long slide that has eroded the current floor.

The two-thirds benchmark is also well-supported by economic research. Decades of studies show that minimum wage increases up to two-thirds of the median wage deliver meaningful pay increases and do not result in the kind of job loss critics of a higher minimum wage predict.

EPI’s proposal would eliminate poverty wages and move the federal minimum wage meaningfully toward a living wage in much of the country. Under EPI’s Family Budget Calculator thresholds, a single adult working full time at the proposed wage could cover the expenses of a modest but adequate standard of living in half of U.S. counties, a substantial step toward economic security for tens of millions of low-wage workers.

But in higher-cost states and localities, state and local policymakers can and should set even higher minimum wages to reduce even wider gaps between pay and the cost of an adequate standard of living. And even a strong federal floor cannot, on its own, guarantee economic security: Lifting working families requires a broader agenda of strengthening unions, expanding the safety net, and keeping unemployment low.

“The woefully inadequate federal minimum wage is a major driver of the affordability crisis facing low-wage workers. Meaningfully raising the federal minimum wage and indexing it to median wage growth is the single most direct step Congress can take to lift pay for U.S. workers and their families,” said Ben Zipperer, EPI senior economist and author of the report. 

“A stronger federal minimum wage is needed to put workers within reach of a living wage,” said Patrick Oakford, director of worker power and economic security at the Roosevelt Institute. “But a minimum wage alone won’t provide the foundation workers need to build meaningful economic security. We need common-sense employment policies to address persistent income inequality and limit corporate power, including universal just-cause protections for all employees.”

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.

Introduction

In 2025, unionization in the United States grew to its highest levels since 2009 (McNicholas, Poydock, and Shierholz 2026). This growth is a testament to the fact that Americans increasingly view unions favorably and recognize them as critical instruments for building a just economy. Yet more than 50 million nonunion workers would join a union but are unable to do so because our nation’s labor laws allow employers to derail workers’ unionization efforts (McNicholas et al. 2019).

It is well documented that employers often hire union avoidance consultants to dissuade and weaken workers’ unionization efforts. These consultants work to prevent a union election from taking place—and if that fails, to ensure that workers vote against the union and then stall negotiations over a first collective bargaining agreement. Over the past several decades, large law firms have developed substantial business specializing in union avoidance services. These firms now play a significant role in denying workers their rights to a union and collective bargaining (Kaufman and Stephan 1995).

The role of these law firms in defeating workers’ organizing campaigns and frustrating workers’ attempts to reach a first contract has largely gone unexamined. While employers are required to disclose money spent on lawyers engaged in persuading employees on their union and collective bargaining rights, there is an exemption around reporting money spent on “advice” services, which is ill-defined under the law. Union avoidance law firms have taken full advantage of this reporting loophole and have constructed an industry providing counsel on union busting. Further, many union avoidance law firms provide employers services beyond these persuader activities, including representation at the NLRB and the stalling of first contract negotiations. 

In this report, we examine the union avoidance industry and the law firms that play integral roles in this business. We calculate the revenue law firms generate from employers who try to avoid unions and undermine collective bargaining with their workers. Further, we discuss the impacts of the union avoidance industry on workers’ ability to organize and what it means for workers, our economy, and our democracy.

Employers spend millions on union avoidance consultants

When workers seek to form a union, employers often hire union avoidance consultants to dissuade and weaken workers’ unionization efforts. These consultants include both non-attorney consultants and attorney consultants. Under the Labor–Management Reporting and Disclosure Act (LMRDA), employers and the consultants they hire must file disclosure reports on agreements in which the consultant is engaging in union-busting activities. Table 1 lists just a few of the employers who filed mandatory reports with the Department of Labor during 2025.

Table 1

These reports represent only a fraction of the total money spent on anti-union campaign services, not to mention legal counsel, representation, and litigation aimed at union avoidance. That’s for two main reasons: 1) consultants are not required to report activity that counts as “advice,” which is ill-defined but currently interpreted to exempt nearly all activities that don’t involve direct contact with workers, even though this accounts for the vast majority of work that consultants engage in; and 2) even activities that clearly must be reported very often are not. Research from LaborLab found that 57% of employers who were known to owe a financial disclosure for having hired a union avoidance consultant in 2024 had failed to file their required disclosure by June 30, 2025, three months after the filing deadline (LaborLab 2025). In 2024, a total of 153 employers filed a financial disclosure, according to the LaborLab report. This showcases a significant amount of underreporting from employers when one considers that over 3,200 union election petitions were filed in 2024, and that 71%–87% of employers hire a union avoidance consultant when faced with a union-organizing drive (NLRB 2026; DOL n.d.). If most “advice” provided by consultants were included, EPI estimates employers spend $442 million per year on both attorney and non-attorney consultants for anti-union campaign services.1

