The value of the federal minimum wage is at its lowest point in 66 years

The value of the federal minimum wage has reached its lowest point in 66 years, according to an EPI analysis of recently released Consumer Price Index (CPI) data. Accounting for price increases in June, the current federal minimum wage of $7.25 per hour is now worth less than at any point since February 1956. At that time, the federal minimum wage was 75 cents per hour, or $7.19 in June 2022 dollars.

Last July marked the longest period without a minimum wage increase since Congress established the federal minimum wage in 1938, and continued inaction on the federal minimum wage over the past year has only further eroded the minimum wage’s value. As shown in Figure A, a worker paid the current $7.25 federal minimum wage earns 27.4% less in inflation-adjusted terms than what their counterpart was paid in July 2009 when the minimum wage was last increased, and 40.2% less than a minimum wage worker in February 1968, the historical high point of the minimum wage’s value.

The minimum wage increases of the late 1960s expanded the coverage of the minimum wage to include industries like agriculture, nursing homes, restaurants, and other service industries. The earlier exemption of these industries from the federal minimum wage disproportionately excluded Black workers from this important labor protection. The application of the minimum wage to these industries raised workers’ incomes and directly reduced Black-white earnings inequality. Congress’s failure to raise the minimum on a regular basis in the interim, however, has eroded the value of the federal minimum wage and worsened racial earnings gaps.

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The growing housing supply shortage has created a housing affordability crisis

Rising housing costs have made housing largely inaccessible and unaffordable to most Americans, but have acutely impacted communities of color and low- to moderate-income families over the past several decades. The median asking rent in the United States rose above $2,000 for the first time in June 2022. Given that the U.S. Department of Housing and Urban Development (HUD) sets the standard of affordability at 30% of household income, $2,000 per month would only be “affordable” for households earning at least $80,000 per yearwell above the median U.S. household income ($67,521)

A growing housing supply shortage is a key contributor to the housing affordability crisis. Following the Great Recession, the share of homes being built fell significantly, causing buyer demand to exceed housing production. In fact, fewer new homes were built in the decade following the Great Recession than in any decade since the 1960s. This deficit has now expanded even further, contributing to a shortfall of over 3 million homes and growing.

Some of the leading factors responsible for the housing shortage are land availability and exclusionary zoning laws, which restrict the kinds of homes that can be put in certain neighborhoods—maintaining segregation. Examples of exclusionary zoning laws include minimum lot and square footage requirements, limits on the height of buildings, and restrictions on building multi-family homes. These laws have historically sought to exclude lower-income residents from living in more affluent suburban developments with access to high-performing schools, employment, and other amenities. In the early decades of the 20th century, these laws were also used as a vehicle for explicit racial discrimination excluding Black residents from predominantly white neighborhoods.

Today, the legacy of these laws remains in place and has had far-reaching consequences for all families trying to secure housing. Despite the Fair Housing Act prohibiting discrimination based on race, color, national origin, religion, sex, and other identities, the law does not prohibit class-based discrimination. This allows a legal loophole where people earning low incomes can be restricted to certain neighborhoods and excluded from living in more affluent areas with broader investment and economic opportunity. Given that Black and Latinx families have far less wealth and income than white households, on average, these exclusionary zoning laws are often used to intentionally drive people of color out of certain communities and keep neighborhoods more uniformly white. The pattern of this discriminatory practice over time has exacerbated many racial economic disparities we see today and also takes root in the current housing unaffordability crisis.

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A recession would be worse than today’s inflation

The Federal Reserve has been under intense pressure in recent months to sharply raise interest rates in the name of taming inflation. The voices calling for these rate increases often explicitly say that they are worth doing even if they greatly increase the risk of recession. At their last open market committee meeting, the Fed heeded these voices and raised rates by 0.75%—the largest single increase in 28 years—and indicated commitment to continuing to raise rates until inflation normalized, even if this increased the risk of recession.

The Fed’s actions to date do not guarantee a recession, but they have already made one more likely. Moreover, if they continue on a hawkish path much longer, a recession is quite probable. This would be a huge and avoidable policy mistake. Inflation is not being driven by large macroeconomic imbalances between aggregate demand and supply. Wage growth is already decelerating noticeably. In short, the point of rate hikes—bringing demand and supply into balance and restraining wage growth—has already been accomplished.

Besides failing to recognize these points, many voices in this debate have implicitly or explicitly argued that recession and inflation cause equivalent damage, or that inflation actually causes worse damage than recession. This view is clearly wrong—the economic damage wrought by recessions is far greater than that by single-digit inflation rates.

A common argument runs that inflation harms everybody in the economy, but only those who lose their job are harmed by recession. This is the opposite of truth. A recession directly reduces economy-wide incomes while inflation does not.

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June inflation data show continued growth in overall CPI, but don’t capture recent price declines in food and energy

Below, EPI director of research Josh Bivens offers his insights on today’s release of the consumer price index (CPI) for June. Read the full Twitter thread here

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Rising minimum wages in 20 states and localities help protect workers and families against higher prices

On July 1, three states, 16 cities and counties, and the District of Columbia raised their minimum wages. These updates can all be viewed in EPI’s interactive Minimum Wage Tracker and in Table 1 and Table 2 below. At a time when families are coping with rising prices, these increases will help many low-wage workers and their families make ends meet.

State minimum wage increases

Connecticut, Nevada, Oregon, and the District of Columbia raised their minimum wages, with increases ranging from $0.50 per hour in Oregon’s nonurban counties1 to $1.00 in Connecticut. The new wage floors in Connecticut ($14.00), Nevada ($10.50), and Oregon ($13.50) were set in legislation passed in the last few years, while the District of Columbia’s minimum wage ($16.10) went up due to automatic annual inflation adjustment built into the District’s minimum wage law. (Eighteen states and the District of Columbia, as well as dozens of cities and counties, have automatic annual inflation adjustment built into their minimum wage laws.)

