New research shows the importance of worker power for addressing U.S. wage inequality

Posted on by Maria Monroe
An employee of the Nantucket Stop & Shop stands in the rain shortly after local management forced strikers off the property.
An employee of the Nantucket Stop & Shop stands in the rain shortly after local management forced strikers off the property, April 2019.

Workers in the United States over the past 40 years experienced stagnant real wages for those at the lower end of the income distribution, along with rising income inequality, even as productivity rose. Some economists and policymakers argue these poor labor market outcomes are the unavoidable result of competitive markets, globalization, and technological advancement. Yet there is compelling evidence these negative outcomes for U.S. workers are due to policies that lower labor standards and structurally weaken workers’ bargaining power.

Indeed, not all countries experienced these patterns of declining wage quality and rising inequality, as demonstrated in two recent working papers from economist David Howell, an Equitable Growth grantee and a member of Equitable Growth’s Research Advisory Board. Howell’s latest research provides additional evidence that not only are U.S. wage outcomes exceptionally poor when viewed alongside outcomes in similar countries, but they are also a consequence of more than four decades of political choices.

How Exceptional is American Job Quality? WP HowellDownload
120321-WP-Low Pay in Rich Countries-HowellDownload

In his first working paper, “How Exceptional is American Job Quality? The Incidence of Decent- and Poverty-Pay Jobs in the United States, United Kingdom, Canada, Australia, and France,” Howell compares earnings quality for workers by age, gender, and education in five countries—the United States, the United Kingdom, Canada, Australia, and France—over time.

Howell finds that other countries—most notably France—show higher and often increasing shares of workers in “decent-pay” jobs, compared to the United States. He also finds that the share of “poverty-pay” jobs is highest for the United States, accounting for 30.2 percent of workers in 2017. (See Figure 1.)

Figure 1

Share of poverty-pay and decent-pay jobs by country, from 1980 to 2017

Some economists propose that recent technological advances reduced opportunities for U.S. workers with lower levels of education, and this is the key factor driving down wages for this group. But Howell finds that while wage outcomes in the United States since 2000 became worse for young workers without a college degree, the wage quality for similar workers in other countries actually rose over that same time period. (See Figure 2.)

Figure 2

Changes in wage-quality measured by the real median wage for workers aged 18-34 without a college degree for all jobs and for poverty-pay jobs by gender, 2000-2014

In a second new working paper, “Low Pay in Rich Countries: Institutions, Bargaining Power, and Earnings Inequality in the U.S., U.K., Canada, Australia and France,” Howell further explores these pay patterns in the context of these countries’ approaches to labor protections, wage setting, and social policies that strengthen worker power.

To compare worker power across countries, Howell created an Institutional Bargaining Power Index that captures various measures of collective bargaining coverage, national minimum wages, employment protection, and income supports. (See Figure 3.)

Figure 3

Institutional Bargaining Power Index for five countries, 2017-2019

Howell finds that differences in countries’ institutional bargaining power explain a great deal of the differences in pay patterns between countries. This supports evidence from ­other research showing the importance of strengthening workers’ bargaining power and counteracting uncompetitive wage-setting practices by U.S. employers, which otherwise depress wages, increase inequality, and contribute to racial and gender pay divides. (See Figure 4.)

Figure 4

Institutional Bargaining Power Index and the prevalence of poverty-pay jobs for all workers, 2012-2014

These patterns are even more striking for younger workers with lower levels of education. The United States has the lowest score on the Institutional Bargaining Power Index and the highest levels of poverty-pay jobs for both young women (70.1 percent) and young men (57.1 percent) who do not have college degrees. (See Figure 5.)

Figure 5

Share of poverty-pay jobs for workers aged 18-34 without a college degree in five developed economies, 2012-2014, by gender
working paper

From Decent to Lousy Jobs: New Evidence on the Decline in American Job Quality, 1979-2017

By David Howell,

August 30, 2019

post

Labor in the Boardroom: A Model for the United States?

By Kate Bahn,

October 20, 2020

post

Factsheet: How strong unions can restore workers’ bargaining power

By Equitable Growth,

May 1, 2020

Conclusion

Howell’s two working papers demonstrate the ways in which bargaining power shapes economic outcomes in the United States, compared to other peer economies. His findings further buttress the evidence that U.S. workers’ economic gains are not merely defined by individual characteristics, such as education, or broader trends, such as globalization and technological advances.