However, that still represents only a fraction of what employers spend on union avoidance. The EPI estimate excludes spending on legal counsel, representation and litigation aimed at defeating organizing drives and stalling contract negotiations, as well as strike preparation and strike-breaking services (McNicholas et al. 2019). It further excludes spending on consultants to implement or enhance employee engagement and “positive employee relations” programs that center around “union-substitution” policies (Levine et al. 2025). These programs feature techniques that are deliberately crafted to preempt, detect, and rapidly quash union organizing, including supervisor training, manipulative communication policies, surveillance techniques, “voice” mechanisms (like suggestion boxes), and employee-involvement programs (such as employee committees and teams).

As mentioned, EPI estimates that employers spend at least an estimated $442 million on anti-union campaign services provided by consultants that are designed to persuade or intimidate workers into voting “no” in union elections. Many of these consultants are also practicing attorneys who simultaneously will provide legal counsel and representation services related to NLRB proceedings. These attorneys also will help employers bend the law to their advantage during contract negotiations, prepare for and break strikes, file unfair labor practice charges to weaken unions and defend employers against such charges, sometimes appealing them not just to the NLRB but also into federal courts. Inclusive of all of these services, the traditional labor relation practices of these law firms generate an estimated $1.48 billion on average.2 When we account for overlap (much labor practice revenue comes from providing anti-union campaign services, not just representation and counsel), these two figures suggest that total spending on attorneys (whether for representation, consulting, or both) and non-attorney consultants is roughly $1.7 billion a year.3 Table 2 shows top law firms’ share of cases at NLRB and the estimated revenue the labor relations practices of these firms generated in 2024.

Table 2

Union avoidance law firms

Prominent law firms—such as Littler Mendelson, Morgan Lewis, and Jackson Lewis—have generated substantial business in union avoidance work on behalf of U.S. employers seeking to frustrate worker organizing and collective bargaining. As shown in Table 2, these law firms do a great deal of business before the National Labor Relations Board, the independent agency charged with enforcing the National Labor Relations Act (NLRA). The NLRA is the nation’s fundamental labor law that guarantees most private-sector workers the right to organize and the right to collective bargaining. However, decades of federal policy and court decisions have weakened the NLRA (Shierholz et al. 2024). Union avoidance consultants and law firms have long exploited the law’s significant loopholes, making it harder and harder for workers to win unions. For nearly 80 years, policymakers have failed to address the NLRA’s weaknesses and restore meaningful union and collective bargaining rights to workers.

These law firms have represented employers in fighting against some of the largest organizing efforts over the last decade, including worker organizing drives at Amazon, Starbucks, and Trader Joe’s (Logan 2025). These law firms have essentially created a specialized practice of union busting and together have generated billions of dollars in revenue, as shown in Table 2. The firms range from exclusively labor and employment firms to full-service corporate firms offering representation in a range of matters. The following are profiles of three law firms that have been at the center of the largest union avoidance campaigns in recent years.

Littler Mendelson

One of the largest union avoidance law firms is Littler Mendelson, a global management-side law firm with more than 1,800 attorneys who can make upwards of $1,700 an hour (Littler Mendelson 2026).4 In Littler Mendelson’s 80-year history, it has represented the likes of Amazon, Delta Airlines, and McDonald’s and has played a predominant role in Starbucks’s anti-union campaign (Logan 2022; Logan 2025). Beyond offering their union-busting services to employers, Littler Mendelson has expanded their services to include promoting anti-worker legislation. For example, Littler Mendelson’s Workplace Policy Institute (WPI) played a predominant role in opposing California’s Assembly Bill (AB) 5, legislation aimed at protecting workers by combatting misclassification (Poydock 2020). WPI also supported the passage of Proposition 22, which exempted gig workers from AB5 (McNicholas and Poydock 2019). WPI is part of the Coalition for Workplace Innovation, which has lobbied for proposals that weaken workers’ rights, including the exclusion of gig/app-based workers from employee status (Pinto 2022).

Morgan Lewis

Morgan Lewis also has a large practice aimed at union avoidance (Morgan Lewis 2026). The firm is a global law firm with nearly 2,000 attorneys, representing the likes of Amazon, REI, and McDonald’s. In addition to being one of the largest union avoidance law firms, Morgan Lewis is also known as one of the most expensive firms, with partners making $1,100 to $1,900 an hour.5 Morgan Lewis is the lead law firm engaged in the legal challenge to have the NLRB declared unconstitutional, despite employing multiple former NLRB officials (Rhinehart and McNicholas 2024).