Added to the 21 states that raised their minimums at the start of the year, a total of 24 states and the District of Columbia have raised their minimum wages in 2022. Florida and Hawaii also have minimum wage increases scheduled to occur in October. Hawaii’s increase will be the first of four increases, recently enacted by state lawmakers, that will ultimately bring the state’s minimum wage to $18 by 2028.

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Jobs report: Moderating wage growth means the Fed doesn’t need to raise interest rates further to contain inflation

Below, EPI president Heidi Shierholz offers her initial insights on the jobs report released this morning, which showed 372,000 jobs added in June and wage growth continuing to decelerate. Read the full Twitter thread here

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Will Friday’s wage growth numbers stop the Fed from snatching defeat out of the jaws of victory?

This Friday’s data from the Bureau of Labor Statistics (BLS) could be enormously consequential for what the Federal Reserve does over the next few months. If, as we think, Friday’s data continue to show decelerating wage growth, then the Fed really doesn’t need any more interest rate increases to contain inflation. But if the Fed ignores this and tightens anyhow, the magnificent achievement of a rapid recovery from the worst economic shock of the century could be thrown away, snatching defeat from the jaws of victory. 

In March and April of 2020 as COVID-19 first spread across the United States, 22 million jobs were lost. Aided by the CARES Act passed in April 2020, the first 12 million jobs came back pretty easily over the following six months—businesses that had closed their doors but not gone bankrupt during the months of lockdown simply re-opened. But, job growth slowed in every month between August 2020 and December 2020—and in that last month employment contracted. Progress had not just stalled but gone backwards. At a similar point in the recovery from the Great Recession of 2008–2009, fiscal policymakers perversely shifted toward austerity and the result was that it took a full 10 years to regain pre-recession labor market health.

This time, however, additional fiscal support was passed in December 2020 and with the American Rescue Plan in March 2021. And since December 2020, the pace of job growth has been spectacular, with 9.2 million jobs added in 17 months—about 540,000 jobs every single month. Fiscal policy led the way on this, but the Federal Reserve has played a strong supporting role in boosting growth over this time as well. Today, unemployment is fully recovered to pre-pandemic levels and labor force participation nearly so. This is a huge policy accomplishment

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State and local governments have made transformative investments with American Rescue Plan recovery funds in 2022: A tighter focus on working families and children will have the greatest impact going forward

An earlier version of this post reported that large cities and counties had only budgeted 50% of their allocated funds. However, this number is misleading as only 50% of SLFRF funds for local governments were disbursed in 2021. This post has been edited to show that 83% of the received funds had been budgeted.

As most states wrap up their legislative sessions, we can assess expenditures of State and Local Fiscal Recovery Funds (SLFRF), appropriated by the American Rescue Plan Act (ARPA), so far this year. Many state and local governments have used ARPA funds to make transformative investments to support an equitable recovery, while others have used the funds in ways that will do much less to stimulate the economy, enhance racial equity, or support low-wage workers and their families. State and local governments still have considerable remaining ARPA resources to spend, and ample opportunity to use them effectively.

By now, nearly all of the $350 billion in ARPA funds has been disbursed by the federal government to the states; some entities got all their funds at one time in 2021, but most had half their funds withheld to 2022. According to the National Council of State Legislatures, states and territories have so far appropriated $133 billion of the $199.8 billion allocated to them for SLFRF. Below the state level, it’s not possible to know exactly how much of the approximately $150 billion allocated to cities, counties, and tribal governments has been spent, since those reports are not publicly available. However, the largest cities and counties are required to file reports on SLFRF funds, and as of the end of 2021, 83% of the money they received in the first tranche of funding has been budgeted, according to an analysis by the Treasury Department. (This does not mean all budgeted funds have already been spent.)

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Job openings still near historic high in May while hires and separations were little changed

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for May. Read the full Twitter thread here. 

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Against panic: The Fed should not be given permission to cause a recession in the name of inflation control

The disappointing May data on consumer prices—showing continued strong growth of overall inflation and no real reduction of core inflation—seem to have been a turning point in how many influential policymakers and analysts view the U.S. inflation problem. In particular, it has inspired near-panic and damaging exhortations that the Federal Reserve should push the economy to the brink of recession in the name of fighting inflation. It has also led to preemptive absolutions of the Fed of any criticism that might come their way if a recession does result from steep interest rate increases.

This panic is unwarranted, and the Federal Reserve should not feel free to ratchet up interest rates without regard to the risk of recession. Years from now, a recession induced by the Fed raising rates too quickly will be seen clearly as a policy mistake that could have been avoided. This conclusion stems from several simple facts:

  • Both real output and the economy’s underlying productive capacity (potential output) are essentially in line with what pre-pandemic forecasts projected by mid-2022. None of these pre-pandemic forecasts indicated this would imply economic overheating by now. Given this, the macroeconomic balance between demand and supply cannot be so out of alignment that it explains a large share of the acceleration of inflation in the past 15 months.
    • Crucially, potential gross domestic product (GDP) was clearly above actual GDP for most of 2021 when inflation started. This is very hard to square with macroeconomic imbalances driving the rise of inflation.
    • Finally, there is rich, existing literature on the degree of inflation to expect given an overshoot of aggregate demand over potential supply. These estimates imply substantially less inflation than we’ve seen to date, meaning that factors besides simple macroeconomic imbalances are likely at play.
  • While the May price data were discouraging, there is reason to think that some of the drivers of inflation in recent months may be losing steam.
    • Profit margins are still at historically high levels but have come down significantly in 2022.
    • Wage growth has lagged inflation over the entire episode and has even decelerated in recent periods. This means that wages’ role as a dampener of inflation looks set to continue (and maybe even strengthen) in coming months.
  • The main channel through which higher interest rates will put downward pressure on prices runs through a softer labor market (higher unemployment) reducing growth in labor incomes, which reduces demand and reduces pressure on prices from the cost side as well. But, labor income growth has not been a key driver of inflation so far; in fact, wage growth has significantly dampened the growth of inflation over the past 15 months. In the past six months, hourly wage growth is actually running at a pace entirely consistent with the Federal Reserve’s 2% long-run inflation target.

