U.S. antitrust laws, as interpreted and enforced today, are inadequate to confront and deter growing market power in the U.S. economy.
Recent economic research establishes that the United States suffers from a growing market power problem. Market power, often referred to as monopoly power, means consumers pay more for the goods and services they need. Workers earn less. Small businesses have a harder time succeeding. Innovation slows. Market power exacerbates wealth inequality, too, because those who benefit from monopolies—the high-paid executives and stockholders of corporations—are wealthier, on average, than the consumers, workers, and small businesses who bear monopolies’ costs.
U.S. antitrust laws, as interpreted and enforced today, are inadequate to confront and deter growing market power in the U.S. economy. To restore a fair and competitive market, we need legislation that strengthens the law and counters growing corporate power, enforcers who are willing to aggressively enforce laws, and increased fiscal resources to enforce the law.
Antitrust enforcement is typically handled at the federal level by the Federal Trade Commission, the U.S. Department of Justice’s Antitrust Division, and federal courts. It is governed primarily by Congress’ century-old policy direction in the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. The key resources below provide solutions for corralling corporate power through these antitrust enforcement tools.
Fiona Scott Morton discusses the evidence of increasing market power in the U.S. economy, the benefits of stronger antitrust enforcement, and the law’s overly lenient approach to corporate actions that undermine competition. She concludes with an agenda to confront market power.
Competition policy in the United States has become a major public policy issue for the first time in decades, but discussion about the current U.S. antitrust enforcement regime has been less systematic. This report examines enforcement activity (the number and type of cases that enforcers bring), the resources Congress provides for antitrust enforcement, and, in the federal system, the merger filing-fee system that has become the primary source of antitrust funding. The report finds that antitrust enforcement is historically low by a number of measures and funding for enforcement has decreased substantially since 2010.
A joint statement to the U.S. Congress by top U.S. antitrust experts. They conclude that outdated and bad economic theory has undermined antitrust enforcement, allowing dominant companies to gain an unfair advantage in the marketplace to the detriment of other businesses and consumers, innovation, and productivity growth. They call on Congress to revise current law to align it with modern economic theory and to fix harmful judicial rules: “The signatories to this letter agree that antitrust enforcement has become too lax, in large part because of the courts, and that Congress must act to correct the state of antitrust enforcement.”
Top experts
Michael Kades, director of markets and competition, Washington Center for Equitable Growth
Nancy Rose, Charles P. Kindleberger professor of applied economics, Massachusetts Institute of Technology
Tim Wu, Julius Silver professor of law, science and technology, Columbia Law School
Fiona Scott Morton, Theodore Nierenberg professor of economics, Yale University
To view the other policy sheets in this series, please click here.
The federal income tax does a poor job of taxing income derived from wealth. The root cause of this problem is that the tax code allows taxpayers to defer (without interest) paying tax on investment gains until assets are sold. Moreover, even when assets are sold, the investment gains are taxed at preferential rates. The top federal tax rate on wages and salaries is 37 percent while the top federal tax rate on investment gains is only 20 percent. Finally, if taxpayers can avoid selling assets until they die, the investment gains are wiped out for income tax purposes. The result is a two-tier tax system, where middle-class families pay full freight on their wages while wealthy, disproportionately White families pay reduced rates on their investment income.
Lawmakers in Congress should eliminate this two-tier system by reforming the taxation of wealth and investment income. To do so, they should adopt either a wealth tax or a reformed approach to income taxation, often referred to as mark-to-market or accrual taxation that would tax all investment gains on an annual basis regardless of whether assets are sold. Accompanying reforms to the estate tax—or the adoption of an inheritance tax—are also worth considering. The key resources below detail these solutions.
In a system of mark-to-market taxation, investors pay tax on the increase in the value of their investments each year rather than deferring tax until those investments are sold, as they do under current law. This issue brief first defines investment income and explains how mark-to-market taxation works. It then reviews the revenue potential of this approach to taxing investment income, explaining why a mark-to-market system can raise substantial revenues. Finally, it summarizes the distribution of the burden that would result, which would fall overwhelmingly on wealthy individuals.
This brief provides an introduction to net worth taxes, also referred to as wealth taxes. It summarizes how a net worth tax works, reviews the revenue potential of such a tax, and describes the distribution of the economic burden that would be imposed.
Wealth inequality in the United States is high and has increased sharply in recent decades. This increase—alongside a parallel increase in income inequality—has spurred increased attention on the implications of inequality for living standards and increased interest in policy instruments that can combat inequality. Taxes on wealth are a natural policy instrument to address wealth inequality and could raise substantial revenue while shoring up structural weaknesses in the current income tax system. This paper provides an introduction to net worth taxes, perhaps the most explicit means of taxing wealth.
This 2016 analysis explains the case for better taxing estates or inheritances, and how lawmakers in Congress could do this. Batchelder shows how wealth transfers are extremely inequitable, currently lightly taxed, and that there are several practical solutions to resolve this problem.
In the economic boom times of 1997, federal taxes raised more revenue and were a more powerful force for equity. Zwick and Zidar propose several changes that would return the United States generally to this tax system, including increasing tax rates on capital gains, dividends, and profits from pass-through businesses, as well as some additional reforms, including taxing unrealized capital gains at death.
This research paper outlines the case for major reforms to the taxation of wealth in the United States, details different approaches to reform, and discusses the economic effects of these approaches and their relative advantages and disadvantages.
Top experts
Greg Leiserson, director of tax policy and chief economist, Washington Center for Equitable Growth
Lily Batchelder, Frederick I. and Grace Stokes professor of law, New York University
David Kamin, professor of law, New York University
Emmanuel Saez, professor of economics, University of California, Berkeley, and an Equitable Growth Steering Committee member
Gabriel Zucman, associate professor of economics, University of California, Berkeley
To view the other policy sheets in this series, please click here.
Only 18 percent of private-sector workers have paid family leave and 44 percent have paid personal leave through their jobs.
The coronavirus pandemic and the recession it caused lay bare a familiar challenge for U.S. workers—balancing family and job responsibilities without access to paid family and medical leave. When a new child arrives, loved ones get sick, or a serious illness strikes, people need time away from work. But even at these times of joy or stress, bills and expenses will keep coming, and families must find a way to cope with financial uncertainty. While some workers can count on their employers to provide them with paid leave, it is rare: Only 18 percent of private-sector workers have paid family leave and 44 percent have paid personal leave through their jobs. Access to these benefits drops precipitously for lower-income and part-time workers.
This is not a new challenge, but it is often one that families deal with individually—with every household forced to patch together solutions as best they can.