Jackson Lewis

Another law firm with a significant union avoidance practice is Jackson Lewis, a national labor and employment law firm with a nearly 70-year history in union avoidance (Jackson Lewis 2026). The firm has over 1,000 attorneys who can make upwards of $730 per hour.6 Jackson Lewis has an especially robust presence in the higher education and health care industries but also serves major companies in a wide range of other industries, such as ExxonMobil, Amazon, and Google. As with other union avoidance law firms, Jackson Lewis’s services go beyond legal representation—often providing employers a “full-service” campaign in which they train supervisors and design materials, including speeches, to dissuade workers from organizing a union (Correia 2019).

How union avoidance law firms frustrate worker organizing

The NLRB election process is designed to be straightforward. Workers seeking to form a union file an election petition with the NLRB with signatures of at least 30% of the proposed bargaining unit. If parties cannot agree on a bargaining unit and election logistics, the NLRB will hold a hearing on issues of disagreement and then issue a decision and direct that an election be held. Either party can file post-election objections over the conduct of the election and other issues. Once these issues are resolved, if a majority of workers casting valid ballots in the election vote for union representation, the NLRB will certify the union and direct the parties to begin bargaining. 

While the NLRB election process is supposed to be relatively simple, the strategy of union avoidance law firms follows a standard playbook—they use their overwhelming resources to exploit the NLRB’s administrative processes and sometimes create nearly endless delays. This includes challenging bargaining units and election results and filing endless appeals of adverse decisions (See Appendix Table 1 for examples). The result is to create an unnecessarily complicated and protracted legal process for workers. The NLRB’s own performance objectives aim to ensure that the median age of representation and unfair labor practice cases before the Board is 180 days or less (NLRB 2025). While the NLRB has achieved this goal for many years, the median age for cases is over 100 days and for some workers, it can take years. For example, the NLRB only recently ordered Amazon—an employer known for hiring Littler Mendelson, Morgan Lewis, and Ogletree Deakins—to bargain with workers who voted to unionize over four years ago (Bensinger 2026).

Impact of union avoidance

The roughly $1.7 billion U.S. employers spend each year on anti-union law firms and consultants has an undeniable impact on workers’ ability to organize and bargain collectively. It also contributes to the creation of an economy marked by inequality: It has been well documented that the decline in unionization has contributed to increased income inequality over the last several decades (Bivens et al. 2023). It is no coincidence that the overall decline in unionization follows decades of federal policy neglect that have weakened U.S. labor law. The loopholes in U.S. labor law, which union avoidance consultants and law firms exploit, routinely frustrate workers’ organizing and collective bargaining, enabling wealthy corporations to prosper at workers’ expense.

Why would these corporations want to frustrate workers’ organizing? Consider the benefits unions provide for workers and their communities. When workers join together in a union and engage in collective bargaining, they see higher wages and better benefits (McNicholas, Poydock, and Shierholz 2026). Further, in communities with higher union density rates, working families have higher incomes, greater access to health care, and few voter restrictions (McNicholas et al. 2025). It is clear that when unions are strong, workers have more power and their communities thrive.

Despite the erosion of U.S. labor law and the standard playbook of union avoidance, workers do win unions and union contracts. In 2025, 16.5 million workers in the United States were represented by a union—an increase of 463,000 from 2024 and the highest number of unionized workers in the U.S. in 16 years. The 2025 rise in union density coincides with a high public favorability toward unions, with nearly 70% of people in the U.S. viewing unions favorably (Brenan 2025). Further, research from the Pew Research Center finds that most people in the U.S. see the decline in union density as bad for the country (60%) and bad for working people (62%) (Van Green 2025).

To sustain the modest gains seen in union density in 2025, policymakers must act to restore workers’ rights to a union and collective bargaining. This is critical to the health of our economy and to ensuring that workers receive a fair share of the profits they help produce. Policymakers must pass the Richard L. Trumka Protecting the Right to Organize (PRO) Act, which would help restore private-sector workers’ ability to form unions and bargain collectively.7 The PRO Act addresses many of the major shortcomings with U.S. labor law by establishing civil penalties for employers who violate workers’ rights, creating an election process that limits employer interference, and establishing a bargaining process for reaching a first contract in a timely manner. The PRO Act also would shed light on the union avoidance industry by requiring prompt disclosure of union-busting activities and closing the “advice” loophole through which employers and consultants have evaded reporting (McNicholas, Poydock, and Rhinehart 2021).

Acknowledgments

The authors would like to thank Joe Fast and Hannah Faris for their research assistance for this report.

Appendix

Methodology for labor practice revenue estimate

Estimated revenue of company-level labor practices and of U.S. labor practices as a whole was calculated in the following manner. 