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Revoking tariffs would not tame inflation: But it would leave our supply chains even more vulnerable to disruption

Key takeaways:

  • Section 232 and 301 tariffs have nothing to do with the current inflationary spike. The tariffs—implemented in 2018—had little effect on U.S. prices, and inflation only spiked after the pandemic recession began in February 2020.
  • Eliminating tariffs would not significantly reduce inflation. At best, removing these tariffs would result in a one-time price decrease of 0.2%—a drop in the bucket when consumer prices have risen by more than three times as much, on average, every month since January 2021, driven largely by pandemic-related global supply chain disruptions and the war in Ukraine.
  • Removing these tariffs would undermine U.S. steel and aluminum industries and increase domestic dependence on unstable supply chains. Tariff removal would result in job losses, plant closures, cancellations of planned investments, and further destabilize the U.S. manufacturing base at a time of intensifying strategic importance for good jobs, national security, and the race to green industry.

With dwindling options on inflation and a mounting chorus of special interest business lobbies, the Biden-Harris administration is reportedly considering removing some Trump-era tariffs in an effort to moderate rising prices in the U.S. economy.

Tempting as such an action may seem, it is certain to have unnoticeable effects on overall prices—at best. And the action will ensure, moving forward, that our supply chains will be even more vulnerable to the kinds of disruption risks we are seeing play out right now. These tariffs offer a tangible policy response to a real-world economy rife with market failures that invalidate the predictions of canonical economic trade models used to argue against keeping the tariffs.

In the absence of a more comprehensive approach to U.S. industrial strategy, the tariffs are working to resuscitate America’s industrial base and have done so with no meaningful adverse impacts on prices. Pulling the rug from under this rebuild now, without first putting in place other policy solutions to address costly market failures, risks undoing this progress and jeopardizing the financial conditions in industries that are critical to building the infrastructure and renewable energy investments needed to power future economic growth.

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Local governments stepping in to bolster workers’ rights

There has been a surge of action in cities and other localities across the country to advance workers’ rights.

A just released report, issued by EPI, the Harvard Labor and Worklife Program, and Local Progress, provides a comprehensive overview of this local government labor activity, highlighting what cities and other localities have been doing and offering a blueprint of what they can do.

Some examples:

  • 52 localities have enacted their own higher local minimum wages, and 19 have passed paid sick leave laws. Some cities have passed cutting-edge laws requiring predictable scheduling, outlawing arbitrary firings in certain industries, securing pay for independent freelance workers, and protecting workers during the COVID-19 pandemic.
  • At least 20 localities have created or are creating dedicated local labor agencies, including large coastal cities like New York, San Francisco, and Seattle, as well as cities like Chicago, Denver, Minneapolis, Saint Paul, and soon Tucson. 
  • Some cities are requiring high-road or at least legally compliant practices among their contractors by setting prevailing or living wages, or passing responsible bidder ordinances. Others have set up systems under which permits or licenses can be revoked for labor violations.
  • Although some cities are preempted by state law from passing laws, there’s still a lot they can do: educating workers about their rights, providing good jobs to their own municipal employees, setting high standards for contractors and vendors, reporting on local conditions, and showing public support to workers standing up for their labor rights. 

Although many local governments have embraced this new role of looking out for workers, there’s still tremendous untapped potential for more action. 

Young adults are graduating into a more promising labor market

As young adults across the country graduate from high school and college, it’s an appropriate time to reexamine how the labor market is performing for young workers. Young workers, 16–24 years old, were among the hardest hit in the pandemic recession, given their vulnerability to labor market downturns in general and their specific exposure to economic weakness in the pandemic. For instance, a quarter of young workers had leisure and hospitality jobs, where employment declined 41% in the spring of 2020.

Fortunately, unlike the protracted recovery from the Great Recession, policymakers responded to the pandemic recession by enacting policies at the scale of the problem. As a result, the economy bounced back quickly, and employment is now within 1% of pre-recession levels. Mirroring the overall labor market recovery, young workers have also experienced a tremendous recovery from the depths of the pandemic recession.

In April 2020, the overall unemployment rate spiked to 14.7%. Over the last three months, the unemployment rate has leveled out at 3.6%—basically at pre-pandemic levels—while labor force participation continues to recover steadily. Figure A compares the unemployment rate of young adults, ages 16–24, with workers ages 25 and up through the last two recessions. There are two key factors to note from the figure. First, young workers tend to have much higher unemployment rates than older workers, on average about two and a half times higher. Second, both groups of workers saw a huge increase in unemployment in the spring of 2020 and both groups have experienced a tremendous bounce back, far faster than the recovery from the Great Recession.

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Proposed New York state minimum wage increases would lift wages for more than 2 million workers through 2026: Minimum wages would range by region from $16.35 to $21.25 per hour by 2026

Proposed legislation in the New York state legislature would ensure that low-wage workers in New York are protected from rising prices and benefit from improvements in the broader economy. Senate bill S3062C and assembly bill A7503B would schedule annual increases to the minimum wage that would be linked (or “indexed”) to the combination of the consumer price index (CPI) and a measure of labor productivity. We estimate that the resulting increases in the state minimum wage would lift wages for more than 2 million New Yorkers through 2026.

New York’s minimum wage law sets separate minimum wages for three different regions of the state: New York City, the suburban counties of Nassau, Suffolk, and Westchester, and the remainder of upstate New York. Under current projections1 for inflation and labor productivity, as shown in Table 1, indexing the minimum wage to changes in prices and productivity would increase New York City’s minimum wage from $15.00 where it is now to $21.25 by 2026. Nassau, Suffolk, and Westchester counties’ minimum wage would rise from $15.00 to $18.65 by 2026, and the rest of the state would increase from $13.20 to $16.35.

