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A domestic worker helps her client in Miami. Photo by Mike Kane for Marguerite Casey Foundation's Equal Voice News

Equal Voice News

The Low Jobless Rate: No Benefits for Poor and Middle Class?

October 9, 2018

Paul Nyhan
By Paul Nyhan
Storytelling and Partnership Manager

In September, U.S. jobless numbers hit a record low in nearly half a century. How did poor and middle-class families fare? A deeper look reveals more needs to be done.

The nation’s unemployment rate hit its lowest point in nearly 50 years in September, but that good news overshadows a job market where poor and middle-class families are not fully sharing in the benefits of a healthy U.S. economy.

The monthly jobless report often gains a lot of attention, but only for a couple of numbers: the percentage of unemployed Americans and how many jobs were created. The September report may have shown low unemployment, but it was packed with other data that painted a far different picture of how families, particularly working-poor parents, are faring in the modern U.S. economy.

Beyond September’s jobless rate of 3.7 percent, it’s clear that nominal wages – people’s pay – only grew 2.8 percent over the last year, according to the same U.S. Labor Department report that contained the unemployment rate.

This means these wages largely kept pace with inflation, the Washington, D.C.-based Economic Policy Institute (EPI) found, instead of reflecting real pay raises workers might expect when labor markets are tight.

Historically, when workers are in demand – and that seems to be the story of a 3.7 percent jobless rate – pay has risen, said Heidi Shierholz, senior economist at EPI, a progressive economic policy organization. In the past, bigger paychecks for lower-and-middle-wage workers have sent positive ripples through the economy, reducing reliance on government programs and helping lower the nation’s poverty rate, Shierholz added.

This time that doesn’t appear to be happening.

The U.S. Census Bureau foreshadowed this in September when it reported that nearly 40 million people, by federal government standards, lived in poverty in 2017, not statistically different than the 40.6 million families below the poverty line in 2016.

“This should be a moment when low-and-middle-income workers are actually reaping the benefits of this expansion, sharing in overall growth. There is an opportunity here actually to raise living standards across the board,” Shierholz said. “This is the moment (they) have to sort of dig out of some holes, and that is even more true for racial and ethnic minorities.”

Beyond digging out, economic booms are times when lower-income families can prepare for the next inevitable downturn. In a healthy economy, workers can earn raises that put them on a path toward even higher wages in the future, build up valuable work experience and potentially contribute more to their retirement accounts, according to Shierholz.

Dive deeper into the federal monthly unemployment report and signs of persistent inequity are clear. In September, the jobless rate among Black workers was 6 percent, more than 2 percentage points higher than White workers in the labor market, according to the report from the Bureau of Labor Statistics, which is part of the U.S. Labor Department.

There was a similar gap between Latino workers and White workers, where unemployment rates were 4.5 percent and 3.3 percent respectively.

But workers on the lowest rung of the wage ladder did enjoy real wage growth – pay that rose faster than inflation – thanks, in part, to local and state minimum wage increases, Shierholz said. But, the increase was not that big.

The push for higher minimum wages continues to grow. In early October, retail giant Amazon announced it would raise its minimum wage to $15 an hour, though it’s unclear what that raise may mean in reality, according to The New York Times.

Around the country, fast-food workers continue to participate in a wave of actions, demanding better pay and working conditions.

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Paul Nyhan is the senior writer for Equal Voice. Equal Voice is Marguerite Casey Foundation’s publication featuring stories of America’s families creating social change. With Equal Voice, we challenge how people think and talk about poverty in America. All original and contracted Equal Voice content – articles, photos and videos – can be reproduced for free, as long as proper credit and a link to our homepage are included.

      2018 © Marguerite Casey Foundation

The Low Jobless Rate: No Benefits for Poor and Middle Class?

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