U.S. policymakers need to empower unions and collective action so that when U.S. workers experience the ups and downs of economic trends, they can share in the gains of the economic growth to which they contribute. U.S. policymakers also need to invest in the nation’s critical social infrastructure so that U.S. workers and their families can be more productive and improve their well-being and the productivity and well-being of future generations.

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Brad DeLong: Worthy reads on equitable growth, November 2-8, 2021

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

1. The general flow of news and misinformation in today’s media gives people who are not following closely a very false impression. It greatly understates how far we still are away from full employment. There remain considerable supply constraints on people’s willingness and ability to work—fear of catching Covid-19 and then giving it to immunocompromised and elderly relatives and friends, plus the logistical difficulties that stubbornly remain large, due to the inability to get all of the pieces of the family weekly schedule together, and due to failures of supply chain management in the U.S. economy as a whole. As these supply constraints are relaxed in the future, there will then need to be the demand to pull people back into work, and into the best attainable work for themselves and the economy and to reach full employment. Read Kathryn Zickuhr and Carmen Sanchez Cumming, “Equitable Growth’s Jobs Day Graphs: October 2021 Report Edition,” in which they write: “Total nonfarm employment rose by 531,000 in October, and the prime-age employment rate for prime-age workers rose to 78.3 percent. … The unemployment rate declined to 4.6 percent in October … [but] higher for Black workers (7.9 percent) and Latinx workers (5.9 percent). … Unemployment rates are markedly higher for workers with lower levels of education, at 7.4 percent for those with less than a high school degree and 5.4 percent for high school graduates. … Public-sector employment fell in October and remains significantly below pre-crisis levels, while private sector employment continued to see more rapid gains. … The proportion of unemployed U.S. workers facing long-term unemployment … remains elevated, as 45.0 percent of unemployed workers have now been out of work for more than 15 weeks.”

2. Reproductive autonomy—the ability to effectively engage in family planning—has always been key to what opportunities women have had and what freedom to live their lives as they choose women have been able to grasp. Abortion rights have been a very powerful part of enabling women’s opportunities in America over the past two generations. They now appear to be under considerable threat in Texas, Louisiana, and elsewhere. Read Kate Bahn and Maryam Janani-Flores, “Economic security and opportunity for women under threat after U.S. Supreme Court takes anti-abortion stance in Texas,” in which they write: “Nearly 1 in 4 women in the United States… will have an abortion by the age of 45, and nearly 1 in 20 women will have an unintended pregnancy…. Research by economists and other social scientists repeatedly demonstrates how this link between bodily autonomy and a person’s ability to decide when, how, and under what circumstances to plan for a family is critical to economic security and stability…. The early broad-based dissemination of the birth control pill and on restrictions for abortion services, including gestational limits and targeted restrictions of abortion providers, or TRAP laws, finds that autonomy over family planning choices is directly linked to a woman’s job opportunities and financial security.”

3. In September Alix Gould-Werth highlighted a new Transportation Security Index developed by her and her co-researchers to measure transportation inequities. Here is their more recent and very interesting take on how the inability to be sure that you will get to the job, or the appointment, greatly hobbles many people’s ability to successfully maneuver day-by-day in our society of sprawl. Read Alexandra K. Murphy, Alix Gould-Werth, and Jamie Griffin, “Validating the Sixteen-Item Transportation Security Index in a Nationally Representative Sample: A Confirmatory Factor Analysis,” in which they write: “We developed a preliminary Transportation Security Index (TSI): a 16-item measure that captures the experience of transportation insecurity at the individual level. … We use confirmatory factor analysis to replicate and validate the 16-item TSI. Our results show that a slightly modified TSI16 is an effective tool that can be used to uncover transportation insecurity across different samples. They also suggest that, counter to the results of our previous study, transportation insecurity is a unidimensional condition that is experienced both materially and relationally.”