First, we divided the number of attorneys listed in a company’s labor practice in 2026 by the number of attorneys that Law.com reported that the firm had in 2024, the most recent year for which Law.com data are available. We treated that figure as an initial indicator of the fraction of the firm’s total revenue that came from its labor practice. We then multiplied that fraction by the company’s total 2024 revenue, as reported by Law.com. Next, we discounted the result by 50%, on the conservative assumption that half of the revenue generated by attorneys in a company’s labor practice was earned for work performed in other areas of law than labor law. (Many labor relations attorneys belong to multiple practices, often practicing both labor law and employment law at the same company.) This calculation yielded our estimate of the revenue generated by a firm’s labor practice in 2024, inclusive of both representation and consulting services. 

We performed this calculation for the six law firms with 1.5% market share or more in 2024, where market share is defined here as a firm’s share of all NLRB cases in 2024. We then estimated the total revenue generated by all U.S. labor practices by dividing the sum of the six firms’ estimated labor practice revenue by the sum of the six firms’ market share.

Market share data were obtained through a custom query of NLRB data compiled by Labor Data (https://labordata.bunkum.us/). The number of attorneys in a company’s labor practice was obtained by tallying the number of attorneys listed on each company’s labor relations practice page in March 2026 and weeding out any attorneys practicing outside the U.S. 

Note: The share of revenue generated by attorneys in a labor practice that comes exclusively from labor relations services (rather than other areas of practice, such as employment law) may vary significantly by each law firm. For example, our labor practice revenue estimate for Littler Mendelson is lower than our estimate for Ogletree, Deakins, Nash, Smoak & Stewart, even though the former has greater market share than the latter does. This may be because our 50% assumption is too low in Littler Mendelson’s case. Perhaps attorneys in Littler Mendelson’s labor practice specialize in labor relations more often and more intensively than attorneys in Ogletree’s labor practice, thereby leading to higher labor practice revenue for Littler than our estimate suggests.

Appendix Table 1

Notes

1. See Celine McNicholas, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau, Unlawful: U.S. Employers Are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns, Economic Policy Institute, December 2019. To arrive at the $442 million figure, we take the $338 million dollar estimate from McNicholas et al. 2019, which covered the four-year period 2014–2017, and adjust it for inflation to 2025 dollars, according to Consumer Price Index (CPI-U) estimates using the annual average of the BLS CPI-U for 2014–2017 and BLS C-CPI-U for 2025. The estimated rates for consultants are from McNicholas et al. 2019.

2. Full methodology for this calculation can be found in the methodology section in the appendix.

3. We assume about half ($221 million) of the $442 million goes to attorney consultants for anti-union campaign services, which we also capture in the law firms’ labor practice revenue of $1.48 billion. To get to the $1.7 billion, we add the remaining of the $442 million ($221 million) on non-attorney consultants with the law firm revenue estimates ($1.48 billion).

4. Author’s analysis of public court documents and engagement letters sourced from LexisNexis and municipality websites.

5. Author’s analysis of public court documents and engagement letters sourced from LexisNexis and municipality websites.

6. Author’s analysis of public court documents and engagement letters sourced from LexisNexis and municipality websites.

7. Richard L. Trumka Protecting the Right to Organize Act of 2025, [H.R. 20], 119th Cong. (2025).

References

Bensinger, Greg. 2026. “Amazon Must Negotiate with Staten Island Warehouse Workers, NLRB Says.” Reuters, April 2, 2026.

Bivens, Josh, Celine McNicholas, Margaret Poydock, Jennifer Sherer, and Monica Leon. 2023. What to Know About This Summer’s Strike Activity. Economic Policy Institute, August 2023.

Brenan, Megan. 2025. “Labor Union Approval Relatively Steady at 68% in U.S.” Gallup, August 28, 2025.

Correia, David. 2019. “Union Busting on Campus: Jackson Lewis and Higher Education Anti-Unionism.” Verso Books, March 11, 2019.

Department of Labor (DOL). n.d. Persuader Agreements: Ensuring Transparency in Reporting for Employer and Labor Relations (fact sheet). n.d.

Department of Labor, Office of Labor–Management Standards (OLMS). 2026. “OPDR–LM-10 Employer” (web page). Accessed May 15, 2026.

Gregg, Forest. 2026. “Labor Data.” Accessed May 15, 2026.

Jackson Lewis. 2026. “About Us” (web page). Accessed May 8, 2026.

Kaufman, Bruce E., and Paula E. Stephan. 1995. “The Role of Management Attorneys in Union Organizing Campaigns.” Journal of Labor Research 16 (December 1995): 439–454. https://doi.org/10.1007/BF02685719.

LaborLab. 2025. One-Sided Transparency: The Growing Gap Between Required Annual Union Versus Employer and Persuader Filings and OLMS Compliance Efforts Continues to Widen. July 2025.