The Families First Coronavirus Response Act, passed in March 2020, provided some private-sector workers with access to federal paid leave benefits for the first time, but the program fell far short of satisfying the needs of the workforce. In 2021, policymakers should prioritize the establishment of a national and permanent paid family and medical leave social insurance system. Evidence from states that already guarantee access to paid leave also suggests positive human capital and economic outcomes for families and the broader economy without meaningful negative effects on employers. Inclusive eligibility requirements, progressive wage-replacement structures, robust job protections, and leave lengths that meets the needs of workers and their families are all important policy design elements to consider in fashioning a paid family and medical leave program that meets the needs of the diverse workforce of the United States.
This essay examines paid family leave programs at the state and local level, which are helping to set the stage for a federal paid leave program. The authors then describe the current research on the impacts of paid family leave on workers, children, and employers, with an eye toward understanding the economic costs and benefits of a potential federal program and the key policy levers to consider. The authors also briefly discuss how paid family leave may relate to the growth in economic inequality in America and whether a federal policy could help curb this trend. While paid leave can cover both bonding with a new child and caring for other relatives, in this essay, the authors primarily focus on the effects of bonding leave.
This factsheet summarizes the state of research on major paid leave policy issues by looking at the FAMILY Act, one of the most prominent, comprehensive paid leave bills introduced in the U.S. Congress. It summarizes studies on reasons for implementing paid leave, the definition of family members, the length of leave, wage replacement levels during leave, and job protection during leave.
Paid time off to address one’s own medical condition is the most frequently used type of paid leave, yet it has received far less attention in the policy debate and research. In this report, Smalligan and Boyens aim to inform future research by first providing background on what paid medical leave is and highlighting important features that make it distinct from parental and family caregiving. They then describe what is known about the expected impact of paid medical leave and the ways in which it could be expected to affect economic and health outcomes, including effects on individuals, public health, employers, and the U.S. economy. Paid medical leave could improve economic outcomes by reducing income volatility, helping workers to return to employment, improving productivity, and supporting labor force participation. Paid medical leave may also have positive effects on health outcomes by improving health management, encouraging earlier treatment, and reducing financial stress.
Leave to care for a family member with a serious illness, whether that be a spouse, domestic partner, child, parent, or other relative, is more widespread and more frequent than it is for the other types of family leave. In contrast to other types of leave—in particular, parental leave, which has been studied extensively—family care leave receives much less attention in existing research. Its inclusion in policy proposals is also uneven. This paper focuses on reviewing what we know and do not know about family care leave. This paper contributes to an understanding of the need for paid leave to care for a seriously ill family member and the current state of policy and research. Considering the evidence, Waldfogel and Liebman offer implications for policy and future research.
Top experts
Alix Gould-Werth, director of family economic security policy, Washington Center for Equitable Growth
Maya Rossin-Slater, assistant professor, Stanford University School of Medicine
Jane Waldfogel, Compton Foundation Centennial professor for the prevention of children’s and youth problems, Columbia University School of Social Work
Jack Smalligan, senior policy fellow in the Income and Benefits Policy Center, Urban Institute
Chantel Boyens, principal policy associate in the Income and Benefits Policy Center, Urban Institute
Tanya Byker, assistant professor, Middlebury College
Among essential healthcare workers (20 percent of all those on the front lines), 9.2 percent are part of the AANHPI community.
Overview
The novel coronavirus pandemic and the recession it caused lay bare the clear links between racial and ethnic economic inequities, structural racism, and the outsized harm of these crises on communities of color in the United States. But the impact on Asian Americans, Native Hawaiians, and Pacific Islanders is less evident because the data on these specific communities are not disaggregated to show the full impact of the coronavirus recession among subgroups of AANHPI communities.
The data that are disaggregated, for income levels and educational attainment, demonstrate that aggregated data for all Asian Americans, Native Hawaiians, and Pacific Islanders mask serious socioeconomic inequities within and among the many subgroups in this catch-all category. To address both the public health and economic crises, disaggregating U.S. administrative data by detailed race and ethnicity is a critical element of a broader policy agenda to protect the most vulnerable workers and to address pervasive issues of systemic racism.
“Disaggregating data in the current crisis reveals that anti-Asian bias and hate speech are not the only ways in which Asian American communities experience racism,” says Janelle Wong, a professor of American studies and Asian American studies at the University of Maryland, in an interview with the authors. “Within our community, it is clear that many of those Asian American groups that were already the most economically vulnerable are now hit hardest by doing the unappreciated and underpaid work of essential and front-line workers. This story cannot be told without disaggregated data.”
The sooner policymakers start to disaggregate data by multiple dimensions, the sooner we can target the unique barriers to emergency support in response to this crisis, including healthcare, workplace protections, and other critical services and resources at the local, state, and federal levels. This issue brief details why the U.S. Department of Commerce’s Bureau of Economic Analysis, the U.S. Department of Labor’s Bureau of Labor Statistics, the Federal Reserve Board and statistical agencies at the U.S. Department of Health and Human Services and state and territorial healthcare agencies need to act soon, and what they should do.
What the data reveal about the Asian American, Native Hawaiian, and Pacific Islander workers in front-line occupations
An important factor of this crisis’s disparate toll on people of color is their overrepresentation in lower-paying jobs with fewer benefits, such as paid sick leave, or jobs considered “essential” within the context of the current pandemic, including healthcare workers, cleaning staff, and fast food service workers, among others. According to the 2018 American Community Survey 5-year sample, front-line essential workers comprised 12.8 percent of the AANHPI workforce. (See Figure 1.)1
Figure 1
A deeper look at the data shows notable heterogeneity for subgroups across occupations. Among essential healthcare workers (20 percent of all those on the front lines), 9.2 percent are Asian Americans, Native Hawaiians, and Pacific Islanders, which is higher relative to their 5.6 percent representation within the U.S. total population, according to our calculations.2 Disaggregated data of AANHPI subgroups, such as East Asian and Southeast Asian Americans, compared to White and other racial and ethnic groups, show notable heterogeneity. (See Figure 2.)
Figure 2
But these data still mask important differences between specific racial and ethnic groups within Asian American, Native Hawaiian, and Pacific Islander front-line workers. A deeper look at the American Community Survey data shows notable heterogeneity for subgroups across occupations, relative to the proportion of the total AANHPI population in the front-line workforce. A high proportion of the Filipino (11.5 percent) and Fijian (10.1 percent) subgroup populations are healthcare workers, relative to the rates of the largest AANHPI subgroup populations—Chinese (3.7 percent) and Asian Indians (5 percent), and to all other workers (3 percent).