Since New York state law sets the minimum wage for tipped workers (also known as the “tipped minimum wage”) at two-thirds of the regular minimum wage, these changes would also lead to a rising tipped minimum wage and pay increases for the state’s tipped workers. As discussed more below, indexing the minimum wage in this way would protect the buying power of millions of low-wage workers’ paychecks and, in particular, improve the economic security of predominantly women, Black, and Latinx workers.

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Understanding economic disparities within the AAPI community

Key takeaways:

  • More than 26 different nations are represented in the AAPI community in the U.S. The broad generalization inherent in the AAPI categorization can obscure the economic reality for many groups within the AAPI community.
  • Disaggregated hourly wage data show that groups within the AAPI community face economic disparities. While AAPI average wages are close to the national average, many groups within the AAPI community lag behind.
  • Differing immigration paths and histories within the AAPI community influence which groups might be doing better economically in the United States today.

The U.S. Asian American and Pacific Islander (AAPI) community encompasses over 24 million people, with origins spanning countries in Central, East, and Southeast Asia, the Indian subcontinent, and the island nations in the Pacific.1 This diverse population has been growing rapidly in the United States: Between 2010 and 2020, there was a nearly 40% increase in the number of people who identified as Asian alone or in combination, and a 30% increase for Native Hawaiians and other Pacific Islanders.

Whether they have immigrated recently or lived in the United States for centuries, the AAPI community is a vital piece of American society and the workforce. It is important to note, however, that this group is not a monolith, and examining AAPIs as an aggregate can obscure the economic reality for many groups within the AAPI community. In this post, we examine this varied group in more detail and calculate their hourly wages at a disaggregated level to shed greater light on the actual economic circumstances of Asian Americans and Pacific Islanders, and the economic disparities they may face.

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Debunking 5 top inflation myths

The labor market is largely strong right now, but inflation continues to be a pressing economic concern.

The reasons for escalating inflation are hotly debated, but some theories gaining traction have not been grounded in the data. EPI research sets the record straight on the causes of inflation—and how policymakers can best restrain it. Below, we debunk 5 top inflation myths.

  • Myth #1: Workers’ wage growth is driving inflation. Nominal wage growth—while faster relative to the recent past—has lagged far behind inflation, meaning that labor costs have been dampening, not amplifying, inflationary pressures all along.
  • Myth #3: Federal relief and recovery measures overheated the economy and fed inflation. Evidence from the past 40 years suggests strongly that profit margins should shrink and the share of corporate income going to labor compensation should rise as unemployment falls and the economy heats up. But the exact opposite pattern has happened so far in the recovery—casting much doubt on inflation expectations rooted simply in claims of macroeconomic overheating. In short, the labor market is strong, but it’s not overheating.
  • Myth #4: Removing import tariffs would be a major tool to fight inflation. Tariffs were put in place far before early 2021 when inflation began rising, and eliminating tariffs could not significantly restrain it. Further, removing tariffs would not be costless. Tariff removal could result in job losses, plant closures, cancellations of planned investments, and further destabilization of the domestic manufacturing base, which would increase domestic dependence on unstable import supply chains.

Job and wage growth moderate in May: The labor market is not overheating

Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 390,000 jobs added in May and wage growth moderating.

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What to watch on jobs day: The labor market is strong, not overheating

On Friday, the Bureau of Labor Statistics (BLS) will release the latest numbers on the state of the labor market. Along with rising payroll employment and increases in labor force participation as workers enter or return to the labor market, I will continue to watch nominal wage growth. While some have pointed to fast nominal wage growth as a source of concern in the U.S. economy, this is largely misplaced. Instead, nominal wage growth continues to dampen, not amplify, inflationary pressures, and it has actually decelerated in recent months. And, nominal wage growth running faster than pre-pandemic rates has managed to provide a useful spur to hiring in sectors that were most damaged by the pandemic shock.

Over the last year, in a welcome change, wage growth has been faster at the lower end of the wage distribution, as the labor market has improved and employers try to attract and retain the workers they want. At the same time, employment has grown dramatically because Congress made fiscal investments at the scale of the problem, and employment in the private sector is now within 1% of pre-pandemic levels. While some complain that any wage growth faster than pre-pandemic rates is a sign of damaging labor shortages that are constraining growth, this doesn’t fit the facts. At a macroeconomic level, the economy continues to absorb new workers at historically high rates. And across industries, there is no evidence that fast wage growth is constraining job growth.

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Job openings declined in April while layoffs hit a series low

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for April. Read the full Twitter thread here. 

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The future of work depends on stopping Amazon’s union busting: Shareholders and policymakers must all play a role in protecting Amazon workers’ rights

This week’s Amazon shareholder meeting provides an important opportunity to consider urgent steps shareholders and policymakers can take to protect the threatened rights of unionizing Amazon workers and counter the company’s growing impact on income inequality, racial and gender disparities, and the degradation of work across the labor market.

The agenda for the May 25th annual meeting includes the election of company directors, approval of executive compensation, and several shareholder resolutions concerning Amazon’s employment practices and labor law violations. While Amazon opposes all these resolutions, shareholders should take the opportunity to reject excessive pay for Amazon’s CEO and support resolutions calling for audits of worker health and safety, racial equity and racial and gender pay gaps, employee turnover, and Amazon policies and practices affecting workers’ rights to freedom of association and collective bargaining. Meanwhile, state and federal policymakers should take note of the policy priorities the resolutions suggest for ensuring that Amazon’s anti-union, high-risk, high-turnover business model isn’t allowed to dictate the future of work in the United States and across the globe.