Worthy reads not from Equitable Growth:

1. The U.S. workforce and job system has so much month-to-month churn, and the value of the local information present in a business’s knowledge of the quirks of an employee and an employee’s knowledge of the quirks of a business and a boss is so large, that I have never, ever understood why the U.S. private sector has not done a better job of maintaining employer-employee ties across all the accidents and disruptions of life that lead people to need to step away from the job for a week, a month, or a season. Requiring medical and caregiving leave be offered, and making it paid leave, would jumpstart a more general shift to preserve much of this valuable information—information now lost when employee-employer ties are completely severed—across time. Read Julia M. Goodman and Daniel Schneider, “The association of paid medical and caregiving leave with the economic security and wellbeing of service sector workers,” in which they write: “Our objective was to determine whether paid leave was associated with improved economic security and wellbeing for workers. … Data collected in 2020 by the Shift Project from 11,689 hourly service-sector workers …[showed that] twenty percent of workers needed medical or caregiving leave in the reference period. Workers who took paid leave reported significantly less difficulty making ends meet, less hunger and utility payment hardship, and better sleep quality than those who had similar serious health or caregiving needs but did not take paid leave. Access to paid leave enables frontline workers to take needed leave from work while maintaining their financial security and wellbeing.”

2. Tax policy at the U.S. Department of the Treasury rightly focuses on exactly how much money the Build Back Better legislation can raise for the federal government by simply collecting taxes that are already owed but have not been collected due to the understanding of the IRS in the past. Read Lily Batchelder, “Preliminary Estimates Show Build Back Better Legislation Will Reduce Deficits,” in which she writes: ‘The Build Back Better Act invests meaningfully in American families and workers, while laying the foundation for meeting imperative climate goals. … The legislation would, as the President proposed, generate more than $2 trillion in savings. These savings come from ensuring large multinational corporations and wealthy Americans pay their fair share and reducing the cost of prescription drugs. These provisions will not raise taxes on any taxpayer making less than $400,000. … At the crux of reforms to the tax code is a historic overhaul of the international tax regime, whose global adoption has been successfully negotiated with 136 countries representing nearly 95 percent of the world’s economy. As a result of these changes, the ability of large corporations to shift profits abroad will be substantially limited, and the race to the bottom in corporate taxation will no longer be a driving force weakening capital taxation. … The largest pay-for in the bill is not a tax increase at all. By collecting taxes that are already owed—and disproportionately unpaid by the highest-earners—the Build Back Better Act will generate at least $400 billion in additional revenue. Over the last decade, an under-resourced IRS has been unable to appropriately focus attention on top earners who are most responsible for the tax gap. … These are historic policy achievements in and of themselves—and they also pay for transformational investments that will improve the lives of American workers, our children, and the generations that will follow.”

3. Here is another very good study strongly suggesting that current news-flow fears of a return to 1970s-style inflation vastly overstate the true risks here. Read Davide Brignone, Alistair Dieppe, and Martino Ricci, “Quantifying risks of persistently higher US inflation,” in which they write: “Using the ECB-Global model, this column estimates the impact on inflation of the fiscal stimulus to be limited. Three scenarios … a steeper Phillips curve, stronger fiscal multipliers, and rising inflation expectations … suggest that the impact on inflation from these sources of risk is likely to be moderate, unless all of the risks materialize simultaneously, and the Fed does not depart from the assumed monetary policy path.”

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October U.S. Jobs report: Employment growth picked up steam last month

Posted on by Maria Monroe
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Job gains in the U.S. labor market picked up in October, according to the latest Employment Situation Summary released today by the U.S. Bureau of Labor Statistics. Between mid-September and mid-October a total of 531,000 jobs were added to U.S. economy as COVID-19 cases declined after surging in the late summer, compared with the 483,000 jobs added in August and the 312,000 jobs added in September. In addition, the agency made substantial revisions to its August and September employment estimates, increasing the 3-month average job gains to 442,000; without the revisions that average number would have been of just over 363,000 jobs.

A key measure for the labor market, the prime-age employment-to-population ratio, or the share of 25- to 54-year-olds who have a job, rose from 78 percent  to 78. 3 percent. And the overall unemployment rate continued to fall, dropping from 4.8 percent in September to 4.6 percent in October. These indicators show that the U.S. economy is on its way to a robust jobs recovery, yet some metrics used to measure the detailed health of the labor market failed to make much progress.

The labor force participation rate, for example, continues to be well below its pre-coronavirus levels. At 61.6 percent, the share of U.S. adults who are either employed or actively looking for work stayed flat over the last month and remained at roughly the same level since June of 2020.