This is also true in other front-line, essential occupations, which include food services, cleaning, retail, and public service employees such as police and firefighters. The workforces of certain subgroup populations are highly represented in these industries, such as Hawaiians (10.3 percent), Nepalese (13.6 percent), and Thais (16.3 percent), compared to other large subgroups such as Koreans (7.8 percent) and Vietnamese (7.2 percent), and to all other racial/ethnic groups (8.7 percent). (See Figure 3.)
Figure 3
Asian American, Native Hawaiian, and Pacific Islander health disparities amid the coronavirus pandemic
The role of front-line workers from Asian American, Native Hawaiian, and Pacific Islander communities compounds the dangers of these workers and their families and communities to the coronavirus and COVID-19, the disease caused by the virus. The nature of pandemics, of course, means that the success of public health initiatives to contain a deadly virus or bacteria depends on the protection and treatment of populations most at risk. And structural and economic inequalities play major roles in healthcare outcomes across all racial groups. While incomplete, the existing data on the race and ethnicity of cases of coronavirus and COVID-19 reveal deep inequities.3
The latest data on cases by state and race/ethnicity show that 4 of the 10 states with the highest number of cases are also among the top 10 states in the continental United States with largest number of Asian Americans, Native Hawaiians, and Pacific Islanders per capita.4 “As we have seen in other diseases, such as cardiovascular disease, diabetes, and cancer, aggregating these diverse race and ethnic groups leads to missing important high-risk groups,” says Latha Palaniappan, professor of medicine at Stanford University School of Medicine, in an interview with the authors of this issue brief. She adds that because of the unique health needs of AANHPI communities, “it is also important not to study just one group, say Chinese, and extrapolate to other AANHPI groups, say Filipino.”
Important factors affecting health outcomes, including insurance coverage, language and cultural barriers to medical care, and risk of certain health conditions, vary widely among Asian Americans, Native Hawaiians, and Pacific Islanders. Research from Stanford University shows that diabetes, heart disease, and strokes are common causes of death in AANHPI communities. When looking at health insurance rates, a study from 2018 found that while uninsurance rates among Americans in these communities of color shrank after the enactment of the Affordable Care Act in 2010 (from 18.8 percent to 9 percent), they are still slightly higher than White uninsurance rates today (8.8 percent).
So, even as data reporting on the health impact of the coronavirus and COVID-19 by race and ethnicity improve, states and communities empowered to provide accessible health resources will have difficulty doing so equitably and efficiently using aggregate data alone. As Figure 3 demonstrates, the wide heterogeneity of front-line workers among subgroups of Asian Americans, Native Hawaiians, and Pacific Islanders means that knowing more about those subgroups’ health disparities would help public health officials deal with the pandemic based upon deeper evidence-based data.
Why disaggregated data for Asian Americans, Native Hawaiians, and Pacific Islanders matter
Significant occupational differences are not the only motivation to understanding the heterogeneity within the Asian American, Native Hawaiian, and Pacific Islander communities. AANHPI subgroups (as is true for all racial and ethnic groups) are distinct in terms of their language diversity and English proficiency, caregiving preferences, naturalization rates and immigration histories, and generational cohort sizes. Altogether, these have important implications for policy interventions and government support targeted to these subgroups within the AANHPI population in the United States. Disaggregated data can be critical for state and local jurisdictions with diverse AANHPI populations, for example, so that policymakers can take the proper and effective steps to protect these workers, their families, and their communities, and contain the virus.
It can also empower policymakers at all governing levels to adopt more robust and holistic approaches to address issues that may well be exacerbating the crisis for these communities. A breakdown of the data into AANHPI subgroups by unemployment, healthcare and family care provisions, food and income insecurity, unstable or inadequate housing, and workplace hazards or discrimination would deepen our understanding of these communities.
Or consider language accessibility.5 This is crucial for inclusive public health emergency advisories on testing information, transportation service disruption announcements, workplace protection notices (from adequate break time for workers to access to personal protective equipment), and targeted program uptake (including supports for small businesses during the crisis, as well as families with complex household care needs).6
Then, there’s the travesty faced by all of these subcommunities of Asian Americans, Native Hawaiians, and Pacific Islanders—the compounded amounts of potential harm due to the notable rise of anti-Asian harassment and assault since the onset of this pandemic, as well as massive drops in traffic to AANHPI-owned restaurants and businesses compared to other companies. According to a study published by Pew Research Center, approximately 31 percent of AANHPI adults have been victims of racial slurs, jokes, or attacks, and around 39 percent have said people have acted uncomfortable around them since the coronavirus outbreak began in the United States. Continuing inflammatory rhetoric by some of our nation’s public officials only encourages this racism.
Investing in our public economic infrastructure and strengthening collective bargaining laws are two ways to more broadly help these and other communities of color and our nation at large.7 So, too, would immigration reform—and all of which would help to expedite relief during the current recession, bolster worker power, and provide legal recognition and protections for at-risk workers.8 And the long-term trauma of the coronavirus pandemic and resulting recession will require more public investment in our public mental healthcare infrastructure. This needs to be culturally competent and inclusive to meet the needs of the very diverse subcommunities of Asian Americans, Native Hawaiians, and Pacific Islanders.
Conclusion
Asian Americans, Native Hawaiians, and Pacific Islanders are the fastest growing part of an increasingly diverse U.S. population. The U.S. Census Bureau and other federal agencies, as well as some state and local agencies and universities, now collect data on 23 distinct Asian American and 21 distinct Native Hawaiian and Pacific Islander ethnic groups.9 But persistent problems remain in the collection, standardization, and dissemination of these disaggregated data.
Currently, only the American Community Survey and the U.S. Census Bureau produce disaggregated administrative datasets on subgroups within AANHPI subcommunities. But the Census Bureau’s Annual Social and Economic Supplement of its Current Population Survey does not, as is also the case for the Bureau of Labor Statistics data and the Federal Reserve’s Survey of Consumer Finances.
One assumption as to why federal agencies are against collecting disaggregated data is that collecting specific ethnic and racial data for all groups under the AANHPI umbrella is tedious and can minimize sample sizes to the point that any analysis may not be statistically significant. At the state level, too, some groups have pushed back against efforts to disaggregate data. “One of the biggest contemporary challenges to collecting these data is that some members of our own communities have been opposing the collection of high-quality detailed data,” said University of Maryland’s Wong, who also is a research fellow for AAPI Data, a publisher of demographic data and policy research on Asian Americans and Pacific Islanders.