Amazon’s use of a wide range of legal and illegal tactics to prevent workers from unionizing has been well documented. Amazon engaged in months of coercion, intimidation, vote gerrymandering, and retaliation against Bessemer, Alabama, warehouse workers in the lead-up to their 2021 union election. Aggressive company surveillance led many workers to believe the company was monitoring their secret ballot votes—an offense so egregious it led the National Labor Relations Board (NLRB) to order a brand-new election (the 2022 outcome of which remains too close to call).

In April, Amazon workers at the JFK8 warehouse in Staten Island overcame similar obstacles, including numerous Amazon labor law violations, to win a decisive union election victory. In response, Amazon has refused to recognize the new Amazon Labor Union, instead dragging out legal challenges and refusing to meet with workers to start bargaining a contract. A new report published last week further documents the failure of Amazon’s corporate policies and practices to meet international human rights standards for respecting workers’ rights to freedom of association and collective bargaining.

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Guest post: Food insufficiency in families with children increased after expiration of Child Tax Credit monthly payments

Amidst the continuing COVID-19 pandemic and increased inflation, 15% of households with children reported food insufficiency in March–April 2022. The reports of food insufficiency—sometimes or often not having enough food to eat in the past week—are from the nationally representative Household Pulse Survey (HPS), an internet survey conducted by the U.S. Census Bureau.

Food insufficiency among families with children poses a short- and long-term moral and economic threat to the United States. Even brief disruptions in access to food can have lasting consequences. Not having enough to eat often disrupts children’s cognitive and emotional development and education. This was the case for a child who disclosed that the reason she was fidgeting and not paying attention in class was that she did not have enough food to eat. There may be lifelong ramifications of not having enough to eat in childhood, including increased likelihood of poor health outcomes and avoidable medical expenditures across the lifespan.

Fortunately, Congress can help. Several studies indicate that advance Child Tax Credit (CTC) payments, expanded under the American Rescue Plan Act, were associated with reduced poverty and food insufficiency in households with children.

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Following Dr. Lisa Cook’s historic confirmation to the Federal Reserve Board, we must acknowledge the importance of Black economists for public policy and the economy

Earlier this year, President Biden nominated two Black economists, Dr. Lisa Cook and Dr. Philip Jefferson, to serve as members of the Federal Reserve Board of Governors. On May 10, 2022, Dr. Cook was confirmed in a 51–50 party-line vote, which made her the first Black woman to sit on the Board in its 108-year history. The following day, Dr. Jefferson was confirmed on a 91–7 bipartisan vote, making him the fourth Black man to sit on the Board, but marking the first time two Black governors will serve simultaneously.

Despite this tremendous accomplishment, the nomination of Dr. Cook faced great scrutiny and criticism, with several Senate members questioning her qualifications and expertise despite her years of professional and academic experience in economic development, financial institutions and markets, economic history, and international relations. Sadly, this isn’t new for Black professionals, and specifically not for Black women.

Within the workplace and historically, Black women’s skills and contributions are often undermined, underappreciated, and devalued. These discriminatory roots have led to intersectional gender and racial inequities in the kinds of jobs Black women are hired for as well as the wages and benefits they receive. However, another glaring detail we can glean from the captious confirmation process of Dr. Cook—and the exclusion of Black women from the Federal Reserve Board’s panel for over a century—is how Black economists are broadly underrepresented and their essential view on racial economic inequality is often discounted.

The underrepresentation of Black scholars in the field of economics can be traced to the low numbers of Black students pursuing degrees in economics. In the academic year 2019–2020, there were more than 1,200 doctoral degrees awarded to students in economics. However, less than 2% of doctoral degrees were awarded to Black economics students overall and less than 1% were awarded to Black women. For undergraduate students, Black students overall accounted for 4.1% of bachelor’s degrees awarded in economics and Black women accounted for only 1.5%.

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Abortion rights are economic rights: Overturning Roe v. Wade would be an economic catastrophe for millions of women

A leaked draft of a majority opinion authored by Supreme Court justice Samuel Alito strongly suggests that the court will rule to overturn Roe v. Wade and Planned Parenthood v. Casey, the two landmark cases that have upheld the right to an abortion nationwide for the last half century. If the final ruling largely follows what is sketched out in the leaked draft, abortion services will be drastically curtailed, if not outright banned, in over half the country.

Abortion is often framed as a “culture-war” issue, distinct from material “bread and butter” economic issues. In reality, abortion rights and economic progress are deeply interconnected, and the imminent loss of abortion rights means the loss of economic security, independence, and mobility for millions of women. The fall of Roe will be an additional economic blow, as women in the 26 states likely to ban abortion already face an economic landscape of lower wages, worker power, and access to health care.

Women’s economic lives, livelihoods, and mobility are at the heart of the reasoning to overrule Roe.

In the draft majority opinion, Justice Alito dismissed the argument in Casey that women had organized their lives, relationships, and careers with the availability of abortions services, writing “that form of reliance depends on an empirical question that is hard for anyone—and in particular, for a court—to assess, namely the effect of the abortion right on society and in particular on the lives of women.” In fact, this empirical question has been definitively assessed and answered. A rich and rigorous social science literature has examined both the detrimental effect of a denied abortion on women’s lives, as well as the individual and societal economic benefits of abortion legalization, as detailed in the thorough amicus brief filed in Dobbs on behalf of over 100 economists.

Some of the economic consequences of being denied an abortion include a higher chance of being in poverty even four years after; a lower likelihood of being employed full time; and an increase in unpaid debts and financial distress lasting years. Laws that restrict abortion providers, so-called “TRAP” laws (targeted regulation of abortion providers), have led to women in those states being less likely to move into higher-paying occupations.