As of October, there are 3million fewer workers in the labor force than there were prior to the start of the coronavirus recession in February 2020. A still low labor force participation rate is particularly worrying because this indicator previously never returned to its pre-crisis levels in the aftermath of either the 2001 recession or the Great Recession of 2007–2009. The only sector to shed jobs in October—the public sector—lost more than 150,000 jobs over the past three months.

Across race and ethnicity, the unemployment rate continues to be highest for Black workers—the racial or ethnic group whose unemployment rate tends to be most sensitive to both economic contractions and expansions. At 7.9 percent, the jobless rate for Black workers remained unchanged between September and October, and is almost double the unemployment rate of White workers (4 percent). The jobless rate for Asian American workers also remained flat, staying at 4.2 percent. Latinx workers are currently experiencing a 5.9 percent jobless rate—2.9 percentage points above the unemployment rate for White workers. (See Figure 1.)

Figure 1

U.S. unemployment rate by race, 2019-2021. Recessions are shaded.

There also are large differences in employment and labor force participation by age group. A year after the onset of the coronavirus recession, for example, the youngest workers in the U.S. economy were faring better than their older counterparts. Workers between the ages of 16 and 19 experienced employment declines of only 4.4 percent between February 2020 and February 2021.

Conversely, the pandemic initially hit the oldest workers much harder than early- and mid-career workers, and over the same period adults 65-years-old and older experienced a massive 10 percent decline in employment. For instance, according to an analysis of Bureau of Labor Statistics data by the Urban Institute, the labor force participation rate for U.S adults ages 65 and older fell 11.1 percent between February 2020 and February 2021—the largest 12-month drop in 60 years.

Alongside this drop in both employment and labor force participation, retirement rates increased dramatically amid the pandemic. According to a recent report from the Kansas City Federal Reserve, for example, the number of retirees increased by 3.6 million retirees between February 2020 and June 2021 or more than twice as many as would have been expected under previous trends.

The Kansas City Federal Reserve authors find that the overall increase is not driven by a greater number of retirements. Instead, they cite “a steep decline in the percentage of retirees returning to work” during this time, possibly due to health concerns for this higher-risk group during the pandemic. (See Figure 2.)

Figure 2

Monthly transition rates between retirement, employment, and U.S. unemployment, January 2018-June 2021

This shift may not reflect a permanent transition to retirement for all of these workers, however, as many may return to work as risks subside, particularly for those who are still young enough to return to the labor force. (See Figure 3.)

Figure 3

Increase in the number of U.S. retirees since February 2020 (in millions), by age

Many older workers face important challenges in the U.S. labor market and barriers to a good retirement

Retirement trends are likely to normalize as the U.S. economy continues to recover, yet this spike in the number of retirees has put a spotlight on the challenges that older workers experience in the labor market. Hiring discrimination, for example, may make it more difficult for older workers to find new jobs after separations during the pandemic.

Indeed, a working paper by Gordon Dahl at the University of California, San Diego, and Matthew Knepper at the University of Georgia suggests that age discrimination charges in hiring and firing rose in the period of higher unemployment after the Great Recession. Examining data from a correspondence study using fictitious resumes of college-educated women with significant work experience, the authors also find that the callback rate for older women versus younger women fell by 15 percent for every percentage point increase in the local unemployment rate.

Other research finds that age discrimination in hiring appears to be more prevalent against older women than older men, and older women may be subject to a disproportionate amount of monopsony power compared to other workers. Age discrimination intersects with discrimination by race as well, with one study finding disproportionate hiring discrimination among Black applicants in the oldest and youngest age groups. In addition, the Urban Institute also found that older adults who are able to find new jobs after being unemployed during the Great Recession and recovery received lower wages.

There also are large inequities in retirement readiness by gender and race, with many female workers and workers of color having no retirement savings other than Social Security. White families are far more likely to have access to an employer-sponsored retirement plan, and more likely to participate in one, according to a Federal Reserve analysis of the Survey of Consumer Finances. The analysis finds that while 60 percent of White families participate in a retirement plan, the same is true for only 45 percent of Black families and 34 percent of Hispanic families. White families typically have much higher levels of household wealth overall compared with Black and Hispanic families, as the analysis notes, further contributing to disparities in retirement readiness. 