Law.com. 2026. “Fisher Phillips” (web page). Accessed May 15, 2026.

Law.com. 2026. “Jackson Lewis” (web page). Accessed May 15, 2026.

Law.com. 2026. “Littler” (web page). Accessed May 15, 2026.

Law.com. 2026. “Morgan Lewis” (web page). Accessed May 15, 2026.

Law.com. 2026. “Ogletree Deakins (web page). Accessed May 15, 2026.

Law.com. 2026. “Seyfarth” (web page). Accessed May 15, 2026.

Levine, Jonathan O., Tanja L. Thompson, Brooke E. Niedecken, and Brendan Fitzgerald. 2025. Littler’s 2025 Labor Survey Report. Littler Mendelson, September 30, 2025.

Littler Mendelson. 2026. “Our Firm History” (web page). Accessed May 8, 2026.

Logan, John. 2022. “Not Your Father’s Anti-Union Movement: Ten Key Facts About Starbucks’ Union Avoidance Law Firm, Littler Mendelson.” The Labor and Working-Class History Association (LAWCHA), March 7, 2022.

Logan, John. 2025. Corporate Union Busting in Plain Sight: How Amazon, Starbucks, and Trader Joe’s Crushed Dynamic Grassroots Worker Organizing Campaigns. Economic Policy Institute, January 2025.

McNicholas, Celine, and Margaret Poydock. 2019. How California’s AB5 Protects Workers from Misclassification (fact sheet). Economic Policy Institute, November 14, 2019.

McNicholas, Celine, Margaret Poydock, and Lynn Rhinehart. 2021. Why Workers Need the Protecting the Right to Organize Act (fact sheet). Economic Policy Institute, February 9, 2021.

McNicholas, Celine, Margaret Poydock, and Heidi Shierholz. 2026. Workers’ Resolve Drives Increase in Unionization in 2025. Economic Policy Institute, February 2026.

McNicholas, Celine, Margaret Poydock, Heidi Shierholz, and Hilary Wething. 2025. Unions Aren’t Just Good for Workers—They Also Benefit Communities and Democracy. Economic Policy Institute, August 2025. 

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

Morgan Lewis. 2026. “Our Firm” (web page). Accessed May 8, 2026.

National Labor Relations Board (NLRB). 2025. The National Labor Relations Board 2025 Performance and Accountability Report. Fiscal Year 2025. 

National Labor Relations Board (NLRB). 2026. “Case Search” (web page). Accessed May 8, 2026.

Pinto, Maya. 2022. How the ‘Coalition for Workforce Innovation’ Is Putting Workers’ Rights at Risk. Gig Workers Rising, National Employment Law Project, PowerSwitch Action, Service Employees International Union, and Temp Worker Justice, July 2022.

Poydock, Margaret. 2020. “The Passage of California’s Proposition 22 Would Give Digital Platform Companies a Free Pass to Misclassify Their Workers.” Working Economics Blog (Economic Policy Institute), October 22, 2020.

Rhinehart, Lynn, and Celine McNicholas. 2024. “What’s Behind the Corporate Effort to Kneecap the National Labor Relations Board?: SpaceX, Amazon, Trader Joe’s, and Starbucks Are Trying to Have the NLRB Declared Unconstitutional—After Collectively Being Charged with Hundreds of Violations of Workers’ Organizing Rights.” Working Economics Blog (Economic Policy Institute), March 7, 2024.

Shierholz, Heidi, Celine McNicholas, Margaret Poydock, and Jennifer Sherer. 2024. Workers Want Unions, but the Latest Data Point to Obstacles in Their Path: Private-Sector Unionization Rose by More Than a Quarter Million in 2023, While Unionization in State and Local Governments Fell. Economic Policy Institute, January 2024.

Van Green, Ted. 2025. “Majorities of Adults See Decline of Union Membership as Bad for the U.S. and Working People.” Pew Research Center, August 27, 2025. 

Key takeaways:

• Affordability is not just about prices; it’s the outcome of a race between income growth and price inflation. When income growth is slower than price inflation, affordability worsens. When income growth is faster, affordability improves.
• Focusing just on prices is bad for understanding how the economy works and how it has performed in the recent past, and it leads to an overly restrictive policy menu for improving families’ affordability.
• Policy can more reliably address income growth for typical families. This growth has been stunted for decades by the rise of inequality. Closing this gap by ensuring more equitable distribution of future growth is the strongest tool we have for improving affordability.