On the flip side, environments in which abortion is legal and accessible have lower rates of teen first births and marriages. Abortion legalization has also been associated with reduced maternal mortality for Black women. The ability to delay having a child has been found to translate to significantly increased wages and labor earnings, especially among Black women, as well as increased likelihood of educational attainment. Treasury Secretary Janet Yellen concluded that “eliminating the rights of women to make decisions about when and whether to have children would have very damaging effects on the economy and would set women back decades.”

The draft opinion of this overtly partisan Supreme Court ignores the rigorous data and empirical studies demonstrating the significant economic consequences of this decision. In doing so, it lays bare the cruel and misogynistic politics that motivate it. Justice Alito’s dismissal of claims that forcing women to bear an unwanted pregnancy imposes a heavy burden is shockingly glib, as he simply asserts “that federal and state laws ban discrimination on the basis of pregnancy, that leave for pregnancy and childbirth are now guaranteed by law in many cases, that the costs of medical care associated with pregnancy are covered by insurance or government assistance….”

Every statement in this casual litany is wildly misleading. Women are still routinely fired for being pregnant, close to 9 in 10 workers lacked paid leave in 2020, the costs of maternity care with insurance have risen sharply and constitute a serious economic burden for even middle-income families. And many of the states certain or likely to ban abortion after the fall of Roe have not expanded Medicaid, leaving women without insurance facing much steeper costs—particularly in the immediate post-partum period. And, of course, our failed health care system often imposes the ultimate cost of all on pregnant women: The U.S. rate of maternal mortality, especially for Black women, ranks last among similarly wealthy countries. In short, the potential costs of bearing a child are high indeed, and it is women who should decide if and when they wish to shoulder them.

Figure A

States likely to ban abortion are more likely to have higher incarceration rates and lag in wages, worker rights, and access to health care

State Minimum wage Incarceration rate (per 100k) Abortion status Right to Work key Medicaid Expansion Right to Work Medicaid Expansion key  Abortion status key
Alabama $7.25 419 Pre-Roe ban or bans/extreme limits RTW No Expansion 1 1 2
Alaska $10.34 243 No change Not RTW Adopted Expansion 0 0 0
Arizona $12.80 556 Pre-Roe ban or bans/extreme limits RTW Adopted Expansion 1 0 2
Arkansas $11.00 585 Trigger ban RTW Adopted Expansion 1 0 1
California $14.00 310 No change Not RTW Adopted Expansion 0 0 0
Colorado $12.56 342 No change Not RTW Adopted Expansion 0 0 0
Connecticut $13.00 246 No change Not RTW Adopted Expansion 0 0 0
Delaware $10.50 380 No change Not RTW Adopted Expansion 0 0 0
Washington D.C. $15.20 N/A No change Not RTW Adopted Expansion 0 0 0
Florida $10.00 444 Likely to ban RTW No Expansion 1 1 3
Georgia $7.25 507 Pre-Roe ban or bans/extreme limits RTW No Expansion 1 1 2
Hawaii $10.10 215 No change Not RTW Adopted Expansion 0 0 0
Idaho $7.25 474 Trigger ban RTW Adopted Expansion 1 0 1
Illinois $12.00 303 No change Not RTW Adopted Expansion 0 0 0
Indiana $7.25 400 Likely to ban RTW Adopted Expansion 1 0 3
Iowa $7.25 293 Pre-Roe ban or bans/extreme limits RTW Adopted Expansion 1 0 2
Kansas $7.25 342 No change RTW No Expansion 1 1 0
Kentucky $7.25 515 Trigger ban RTW Adopted Expansion 1 0 1
Louisiana $7.25 678 Trigger ban RTW Adopted Expansion 1 0 1
Maine $12.75 146 No change Not RTW Adopted Expansion 0 0 0
Maryland $12.50 305 No change Not RTW Adopted Expansion 0 0 0
Massachusetts $14.25 133 No change Not RTW Adopted Expansion 0 0 0
Michigan $9.87 381 Pre-Roe ban or bans/extreme limits RTW Adopted Expansion 1 0 2
Minnesota $10.33 177 No change Not RTW Adopted Expansion 0 0 0
Mississippi $7.25 636 Trigger ban RTW No Expansion 1 1 1
Missouri $11.15 423 Trigger ban Not RTW Adopted Expansion 0 0 1
Montana $9.20 439 Likely to ban Not RTW Adopted Expansion 0 0 3
Nebraska $9.00 289 Likely to ban RTW Adopted Expansion 1 0 3
Nevada $9.75 412 No change RTW Adopted Expansion 1 0 0
New Hampshire $7.25 197 No change Not RTW Adopted Expansion 0 0 0
New Jersey $13.00 209 No change Not RTW Adopted Expansion 0 0 0
New Mexico $11.50 315 No change Not RTW Adopted Expansion 0 0 0
New York $13.20 224 No change Not RTW Adopted Expansion 0 0 0
North Carolina $7.25 313 No change RTW No Expansion 1 1 0
North Dakota $7.25 231 Trigger ban RTW Adopted Expansion 1 0 1
Ohio $9.30 430 Pre-Roe ban or bans/extreme limits Not RTW Adopted Expansion 0 0 2
Oklahoma $7.25 621 Trigger ban RTW Adopted Expansion 1 0 1
Oregon $12.75 353 No change Not RTW Adopted Expansion 0 0 0
Pennsylvania $7.25 355 No change Not RTW Adopted Expansion 0 0 0
Rhode Island $12.25 156 No change Not RTW Adopted Expansion 0 0 0
South Carolina $7.25 352 Pre-Roe ban or bans/extreme limits RTW No Expansion 1 1 2
South Dakota $9.95 426 Trigger ban RTW No Expansion 1 1 1
Tennessee $7.25 384 Trigger ban RTW No Expansion 1 1 1
Texas $7.25 529 Trigger ban RTW No Expansion 1 1 1
Utah $7.25 207 Trigger ban RTW Adopted Expansion 1 0 1
Vermont $12.55 182 No change Not RTW Adopted Expansion 0 0 0
Virginia $11.00 421 No change RTW Adopted Expansion 1 0 0
Washington $14.49 250 No change Not RTW Adopted Expansion 0 0 0
West Virginia $8.75 380 Pre-Roe ban or bans/extreme limits RTW Adopted Expansion 1 0 2
Wisconsin $7.25 378 Pre-Roe ban or bans/extreme limits RTW No Expansion 1 1 2
Wyoming $7.25 426 Trigger ban RTW No Expansion 1 1 1