“For example, in Minnesota, Massachusetts, and Connecticut, some Chinese Americans have lobbied against the efforts of Asian American advocacy organizations to collect detailed data on Asian American populations,” notes Wong. “The unfounded fear of these groups is that identifying disparities within our communities will somehow have a negative effect on the most economically advantaged subgroups.”10
It’s vital that policymakers have a clearer understanding of the intersection of racial health disparities, socioeconomic precarity, and participation in essential occupations to effectively address the coronavirus pandemic and the continuing recession. The White House Initiative on Asian Americans and Pacific Islanders, a federal interagency working group under the U.S. Department of Commerce, should recommit to improving data collection, access, and dissemination on all AANHPI communities and encouraging researchers and policymakers to leverage these datasets for new analysis and smarter planning, which had formerly a been top priority of this initiative in the previous Obama administration.
Federal policymakers should also enact the policies proposed in Equitable Growth’s GDP 2.0 project, which calls for producing headline economic statistics that represent the well-being of all Americans at the top, middle, and bottom of the income distribution. While disaggregating administrative data by race, ethnicity, and gender has proven to positively impact economic and public health initiatives across the country, the combination of this data with disaggregated income data would paint a clearer picture of the state of inequality across all groups and income levels. The extent of cultural heterogeneity revealed would have significant implications not just for the lived experiences of different members of the many Asian Americans, Native Hawaiians, and Pacific Islanders, but also for how policymakers can fully grasp and identify structural weaknesses in the U.S. economy affecting all workers and families during this crisis and the long recovery to follow.
Union and AARP members rally in New York City on the city hall steps, March 2016.
Wages have stagnated for most U.S. workers over the past 40 years while the labor market institutions that promote worker power have faltered in a pro-business and anti-worker policy environment. These two phenomena are two sides of the same coin—productivity decoupled from wage growth results in employers more able to exploit workers to produce more per hour worked while undercutting wages.
Labor market policies, such as minimum wages or premium pay amid the coronavirus pandemic, are not keeping up. Meanwhile, labor laws meant to protect collective action and unionization efforts, guarantee freedom from discrimination, and promote workplace safety are not well-enforced. Furthermore, trends such as domestic and international outsourcing and the fissuring of the workplace are changing the U.S. economy in ways our labor market institutions were not built to handle. These trends unbalance power between workers and corporations so that workers are not able to share in the high profits they create and the economic growth they drive.
Traditional labor market polices, such as increasing minimum wages, expanding overtime pay, instituting prevailing wages, and enforcing anti-discrimination laws and workplace safety through co-enforcement, remain useful and implementable at all levels of government—local, state, and federal. Agencies, including the U.S. Department of Labor, the federal National Labor Relations Board, and the Federal Trade Commission, can make it easier for workers to organize, cut down on independent contractor misclassifications, and restrict the use of noncompete and no-poach agreements, which augment employers’ power over workers.
The United States also needs new policies to address economic power that is further tilted in favor of corporations. This includes new ideas such as sectoral bargaining among U.S. workers in the same industries and the co-determination of corporate governance for U.S. workers.
The pandemic makes all of these policies more necessary, as workers face unsafe working conditions with no voice, and with the likelihood of greater exploitation with rising unemployment and large corporations continuing to profit. The key resources below provide the details for these policy solutions.
A decades-long decline of unions has weakened workers’ ability to fight for a fairer workplace. About 10 percent workers are union members today, compared to 35 percent of the U.S. workforce in the mid-1950s. Over the past 40 years, the power of organized labor has declined alongside a steep rise in income inequality, the erosion of labor standards, and employers’ ability to dictate and suppress wages. Yet unions still play an important role in shaping U.S. labor market outcomes, helping both union and nonunion members share in the economic value they create. This factsheet details those outcomes, including:
Strong unions that benefit both union and nonunion members
Workers who are not part of a union today but want to belong to one
Strong unions that can counteract employers’ wage-setting power
The ability to strike, which remain a powerful way for workers to achieve fair wages and better working conditions
Independent contractors are among the most vulnerable amid the coronavirus recession. Many independent contractors provide face-to-face services. They are either the workers most exposed to the novel coronavirus on the job or those most likely to be out of work without a safety net. Despite being classified as essential, those in the first group often lack the most basic rights and protections, such as sick leave or health insurance. Because they are at the frontlines, they and their families are at particular risk of getting sick. This issue brief describes the challenges faced by independent contractors and policy solutions to help these workers moving forward.
The PRO Act, passed in February 2020 by the U.S. House of Representatives, would address important structural policy barriers that keep workers from joining unions. This factsheet summarizes recent research around unionization, strikes, workplace fissuring, and long-term labor market trends. It demonstrates that the PRO Act, the most prominent labor reform bill to pass the House since 2018, could succeed in allowing more workers to fulfill their desire to join unions, and that this would ensure more equitable and efficient labor markets.
This essay shows that steeply declining U.S. union membership does not reflect a lack of worker demand for unions, with nearly half of all nonunion workers expressing interest in joining a union. It shows that U.S. workers value industrywide or statewide collective bargaining and union-administered portable health and retirement benefits, making the case that state and federal lawmakers should change laws prohibiting unions from providing these to their members.
This essay first examines the evidence demonstrating that raising the federal minimum wage boosts the incomes of those workers at the bottom of the income distribution without any significant job losses for those workers. Dube then explains how establishing wage boards to set minimum pay standards by industry and occupation would also raise wages for U.S. middle-income workers.
Top experts
Kate Bahn, director of labor market policy, Washington Center for Equitable Growth
Arindrajit Dube, professor of economics, University of Massachusetts Amherst, Equitable Growth grantee, and Research Advisory Board member
Suresh Naidu, associate professor of economics, Columbia University, and Equitable Growth grantee
Alexander Hertel-Fernandez, associate professor of international and public affairs, Columbia University, and Equitable Growth grantee
Michelle Holder, assistant professor of economics, John Jay College CUNY
Terry-Ann Craigie, associate professor of economics, Connecticut College
Sylvia Allegretto, co-chair, Center on Wage and Employment Dynamics at the University of California, Berkeley, and Equitable Growth grantee
David Howell, professor of economics and public policy, Milano School of International Affairs, Management, and Urban Policy at The New School, and Equitable Growth Research Advisory Board member
To view the other policy sheets in this series, please click here.
Making recession aid more automatic will allow relief to start quickly, making the recession less severe.
The new coronavirus pandemic and the recession it caused show that the typical set of economic policies used to fight recessions in the United States should be designed to automatically turn on and off in a downturn. It is impossible to predict when the economy will fall into a recession and, on the other end, when it will recover. Making recession aid more automatic will allow relief to start quickly, making the recession less severe. It also would commit Congress to stay the course until objective economic criteria are met and the recovery is well on its way.