Affordability has been the policy buzzword of recent years. Much of the affordability discourse—both among policymakers and the public—has focused near-exclusively on prices as the big affordability problem. But affordability is not a problem of high prices, instead it’s the outcome of a race between incomes and prices. And the reason typical families have faced an affordability crunch in recent decades is not because prices have grown exceptionally fast, it’s because incomes for the vast majority have grown too slowly. This income growth has been suppressed mostly by rising inequality that has put a growing wedge between overall economic growth and the income growth of typical families.

Getting the drivers of affordability right is important—it’s not just quibbling. If you only examine price growth and try to infer what has happened to affordability over periods of economic history, you’ll usually get the story wrong. And if policymakers only look at how to change the trajectory of prices while ignoring what they can do to change the trajectory of incomes, they will be far less effective in providing useful relief to U.S. families. There are far more ways to use policy to raise incomes in a targeted and effective way than there are to suppress price growth.

Below, we provide some more background on why analyses of affordability need to include incomes, why policymakers have much more scope to raise incomes in a useful way as opposed to pushing down prices, and why focusing just on prices can obscure whether affordability has improved or worsened.

Why do prices dominate today’s affordability debates?

In modern capitalist economies, prices rise essentially every year (though at quite different rates), but so do incomes. Determining what has happened to families’ ability to afford a decent and secure life requires looking at measures that take into account both sides of the affordability equation, such as real (inflation-adjusted) income growth. Nobody really disputes this. After all, Americans could buy a new car for $600 in the 1930s, but nobody thinks society was generally richer back then.

The narrow focus on prices in assessing one’s own economic struggles likely stems from several factors.

First, inflation was very fast in the early 2020s. Americans hadn’t experienced inflation rates that high in decades, and they didn’t like them, so prices remain front of mind for many.

Second, it is true that price changes can dominate what happens to real incomes over very short time periods (say a year or less). This recognition is why we can be so sure that the oil price shock inflicted by the U.S. bombing of Iran is going to be so damaging to U.S. families. The rise in oil prices so far this year has likely baked in at least a 1.5% increase in inflation over the next 6–12 months. In 2025, real wage growth for the large majority of workers was slower than 1.5% (which was the outcome of roughly 4% nominal wage growth minus 2.5% inflation). Given this, a sharp and unexpected 1.5% jump in prices will likely erase any prospective real wage gains for workers in 2026.

Finally, it has been noted that many Americans see wage gains as something they accomplished themselves through hard work, while prices are out of their immediate control. Inflation is hence seen as damage done to them and something they need relief from. But this is mostly wrong—policy choices impact wage growth at least as much as inflation, and the most effective policy relief for living standards will come through measures that raise wages, not restrain prices.

Policy can target incomes more effectively and precisely than prices

One person’s income is another person’s cost, which means prices are a bundle of different stakeholders’ incomes. The bill you pay at the grocery store must cover payments the store makes to its shareholders, the salary of the CEO and managers, the wages of cashiers, and the cost of buying food from producers. We don’t want all these incomes to be forced down. Given extreme levels of inequality in the U.S., we would likely be fine with lower CEO pay and payments to shareholders, but we would want wages of cashiers and many in the food production supply chain to rise. Efforts to simply clamp down on this price will have uncertain effects on incomes.

In the jargon of economists, focusing on prices is sector-based policy but to genuinely improve affordability we need factor-based policies, where factors of production like capital, rank-and-file workers, and corporate management can be specifically targeted by policies that aim to raise or restrain their incomes.

Fortunately, there are many good policy options for targeted affordability policy specifically toward low- and middle-income families. Incomes for these families—and for anybody without dynastic wealth—are dominated by wages and public benefits. We talk about each of these in turn below.

Boosting public benefits is affordability policy

Public benefits are entirely under policymakers’ control. If policymakers really cared about the affordability of groceries or health care or energy, they could boost benefits for food stamps, Medicaid, and the low-income heating energy assistance program. These programs currently deliver needed assistance to tens of millions of families to make life more affordable—and they do this with vanishingly small administrative costs, meaning they are highly efficient. Yet all of these programs are slated for steep cuts in the coming decade due to the Republican tax and spending megabill passed in 2025. This bill will inflict large damage to the most vulnerable families’ ability to afford decent and secure lives.

Further, Congress and the Trump administration chose to not extend the Biden administration’s more-generous subsidies for people to buy health insurance through the marketplace exchanges of the Affordable Care Act. The failure to extend these subsidies—even after a full federal government shutdown engineered by congressional Democrats aimed at prioritizing this issue—means that average out-of-pocket costs will double for those buying insurance in the exchanges.

Besides just reversing these cuts, making the U.S. welfare state more robust could also greatly boost the affordability of a decent life. Things like making health coverage more universal with lower out-of-pocket costs, reforming unemployment insurance to make it more protective, and providing all families with children a generous universal child allowance could dramatically improve affordability.