Source: Elizabeth Nash and Lauren Cross, “26 States Are Certain or Likely to Ban Abortion without Roe: Here’s Which Ones and Why,” The Guttmacher Institute, October 2021; “State Minimum Wage Laws, Department of Labor, Updated January 2022; Kaiser Family Fund, “Status of State Medicaid Expansion Decisions,” April 26, 2022; E. Ann Carson, "Prisoners in 2020 -- Statistical Tables," U.S. Department of Justice Bureau of Justice Statistics, December 2020; "Right-to-Work States," National Conference of State Legislatures, Updated 2017.

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Recognizing that abortion is an economic issue is an important step in building support for protecting women’s right of access. But this recognition also allows us to see the potential fall of Roe v. Wade as a key piece in a broader politics and economics of control. Twenty-six states currently have laws or constitutional amendments on their books that ban abortion. If Roe is declared overruled, these bans will go into effect. Low- and middle-income women, especially Black and Brown women, will bear the brunt of the impact. Many of the states with preexisting abortion bans held at bay by Roe are also states that have created an economic policy architecture of low wages, barely functional or funded public services, at-will employment, and no paid leave or parental support. In these states, the denial of abortion services is one more piece in a sustained project of economic subjugation and disempowerment.

Figure A shows the 26 states that have “trigger bans” that will set in immediately after the SCOTUS decision, pre-Roe bans or extreme limits, and likely bans. Figure A also shows the minimum wage in that state, whether that state is a so-called “right-to-work” state that makes it harder for workers to collectively bargain and unionize, whether the state has expanded Medicaid, and the rate of incarceration per 100,000 people in that state. While wages and access to health care (through Medicaid) are relatively obvious measures of well-being, so-called “right-to-work” laws are also useful to look at as worker power and unionization also have strong connections to economic, social, and physical health. Mass incarceration and the criminal justice system are also deeply intertwined with racial and economic inequality, from the impact of a criminal record on employment and earnings, to the intergenerational effects on families and communities.

It is no coincidence that the states that will ban abortion first are also largely the states with the lowest minimum wages, states less likely to have expanded Medicaid, states more likely to be anti-union “Right-to-Work” states, and states with higher-than-average incarceration rates. For example, among the states which will ban abortion, the average minimum wage is $8.39, compared with $11.48 in the states that have abortion access. Similarly, 10 of the 26 anti-abortion states have not expanded Medicaid, and all but two of the states are anti-union “right-to-work” states. While the nationwide rate of incarceration is 419 per 100,000 people, in the 26 anti-abortion states the average incarceration rate is 439 per 100,000 people, compared with 272 for the states without abortion restrictions. The consequences of low wages and lack of access to health care, including abortion services, falls especially hard on Black women in many of these states. There is a long history of racism motivating political organization, like the rise of “right-to-work” legislation in the Jim Crow south, or the complicated combination of anti-abortion politics and backlash against desegregation efforts during the political realignment of the 1970s.

Policymakers and advocates must recognize that the fall of Roe is an economic issue and would be one more victory for the economics of control and disempowerment—low wages, little worker power, and rising disinvestment. Reproductive justice is key to economic justice and protects women’s humanity, dignity, and the right to exert freedom over their own choices in the economy.


Ignoring the role of profits makes inflation analyses a lot weaker

Washington Post columnist Catherine Rampell wrote last week that those pointing to the role of fatter profit margins in driving price inflation are engaged in “conspiracy theories,” and argued that the conspiracy theorists are distracting attention from things that could really lead to lower inflation: faster immigration and removing import tariffs. It’s a pretty unconvincing column all around.

First, the alleged inflation cures that attention is being pulled away from are really weak tea. The case for faster immigration helping to quell inflation runs through its effect on labor markets. If faster immigration increases labor supply this could in theory dampen wage growth. But wage growth has not been the source of the current inflation. And recent readings on wage growth have it roughly consistent with relatively normal rates of inflation. Putting further downward pressure on wage growth that is already lagging far behind inflation would just increase the burden of adjustment to more normal inflation that will be borne by workers.

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No more union-busting. It’s time for companies to give their workers what they deserve

This is an excerpt from an op-ed in CNN Business. Read the full op-ed here.

This year, workers at Amazon, Starbucks and other major corporations are winning a wave of union elections, often in the face of long odds and employer resistance. These wins are showing it’s possible for determined groups of workers to break through powerful employers’ use of union-busting tactics, ranging from alleged retaliatory firings to alleged surveillance and forced attendance at anti-union “captive audience meetings.” But workers should not have to confront so many obstacles to exercising a guaranteed legal right to unionize and bargain for improvements in their work lives and livelihoods.

There are good reasons to believe workers’ organizing momentum will continue (union election filings are already up 57% during the first six months of this fiscal year). Frontline workers are asserting their worth after more than two years of risking their health during an ongoing pandemic while watching corporate profits and CEO pay continue to soar.

The U.S. tax code functionally rewards corporations who use anti-union consultants: Congress must take action

The U.S. tax system is deeply flawed. While millions of working-class Americans pay their fair share, corporations are dodging more and more of their tax responsibilities. Despite record profits, corporate taxes are way down, as corporations exploit loopholes that allow for offshore profit-shifting and various tax breaks and deductions. Specifically, the 2017 Tax Cuts and Jobs Act (TCJA) decreased the statutory corporate income tax rate from 35% to 21% and simultaneously introduced new tax loopholes. Consequently, the TCJA has slashed the effective tax rate for corporations almost in half, further damaging the progressivity of the overall federal tax system. In turn, this erosion of corporate liability and the proliferation of tax avoidance have exacerbated inequality, with the working class facing starved social services, reduced household incomes, and lower standards of living.