Without this commitment, aid for the most vulnerable can be caught up in partisan politics and deal-making when artificial deadlines loom. Many times, as during the Great Recession, vital aid is not renewed, causing the entire economy, and especially marginalized groups and communities, to suffer for years. Instead, Congress could set automatic stabilizers to start as soon as the unemployment rate increases in a recession. The benefits would then phase out and end when the unemployment rate returns to near its pre-recession level. Specifically, this should apply to:
Enhanced jobless benefits
Direct payments to families
Aid to state governments
These automatic stabilizers would allow Congress to focus on novel aspects of the recession, whether they be public health, financial instability, or another cause, without having to relitigate fights over economically vital, previously authorized relief.
This issue brief first explains what a recession is and what role public policy plays in fighting recessions, and then discusses a few important ways in which this recession differs from previous recessions. Finally, the issue brief explains why Congress should expand and reform the United States’ existing automatic stabilizers.
A year before the risks of the new coronavirus and the ensuing recession enveloped our nation, this book advanced a set of six evidence-based policy ideas for shortening and easing the adverse consequences of recessions. With the use of proven economic triggers, aid to households and states would increase through the following six pathways during an economic crisis and only recede when economic conditions warranted.
Congress should create a system of direct stimulus payments to individuals to be automatically distributed when the unemployment rate increases rapidly. Direct stimulus payments to individuals are effective at boosting consumer spending in response to a recession and replace lost income.
Congress should set SNAP benefits to increase by 15 percent during downturns. Research shows that every dollar in new SNAP benefits spurred $1.74 in economic activity during the deep recession in 2007–2009. Recipients quickly spend their SNAP benefits, which provides a rapid fiscal stimulus to the local economy.
Congress should automatically increase the federal share of expenditures on Medicaid and the Children’s Health Insurance Program during recessions. Declines in state revenues and increased demands on government programs, together with states’ balanced budget requirements, lead states to reduce spending, increase taxes, or both, during and after recessions. Those responses deepen recessions, slow subsequent recoveries, and deprive residents of valuable public and private goods. This proposal is designed to offset approximately two-thirds of state budget shortfalls.
The federal government should help states develop and maintain a catalogue of potential infrastructure projects and then expand infrastructure spending in downturns to counteract the declines in public investment that typically accompany recessions.
Unemployment Insurance is one of the most important existing automatic stabilizer programs. Congress should make reforms to the base program, including new triggers to expand the program in recessions.
Congress should make reforms to the Temporary Assistance for Needy Families program to expand federal support for basic assistance during economic downturns and create an ongoing job subsidy program that is more robust in recessions. Safety net programs can be a crucial backstop for families struggling in hard economic times. Unfortunately, because of its block grant structure, the TANF program is unresponsive to changes in need and unhelpful for mitigating the effects of recessions. This proposal would make it more responsive to families’ real economic needs.
Top experts
Claudia Sahm, macroeconomic policy director, Washington Center for Equitable Growth
Indivar Dutta-Gupta, adjunct professor of law and co-executive director, Center on Poverty and Inequality, Georgetown University
Jason Furman, professor of the practice of economic policy, Harvard University Kennedy School; nonresident senior fellow, Peterson Institute for International Economics; and a member of Equitable Growth’s Steerinig Committee
Diane Whitmore Schanzenbach, the Margaret Walker Alexander professor of education and social policy, Northwestern University
Jay Shambaugh, professor of economics and international affairs, Elliott School of International Affairs at The George Washington University, and a nonresident senior fellow in economic studies, The Brookings Institution
Hilary Hoynes, professor of economics and public policy, University of California, Berkeley, and the Haas distinguished chair in economic disparities, UC Berkeley’s Hass School of Business, where she also co-directs the Berkeley Opportunity Lab
To view the other policy sheets in this series, please click here.
Intentional policy action is necessary to correct the systemic and institutional barriers facing Black Americans.
Economic mobility in the United States has been declining over the past half-century at the same time that economic inequality has been rising. Research by Harvard University economist and former Equitable Growth Steering Committee member Raj Chetty and his co-authors shows that rates of absolute intergenerational mobility have precipitously declined in the country during the latter part of the 20th century. People born in 1940 had about a 90 percent chance of growing up to earn more than their parents, but people born in 1980 had only about a 50 percent chance. Chetty also finds that Black Americans are more likely to experience downward mobility than White Americans, and that differences in family education, wealth, and marriage patterns cannot explain this Black-White mobility divide.
Intentional policy action is necessary to correct these systemic and institutional barriers facing Black Americans. Just as government policy helped create these racial disparities in the first place via legalized discrimination, redlining of housing, and the often discriminatory impact of the criminal justice system and incarceration, policies are needed now to promote mobility and begin to address the legacies of these racially discriminatory structures. These policy solutions include:
Improving family income security by expanding refundable tax credits and by fully funding Section 8 Housing Choice Vouchers to make them available to all who qualify
Supporting wealth accumulation for low-wealth families, such as through proposals for “baby bonds”
Addressing racial inequities in credit access and student debt
Redirecting public investment from the criminal justice system to education and social services
These policies can be implemented at the federal level, such as through reforms to the Community Reinvestment Act to improve access to credit and reforms to the Department of Education’s stewardship of student loans, as well as at the state and local level through budgetary decisions related to police, prison, and education funding.
This post features graphics on Black-White disparities in wages, intergenerational mobility, wealth, homeownership, incarceration, and health. The post demonstrates how policy decisions and racial discrimination created and continue to perpetuate economic disparities between White and Black Americans and offers policies to address the structural barriers driving these disparities.
This post explains that geographic and racial differences in economic mobility are particularly important from a policy perspective for three reasons. First, racial differences in mobility can exacerbate racial differences in other areas such as in housing, education, and health. Second, inequalities in opportunity are antithetical to our nation’s creed of equal opportunity for all. And third, structural differences in mobility limit the potential for overall U.S. economic growth.
This essay first examines the historic links between intergenerational economic mobility and race and income inequality—trends heavily influenced by changing patterns in geographic mobility—and how these trends are tied to explicit policy decisions in the past that persist today in terms of housing, education, and health inequality among low- and middle-income Black Americans. The authors discuss educational, housing, and income remedies for persistently low intergenerational economic mobility among Black Americans and how these policies could be put into action and paid for.
This essay discusses how the exponential growth in incarceration in the United States over the past 50 years has been due to more punitive criminal justice policies that tried to address racial and economic inequality through the criminal justice system instead of social programming. Cox calls for U.S. policymaking to shift toward addressing the root causes of racial inequality and poverty. One first step would be to conduct an audit of current federal crime-control policies and funding to eradicate policies that lead to greater racial disparities within the criminal justice system.