Policy can boost affordability through higher wages as well

The link between policy changes and wage growth is slightly less direct than for public benefits, but it remains very strong. Capitalist labor markets are inherently tilted toward employers and against workers. The only periods of history that have seen strong and equal rates of wage growth across the workforce have been periods where policy supported institutions that boosted workers’ leverage with employers.

The 30 years after World War II saw the creation of policies and institutions that successfully spread the gains from rising productivity equitably among workers up and down the wage distribution, with low- and middle-wage workers seeing growth rates as fast as high-wage workers. This equitable distribution of wage growth was a crucial way that income growth more broadly was kept equitable in this period.

Since 1979, however, these institutions have been steadily attacked and weakened with no new institutions being stood up to take their place in ensuring an equitable distribution of economic growth. The result has been that wages and incomes of typical families have lagged far behind average income and wage growth (or productivity). The wedge between income growth experienced by the vast majority of families and average growth is simply income being generated in the economy that is not helping typical families’ affordability struggles. Instead, it is income being funneled reliably away to the top.

There’s no reason that the institutions that equalized wage growth cannot be built back up and modernized.

The federal minimum wage is the most obvious policy institution for raising wages at the low end of the labor market. Raising the federal minimum wage from its current shamefully low $7.25 would directly boost affordability for tens of millions of workers. In the middle of the wage distribution, unions have proven to be the institution that has historically counteracted employer power and given typical workers increased leverage. However, unions are in a far weaker position today relative to their high points because of intentional policy choices—specifically because policymakers failed to act to curb employers’ growing hostility (and often their illegal activities) toward union organizing. If stronger policy boosted union density, unions would raise wages for both members and non-members alike.

Low- and middle-wage workers also benefit enormously from a determined effort to keep unemployment low for extended periods of time. In recent decades, policymakers have tolerated excess unemployment to keep inflation in check, but this is far too costly a strategy to keep potential inflation in check. Besides locking out millions of willing workers from job opportunities, long periods of excess unemployment were periods when real (inflation-adjusted) wage growth became literally stagnant.

Policymakers often seem skeptical of the effectiveness of these wage-boosting policies, arguing that the effects are too indirect and will take too long to provide benefits to workers. It’s true that efforts to boost unionization and sustain full employment will take some time to push up wages. But they will do this reliably. Further, many policies advanced in the name of reducing prices would also take a long time to come to fruition. For example, calls to tighten antitrust restrictions against corporate mergers and to break up established monopolies often have lots of merit. However, they are not policies that happen instantly and have purely predictable effects.

Focusing too hard on prices can obscure when affordability is actually improving

Finally, one key reason to broaden the affordability debate beyond prices is simply to make sure the public and policymakers can correctly identify periods of improvement or degradation of affordability. As an example of how focusing only on prices can lead to an incorrect diagnosis of affordability trends, take the example of two five-year stretches in recent economic history, both measured from a business cycle peak and going five years forward from there: In the years between 2007 and 2012, annual inflation averaged 1.8% and peaked at 5.5%, while between 2019 and 2024, inflation averaged 4.2% and peaked at 9%. Based on price growth alone, one would expect affordability to have eroded more rapidly in that second period, and indeed the popular narrative is that the early 2020s inflation was particularly destructive for affordability.

But between 2007 and 2012, the nation’s unemployment rate averaged 8.3%, while it averaged less than 5% between 2019 and 2024. After 2007, it took 93 months to re-attain the pre-recession unemployment rate, while it took just 29 months after the 2019 business cycle peak. In short, the labor market was far stronger in the second period.

And when it comes to real (inflation-adjusted) wage growth, the second period—largely because of its lower unemployment—saw far better outcomes than the first. In the 2019–2024 period, inflation-adjusted wages for low-wage workers (those at the 10th percentile) and the median worker rose by a cumulative 15.3% and 5.8%, respectively. In short, contrary to most conventional wisdom, affordability improved in this time. Between 2007 and 2012, real wages outright fell for both low-wage and median workers. Even with very slow inflation, affordability was demonstrably worse in that earlier period.

Figure A

More recently, inflation averaged slightly lower in 2025 (2.5%) than 2024 (2.9%). Yet for many workers—and particularly low-wage workers—2025 saw weaker (or even negative) real wage growth. This is largely due to some slight cooling in the labor market as unemployment rose from 4.0% to 4.4% over the course of 2025. Hence, even as inflation decelerated, the cooling labor market led to an even faster deceleration in nominal wages, which meant that affordability worsened for many workers.