One proven tool to combat this rise in inequality is unions. By bringing workers’ collective power to the bargaining table, unions are able to win better wages and benefits for working people—reducing income inequality as a result. Yet data show that U.S. employers are willing to use a wide range of legal and illegal tactics to frustrate the rights of workers to form unions and collectively bargain. And much like our overall tax system favors corporations over working people, the tax code functionally rewards corporations for anti-union activities that suppress worker power.

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Wage growth has been dampening inflation all along—and has slowed even more recently

Yesterday’s inflation data for April 2022 was a mixed bag but had some encouraging seeds in it. Measured year-over-year, overall and core inflation (inflation minus the influence of volatile food and energy prices) both ticked down slightly. Measured just over the past month, the overall index decelerated significantly, but the core index rose back up to the level it had plateaued at in the five months before March. This post is about why wage trends—both throughout the inflationary burst and in very recent months—should make us even a bit more encouraged that inflation can be brought back under control without the Federal Reserve having to move interest rates to a radically more contractionary stance. 

There has been a lot of discussion—and confusion—recently about the role of tight labor markets (“the Great Resignation”) in the rise of inflation we’ve seen since early 2021. In this post, we make the following points about the wage/price relationship:

  • To date, the rise of inflation has unambiguously not been driven by tight labor markets pushing up wages.
  • Nominal wage growth has been fast over the past year relative to the past few decades, but it has lagged far behind inflation, meaning that labor costs are dampening—not amplifying—price pressures. Last week’s jobs report showed that average hourly earnings growth over the last quarter was 4.4% (at an annualized rate), with wage growth actually slowing in the last three months to under 4%.
  • If the only change in the economy over the past year had been the acceleration of nominal wage growth relative to the recent past, then inflation would be roughly 2.5–4.5% today, instead of the 8.6% pace it ran through March. In short, nonwage factors are clearly the main drivers of inflation.
  • Claims that the Federal Reserve needs to shift into a much more hawkish mode to keep wages from amplifying inflation and to bring inflation back down to more normal levels are often greatly overstated and understate how much damage this strategy could cause.
    • As long as wage growth is dampening inflation (and it is), then the question of how hawkish the Fed must be is not a question of whether inflation will return to more normal levels, but just how quickly we want that happen.
    • A much quicker return to more normal inflation would require sacrificing important gains that stem from low unemployment, even though a return to more normal inflation is quite likely to occur on its own. This makes the cost of a more hawkish stance (more joblessness) high and the benefits (a few months of slightly lower inflation as we get back to normal) pretty low.

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Strong and equitable unemployment insurance systems require broadening the UI tax base

The COVID-19 pandemic showed how critical unemployment insurance (UI) is for sustaining workers and the economy during times of crisis, while also revealing deep fissures and inequities in UI systems. Federal programs that expanded UI eligibility, benefit levels, and benefit duration kept local economies afloat and became a lifeline for millions during the early stages of the pandemic, but the crush of UI claims at peak levels of unemployment also exposed the poor condition of state UI systems. From backlogs and delays caused by insufficient administrative capacity and outdated technology to inadequate benefit amounts, many state UI systems operate in a chronic state of underfunding that results in inequity and dysfunction.

One of the root causes of these problems is rarely discussed: Lawmakers have structured state UI financing in a way that permanently starves the UI system. UI is currently funded through a combination of federal and state taxes paid by employers, where state UI taxes pay for benefits during normal economic times. However, in most states, the amount of employee wages on which employers pay state UI taxes, i.e., the taxable wage base (TWB), is extremely low. At present, 14 states and Washington, D.C. have taxable wage bases below $10,000 and a remarkable 36 states have their bases set below $25,000. This means that in 71% of states, employers pay UI taxes at most on the first $25,000 of an employee’s annual earnings.

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Job growth remains strong in April as wage growth cools

Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 428,000 jobs added in April.

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What to watch on jobs day: Wage growth continues to lag inflation

Tomorrow, the Bureau of Labor Statistics (BLS) will release the latest numbers on the state of the labor market. Given fiscal investments at the scale of the problem over the last two years and the resulting trends in payroll employment growth and labor force participation, the labor market is on track for a historically fast and full recovery by the end of 2022.

Even the reported contraction in gross domestic product (GDP) in the first quarter of 2022 won’t push this recovery off track. Most of the slowdown in GDP was due to weak exports (which reflect weakness in trading partner economies, not our own) and to a running down of business inventories, which had been built up at a furious pace in recent quarters. Looking at final sales (so stripping out the inventory effect) to domestic purchasers (so stripping out exports), growth was actually a bit faster in the first quarter of 2022 than it was at the end of 2021.

Moving forward to jobs day, it’s vital to keep tabs on job growth as well as participation to make sure the recovery keeps going strong and reaches all corners of the labor market. It’s also important to track the sectors with particularly large job deficits—like leisure and hospitality—but also state and local jobs, which have had a shallower fall and a slower recovery than the private sector.

Another important metric for a read on the health of the economy and what the Federal Reserve should be doing in the coming year is nominal wage growth. To date, the large increase in inflation since early 2021 has clearly not been driven by labor market trends. In fact, despite being high relative to the recent historical past, nominal wage growth today by every measure is lagging inflation, leading to real wage losses for workers. This is very different than the behavior of wages in previous periods when the unemployment rate was very low and the economy was heating up.

This lagging of nominal wage growth behind price growth has actually dampened inflation so far in this recovery. Tracking this growth going forward is key to deciding whether inflation will stay very high (or even accelerate) or will begin to relent.

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