This research analysis compares intergenerational mobility in the United States versus Canada. The author highlights findings showing that despite the United States having higher average incomes than Canada, areas of particularly low mobility are concentrated on the U.S. side of the border, cover a large proportion of the U.S. population, and are driven by racial disparities in mobility between Black and White Americans. One explanation for why this pattern is observed almost exclusively in the United States is offered in another piece of research by University of California, Berkeley economist and Equitable Growth grantee Ellora Derenoncourt , who finds that as Black Americans migrated from the South, Northern cities decreased their investments in all public goods other than policing.
Top experts
Liz Hipple, senior policy advisor, Washington Center for Equitable Growth
William Darity, Jr., Samuel DuBois Cook professor of public policy, African and African American studies, and economics, Duke University
Darrick Hamilton, incoming Henry Cohen professor of economics and urban policy, The New School
Bradley Hardy, associate professor of public administration and policy, American University
Ellora Derenoncourt, assistant professor in the Department of Economics and the Goldman School of Public Policy, University of California, Berkeley
Trevon Logan, Hazel C. Youngberg Trustees distinguished professor of economics, The Ohio State University
Robynn Cox, assistant professor at the USC Suzanne Dworak-Peck School of Social Work
To view the other policy sheets in this series, please click here.
Unemployed men wait in line to file Social Security benefit claims, circa January 1938.
Longstanding problems with the Unemployment Insurance system in the United States are immediately evident amid the coronavirus recession and echo the problems experienced during the Great Recession more than a decade ago. These include:
Administrative failures at state Unemployment Insurance agencies
Lack of a permanent Unemployment Insurance program that includes the self-employed and others traditionally left out of the program
Low benefit levels that require emergency top-offs
The temporary nature of fixes when recessions hit, which, in turn, requires renegotiations just months after political compromises are reached
The current disarray in the Unemployment Insurance system is neither a surprise nor an accident. It is the result of decades of conscious choices made by policymakers at the state and federal levels: Over the past decade, many states limited Unemployment Insurance benefits, made accessing the program more difficult, and allocated insufficient funds for program administration. This results in chaos and uncertainty just when Unemployment Insurance is critical to prevent deterioration in the wider economy and save families from precarious financial situations.
As in the Great Recession, states’ trust funds are now being depleted, which sets the stage for the erosion of benefit levels while the crisis remains ongoing. And, as was the case in the Great Recession, in the first months of the coronavirus crisis, policymakers have yet to remedy the issues at the heart of these administrative failures.
But it’s not too late. Unemployment Insurance is a joint state-federal system. These programs are run at the state level but follow federal guidelines under the Social Security Act. Reforms to this system are important at both levels. The key resources below provide the details for enacting these reforms.
This primer summarizes how the Unemployment Insurance system functions in the United States and four ways it falls short. First, the current UI system suffers from financial instability that risks compromising its major role as a stabilizer in recessions. Second, the coverage of unemployment benefits has eroded over time, with a declining fraction of workers receiving lower benefits amounts. Third, the UI system does little to avert the large, long-lasting earnings losses among re-employed workers. And fourth, there are persistent questions about the effectiveness of Unemployment Insurance and related programs to quickly re-employ job losers. This primer lays out easy-to-implement small changes to address these problems, as well as fundamental changes to modernize the program.
The authors lay out a plan for improving the Unemployment Insurance program’s function as an anti-recessionary automatic stabilizer. They propose measures that increase take-up of regular unemployment benefits, full federal financing for extended benefits alongside improvements in the formula and design of extended benefits triggers, and an increase in the unemployment benefit amount when extended benefits are triggered.
Gould-Werth presents a description of the problems in the Unemployment Insurance system exposed during the Great Recession and then repeated during the coronavirus crisis. She shows that policymakers have an opportunity to intervene and improve the functioning of the Unemployment Insurance system by increasing and indexing the federal taxable wage base, redesigning extensions to respond to economic changes quickly, and standardizing a minimum benefit level and duration that are sufficiently generous.
One of the biggest political obstacles to fixing the UI system is the fear that increasing access and generosity of benefits will discourage people from working. This Equitable Growth factsheet breaks down the research on work disincentives, showing that the amount of attention given to work disincentives (quite large) is disproportionate to the magnitude of the disincentives themselves, which are substantively small. At the same time, relatively little attention is paid to the benefits of Unemployment Insurance.
Top experts
Alix Gould-Werth, director of family economic security policy, Washington Center for Equitable Growth
Kate Bahn, director of labor market policy, Washington Center for Equitable Growth
Till von Wachter, professor, Department of Economics, University of California, Los Angeles
Adriana Kugler, full professor, McCourt School of Public Policy, Georgetown University
John Coglianese, economist, Federal Reserve Board of Governors
Jesse Rothstein, professor of public policy and economics, University of California, Berkeley, with affiliations in the Department of Economics and the Goldman School of Public Policy
Steve Woodbury, professor of economics, Michigan State University, and senior economist, W.E. Upjohn Institute for Employment Research
To view the other policy sheets in this series, please click here.
JOLTS collects data on job openings, hires, layoffs, quits, and other separations between workers and employers.
The U.S. Bureau of Labor Statistics today released its monthly Job Openings and Labor Turnover Survey for the month of June. Also known as JOLTS, the survey collects data on job openings, hires, layoffs, quits, and other separations between workers and employers, providing information on the labor market dynamics behind June’s overall change in employment.
Over the past few months, JOLTS data have shown how the coronavirus recession has, so far, been different from previous downturns. In typical economic contractions, the number of job openings, hires, and quits usually start to fall before there is a surge in layoffs because workers and employers become more cautious when the economy starts to take a turn for the worse. But when the consequences of the pandemic crashed into the U.S. economy in February, layoffs led the way, with a record 11.5 million workers losing their jobs in March alone.
By June, the previous month with published JOLTS data, as states lifted their shelter-in-place orders and coronavirus cases declined, the pace of layoffs plunged. Hiring was strong, as many temporarily laid-off workers were called back. Yet job openings and quits were still below their pre-pandemic levels, a clear sign that the U.S. economy remained in a downturn.
The most recent Employment Situation Summary, also known as the Jobs Report, released this past Friday, detailed labor market statistics for mid-June to mid-July and showed a slowdown in the job gains the U.S. economy made in the previous 2 months. Today’s JOLTS release provided data for the entire month of June and showed, for instance, that between May and June there was no change in the pace of layoffs, the rate of hiring declined with respect to the previous month, and job openings continued to recover in June.