Figure B

Reducing inequality is the key to improving affordability

Because many policymakers believe that affordability concerns are a new problem caused by inflation of recent years, they are now on a frenzied search for new and creative solutions to this price problem. But because the real affordability problem for U.S. families did not emerge in the past few years (remember, affordability was improving in the five years before 2025) and because the genuine long-run problem of affordability was about the inequality of income and wage growth, not excess inflation, most of these new and creative solutions just won’t hit the mark.

It’s understandable why many policymakers seem frustrated with being reminded of the long-diagnosed problem of inequality and the proven remedies—such as sustained full employment, higher wage standards like minimum wages, protecting workers’ fundamental rights to organize unions and bargain collectively, and a more robust welfare state.

Some, of course, just don’t believe in some of these solutions, while many who do would argue that these proven remedies are politically unrealistic in the current moment. But because the real affordability problem is an inequality problem that requires those at the top of the income and wealth scales having to accept less growth going forward (less than the stratospheric gains they’ve gotten used to, it should be said), any genuine solution is going to seem impossible in today’s political system that is dominated by the wealthiest families and corporations. Any policy—whether old and well-tested or new and creative—that actually aims to redistribute income, wealth, and power away from where it sits today will face a wall of opposition that must be politically overcome one way or the other. There’s no “one weird trick” where you can develop a policy creative and neat enough that it will somehow fool the rich and powerful about what its end result will be. And if the end result of the new and creative policy does not threaten the prerogatives of the rich, it’s not a real solution.

Today’s affordability concerns are indeed rooted in objective facts about the material circumstances of middle- and working-class families in the United States. Precisely because of this, they deserve more serious analysis and policy responses than they have been getting. This means focusing more on incomes than prices, and it means being clear-eyed that it has been the upward redistribution of income to the top—abetted by policy decisions—that is the drag on typical families’ affordability. Until solutions address that, they’re mostly just noise.

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.

Strengthening collective bargaining rights is one of the most powerful policy levers states have available to confront primary economic challenges facing all workers today: an affordability crisis driven by the long-term suppression of workers’ pay, growing income inequality, and persistent racial and gender labor market disparities. It’s widely recognized that in today’s wildly unequal economy, millions of workers wish they had a union contract but face daunting obstacles to exercising their legal rights to get one. Moreover, many workers have never been protected by federal labor law at all due to Jim Crow-era exclusions.  

For the second year in a row, Colorado and Virginia state legislators have passed landmark legislation to remove barriers to unionization:  

• In Colorado, legislators have passed the Worker Protection Act to repeal an 83-year-old state policy that has limited Colorado workers’ freedom to form unions by requiring they undergo a state-mandated “second election” before they can secure full collective bargaining rights.  

• In Virginia, lawmakers have passed collective bargaining legislation to ensure full union rights for more than 500,000 state and local government employees and home care workers—all of whom have historically been denied coverage under federal labor law. The legislation would replace Virginia’s longstanding ban on public employee collective bargaining that has resulted in one of the largest public-sector pay gaps in the nation. 

Both pieces of legislation would correct historical wrongs—restoring rights that Colorado and Virginia workers have been denied since the 1940s, when past state lawmakers adopted anti-union policies amid a wave of white supremacist, big business backlash to multiracial union organizing. Yet both pieces of legislation were vetoed by their states’ respective governors in 2025 and are now once again awaiting governors’ signatures in 2026. 

In Colorado, Governor Polis has already indicated intent to once again veto the Worker Protection Act, but it’s not too late for Polis to seize his second chance to sign the bill.  

In Virginia, Governor Glenn Youngkin vetoed the collective bargaining legislation in 2025 and was ineligible to run for reelection because of term limits. This year, when the legislation was first sent to newly elected Virginia Governor Spanberger, she proposed extensive, damaging amendments to weaken the bill instead of signing it. The General Assembly has since rejected those amendments, and now Spanberger has her own “second chance” to sign this transformative legislation into law. 

Meanwhile, scores of anti-worker actions from the Trump administration are continuing to accelerate a decades-long trend of weakening workers’ rights, suppressing wages, and eroding bargaining power. This year, state lawmakers have handed both Governor Polis and Governor Spanberger historic opportunities to rebalance unequal power in their states’ economies and remove major obstacles Coloradans and Virginians face to exercising their rights to unionize and collectively bargain. And the choices Polis and Spanberger make in the next few weeks will shape economic outcomes in their states for years to come.

On Thursday, May 7, 2026, Economic Policy Institute’s Chief Economist Josh Bivens and Senior Economist Ben Zipperer joined Director of Government & Advocacy Samantha Sanders in a conversation on how policymakers should respond to the rise of AI.

Webinar links, notes and discussion

Timestamped themes, discussion, and resources mentioned in the webinar

Find out about upcoming webinars first! Subscribe to EPI newsletters.