Here are what four labor market indicators available through JOLTS can tell us about how workers and employers experience economic booms and downturns, as well as how this recession is different from the previous one.
The quits rate
The quits rate measures the share of the U.S. workforce that decides to leave their job in a given month. Because most quits are voluntary and tend to reflect job-switching for new opportunities rather than entry into unemployment or exit from the labor force, the quits rate gives insight into workers’ confidence in the strength of the labor market. During booms, workers are more willing to change jobs and find positions that are a better match for their skills or desired earnings, freeing up spots for other workers. As a result, quits tend to have a positive relationship not only with overall job creation but also with the quality of those jobs, since employers have to offer higher wages and more career-advancement opportunities in order to keep and compete for workers.
Conversely, the relationship between quits and the business cycle points to one of the many channels through which both employed and unemployed workers lose bargaining power during downturns. Gadi Barlevy of the Federal Reserve Bank of Chicago proposes that as workers become less willing and able to leave their jobs during recessions, the decline in the quits rate points to a “sullying” effect, where workers get stuck in either low-quality jobs or in positions that are a bad match for their skills. Research shows, for instance, that one of the reasons the Great Recession of 2007–2009 was particularly tough on younger workers was that many older workers decided to retire later and work longer hours, freeing up fewer opportunities for those just stepping into the labor force.
Capturing the onset of the coronavirus recession, March’s JOLTS data show that the quits rate dropped from 2.3 percent in February to 1.8 percent in March—the largest month-to-month decline since the start of the series, in December 2000—and dropped further to 1.4 percent in April. The quits rate rebounded to 1.9 percent in June, but continues to be far below its pre-recession level. (See Figure 1.)
Figure 1
Compared to the Great Recession, however, the initial drop in the quits rate was small, relative to the massive surge in layoffs. That the quits rate did not drop down further is likely a consequence of the coronavirus health crisis: Unlike previous downturns, more workers have had to leave their jobs over health concerns or because of new caregiving responsibilities—work that falls heaviest on women in general and women of color in particular. By industry, the information sector—the industry in which workers are most likely to be able to work from home for pay—has seen the largest decline in its quits rate between February and June.
The ratio of unemployed workers to job openings
The ratio of unemployed workers per job opening is one of the measures economists use to determine how “tight” the labor market is. A low ratio means there are few job-seekers and many vacancies, demand for workers is strong, and the U.S. labor market is operating near full-employment. A tight labor market therefore shifts the bargaining power in favor of workers and, according to economic theory, spurs wage growth, since employers have to make better offers in order to compete for workers.
During the Great Recession and its immediate aftermath, the U.S. unemployed-to-job-openings ratio surged, reaching a high of more than 6.4 jobless workers for every job opening in July 2009. The ratio returned to its pre-crisis level in mid-2015, and by early 2018, there were fewer unemployed workers looking for a job than there were job vacancies for the first time since JOLTS data have been available.
But even as the unemployed-to-vacancies ratio reached a series low, wage growth remained slower than expected. The relationship between unemployment, job openings, and wage growth was weaker than in previous booms, sparking a debate among economists, with some researchers arguing that the labor market was not as strong as the jobless rate suggested. The “wage growth puzzle” has big implications for the U.S. economy, suggesting that the labor market has to be very tight before workers start seeing significant wage gains. This is particularly true for Black workers because their earnings are more responsive to fluctuations in the labor market.
When the coronavirus recession hit the U.S. economy and the unemployment rate skyrocketed, there were more unemployed workers in March than vacancies for the first time since February 2018. By June, there were three jobless workers for every job opening. (See Figure 2.)
Figure 2
The vacancy yield
Also called the job-filling rate, the vacancy yield captures the number of hires in a given month per the number of job openings at the end of that same month. In a strong labor market, there are more job openings, fewer job-seekers, and businesses find it harder to turn their open positions into hires. Conversely, downturns make it easier for employers to fill their vacancies.
Similar to previous downturns, during the Great Recession of 2007–2009, the vacancy yield surged. As many newly unemployed workers competed for few available jobs, employers filled their openings quickly. But in the recovery from the 2007–2009 downturn, the job-filling rate dropped more than in previous recoveries, with some economists proposing that the process by which workers and employers match to turn a job opening into a hire somehow became less efficient.
For instance, Jason Faberman of the Federal Reserve Bank of Chicago argues that a decline in employers’ recruiting intensity helps explain why the U.S. labor market was so slow to recover from the Great Recession. When hiring, employers can ramp up their recruitment efforts not only by posting job openings but also by lowering their hiring standards, spending more time and money on screening candidates, and offering higher wages and better benefits. A team of economists, for example, find evidence that during the 2007–2009 crisis, there was “opportunistic upskilling” as employers began requiring greater levels of experience and education from applicants.
Broken down by sector, researchers find that the leisure and hospitality industry played a major role in the aggregate drop in recruiting intensity during the Great Recession. This could be particularly damaging in the context of the coronavirus recession since this sector is both one of the largest employers in the U.S. economy and the industry that has suffered the greatest number of layoffs since March.
The vacancy yield climbed from 0.8 hires for every job opening in February to 1.1 hires per job opening in June. Despite anecdotal evidence that some businesses are having a hard time re-hiring workers, JOLTS data show that, at least at the aggregate level, employers are now filling their open positions faster than at any point since January 2014. In other words, there does not appear to be a shortage of willing workers, but rather a shortage of job openings. (See Figure 3.)
Figure 3
The Beveridge Curve
The Beveridge Curve maps the relationship between unemployment and job openings. It shows that when the job opening rate increases, the unemployment rate tends to fall. During economic downturns, the opposite happens: Unemployment rises, job openings decline, and the data points move along the curve down and to the right.
In the Great Recession of 2007–2009, this is exactly what happened. The unemployment rate increased, the vacancy rate fell, and the Beveridge Curve tracked the same path it followed in the 2001 recession. As the economy began to recover, however, the curve shifted, moving right and upward from its 2001–2007 recovery pattern. The shift meant that the increase in the job openings rate was not followed by a corresponding drop in the unemployment rate. Some economists worried that the way unemployed workers and open positions matched had become less efficient, while others argued it was a normal consequence of a particularly deep downturn.
The coronavirus recession has led to sharp movements in the Beveridge Curve. As the unemployment rate soared to 14.7 percent in April, the curve shifted to the right. Job openings also fell, but much less so. Even though the curve is now shifting back, generally, the decline of hiring plays a much bigger role in the rise of joblessness. So far, layoffs have led the way. (See Figure 4.)
Figure 4
Job search as a measure of the health of the labor market
A dynamic labor market, where workers are searching for and moving into new jobs that are a better match and higher quality, contributes to overall productivity and income growth and is a fundamental way to understand the health of the labor market. The economic literature on job search theory allows researchers to examine the extent to which “frictions”—or impediments to healthy labor market dynamics—influence unemployment rates, job vacancies, and wage levels. Where there are more frictions evident in job-search measurements, both employment levels and wage levels are lower since it is harder for workers to find a good job and bargain for higher wages, which we can predict by looking at the quits rate.
Job search theory has been a core component of understanding the extent of monopsony in the labor market. When the labor market is not dynamic, workers are not changing jobs in response to the ability to achieve higher wages, which enables employers to exploit these conditions and offer wages lower than would exist in a tight, competitive labor market. Research by Briggs Depew of Utah State University and Todd Sorensen of University of Nevada at Reno finds that so-called labor supply elasticity, or the extent to which workers are sensitive to wage changes, is lower in economic contractions, such as recessions, and higher in expansions. Lower labor supply elasticity in a downturn means that employers will have more wage-setting power, further exacerbating the downside impacts of a recession.
Conclusion
Economic shocks have short-, middle-, and long-term consequences for the way employers make hiring decisions, the confidence with which people move from job to job, and the opportunities available for workers to move up the career ladder and bargain for higher wages. As the coronavirus recession drives uncertainty for workers and employers, the downturn and policy choices aimed at reining it in will continue to have big implications not only for the number of jobs available, but for the quality of those jobs, too. JOLTS data will continue to give economists and policymakers alike a better bead on where the U.S. economy stands in all of these key data measurements.
Latinx workers constitute 24 percent of the leisure and hospitality industry.
With novel coronavirus infections still rising in many states, an ongoing squeeze on already hard-hit workers and businesses, and uncertainty about the federal government’s next economic relief package, July’s Employment Situation Summary by the U.S. Bureau of Labor Statistics shows that the labor market lost some of its momentum toward recovery compared to May and June. And women workers, Asian, Black, and Latinx workers, and workers with lower levels of education are all continuing to experience particularly high rates of unemployment.
After record job losses in April followed by strong employment gains in May and June, the U.S. economy recovered1.8million jobs in July. The share of prime-aged adults who have a job ticked up from 73.5 percent to 73.8 percent, and the overall unemployment rate fell to 10.2 percent—a 0.9 percentage point decline from the previous month. The share of unemployed workers who report having permanently lost their jobs rather than being on a temporary layoff rose for the fourth month in a row, albeit less so than in June and May, going from 20.9 percent in June to 22.6 percentin July.
Small sample sizes in the Bureau of Labor Statistics’ jobs survey mean month-to-month changes should be interpreted with caution, yet the disparities by race and ethnicity are striking. Between June and July the unemployment rate for Black workers fell the most slowly among workers of color, going from 15.4 percent to 14.6 percent. For Asian American workers it declined from 13.8 percent to 12 percent. White workers’ jobless rate fell from 10.1 percent in June to 9.2 percent in July. (See Figure 1.)
Figure 1
The labor market has been particularly volatile for Latinx workers. In April, their unemployment rate shot up, reaching an all-time high of 18.9 percent—6.9 percentage points higher than at its Great Recession peak in August 2009. But the Latinx unemployment rate has been falling relatively quickly since then, dropping from 14.5 percent in June to 12.9 percent in July.
These sharp fluctuations are explained, in part, by the economic downturn’s impact on service jobs. Since the coronavirus recession hit, service industries have borne the brunt of job losses, with the leisure and hospitality industry leading the way. Between February and April the sector lost 8.3 million jobs—almost 50 percent of its pre-pandemic employment. Yet in the last 3 months the leisure and hospitality industry has also made some of the strongest gains. Despite surging coronavirus cases dampening usual summer activities, in July hospitality and leisure accounted for more than a third of all new jobs, more than any other industry, followed by government, retail, and education and health services.
For Latinx workers, these job losses and gains have big implications, since they are overrepresented in service industries and occupations. Despite making up 17.6 percent of the U.S. workforce, Latinx workers constitute 24 percent of the leisure and hospitality industry. In 2019, almost 1 in 3 Latinas and 1 in 4 Latinos worked in service occupations such as housekeepers, medical assistants, and cooks, higher than the proportion of White men and women and Black men and women in service occupations. (See Figure 2.)
Figure 2
Because many of these service jobs require face-to-face interactions, the percent of Latinx workers who were able to telework for pay at any time in June was only 21.1 percent—a smaller share than workers of any other major racial or ethnic group.
The crisis in the service sector is compounded by Latinx workers’ overrepresentation in low-wage jobs. They have the lowest median earnings of any major ethnic or racial group. Breaking the data down by gender, Latinas are the worst paid workers in the U.S. economy.
When analyzing differences in pay, researchers find that there is, on average, a 40-cent wage gap between Latinas and White men. Occupational segregation explains an important chunk of the gap, followed by disparities in education and training, and industry distribution. More than half of the pay gap between Latinas and White men, however, is unexplained by other demographic or human capital variables, and interpreted as evidence of discrimination in the U.S. labor market.
Additionally, some of the decline in the Latinx unemployment rate is probably a consequence of many of these workers dropping out of the labor force altogether. Between June and July the Latinx labor force participation rate—the share of people employed or actively looking for a job—fell more than for any other group, dropping from 65.5 percent to 64.6 percent.
This exit from the U.S. labor force risks erasing some of the gains made by Latinas during the 2009–2020 expansion. As early as a decade ago, Latinas used to have the lowest labor force participation rate in the United States, but by February 2020, just before the coronavirus recession hit, their unadjusted labor force participation rate reached 59.4 percent—higher than the rate for women overall and the highest point since the statistic was first reported in 1976. In July, however, the share of Latinas who are either employed or actively looking for a job dropped from 59.3 percent in June to 58.5 percent in July.
The U.S. labor market is far from roaring back. Many of the jobs created last month—particularly those in service occupations—are worse and less safe than the jobs that were lost in March and April. Uncertainty and lack of support for workers who have been hardest hit by the coronavirus recession are already putting the brakes on the recovery. The expiration of the weekly $600 Pandemic Unemployment Compensation boost at the end of July is particularly painful for low-wage workers in the most exposed industries. Even though it will now take weeks before any further enhancements to jobless benefits reach workers, policymakers should extend the extra $600 and only phase them out once the unemployment rate falls and the health crisis is kept in check. As long as both workers and consumers feel unsafe, the recovery will stall.