Access to employer-sponsored retirement plans has fallen over time, and the types of plans workers participate in has shifted from defined-benefit plans, often called pensions, to 401(k) and other defined-savings accounts, which may not ensure adequate income in retirement. Overall, employer-sponsored retirement plan coverage declined less for workers in unions compared with other workers between 1999 and 2011, and workers in unions remain far more likely to participate in retirement plans than those who are not in unions, as the Economic Policy Institute notes.

Then there’s the need for older workers to be able to access to both good working conditions and a good retirement as the U.S. workforce ages. The pandemic pushed many U.S. workers into retirement, but longer trends reflect that both due to choice and necessity many older workers have been extending their careers over the past few decades. That many older workers are delaying or forgoing retirement could exacerbate other inequities, since older workers without a college degree are more likely to hold physically demanding jobs, and older workers with health problems are losing out on the financial benefits of a late retirement.

The trend toward later retirement can have other effects on the U.S. labor market, too. One is that it creates bottlenecks in career ladders that may affect the career progressions and wages for younger workers.

Conclusion

The latest Jobs report in October shows that more than 7.4 million workers who want a job and are actively looking for one did not have one, and the U.S. economy is still at a 4.2 million job deficit with respect to February 2020. These workers across the spectrum of age, gender, and race and ethnicity will return to the labor force most immediately when the pandemic is brought under more control so that those who want to return to work can do so without the fear of getting sick.

More broadly, as both the workforce and the population age, it will become increasingly important to invest in the country’s social infrastructure by ensuring that people can reach accessible and high-quality elder care, that the workers who care for the country’s older adults are fairly compensated and have good working conditions, and that the country’s families have access to robust Social Security benefits and disability benefits. It will also be important to effectively enforce labor laws that are meant to protect older adults from employment discrimination.

Empowering U.S. workers with the legal and institutional support they need to reach good labor market outcomes and be treated fairly at work—as well as to be able to have a good retirement if they choose to stop working or are unable to work—will be essential for broad-based and sustainable economic growth.

Equitable Growth’s Jobs Day Graphs: October 2021 Report Edition

Posted on by Carmen Sanchezcumming

On November 5th, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of October. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.

Total nonfarm employment rose by 531,000 in October, and the prime-age employment rate for prime-age workers rose to 78.3 percent.

Share of 25- to 54-year-olds who are employed, 2007-2021. Recessions are shaded.

The unemployment rate declined to 4.6 percent in October, remaining higher for Black workers (7.9 percent) and Latinx workers (5.9 percent) compared with White workers (4.0 percent) and Asian workers (4.2 percent).

Unemployment rates are markedly higher for workers with lower levels of education, at 7.4 percent for those with less than a high school degree and 5.4 percent for high school graduates. The unemployment rate is 4.4 percent for workers with some college, and 2.4 percent for college graduates.

Unemployment rate by U.S. educational attainment, 2019-2020. Recessions are shaded.

Public-sector employment fell in October and remains significantly below pre-crisis levels, while private sector employment continued to see more rapid gains.

U.S. public- and private-sector employment indexed to average employment in 2007

The proportion of unemployed U.S. workers facing long-term unemployment decreased in October but remains elevated, as 45.0 percent of unemployed workers have now been out of work for more than 15 weeks.

Percent of all unemployed U.S. workers by length of time unemployed, 2019-2021

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Brad DeLong: Worthy reads on equitable growth, October 26-November 1, 2021

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

1. The excellent Anna Stansbury makes a very good point here—the size of the penalties multiplied by the likelihood of enforcement are such that a firm can, in all probability, make higher profits by violating than by complying with the Fair Labor Standards Act and the Nation Labor Relations Act. To the extent that firms do comply with these legal obligations, it is as part of a broader social contract of expectations of cooperative behavior. But that social contract has been degrading and decaying at least since the late 1960s. Read her “Do US Firms Have an Incentive to Comply with the FLSA and the NLRA?,” in which she writes: ‘To what extent do US firms have an incentive to comply with the Fair Labor Standards Act and the National Labor Relations Act ? I examine this question through a simple comparison of the expected costs of noncompliance (in terms of legal sanctions) to the profits firms can earn through noncompliance. In the case of the FLSA minimum wage and overtime provisions, typical willful violators are required to pay back wages owed and in some cases additional penalties, if detected by the Department of Labor. Based on available data on the penalties levied, a typical firm would need to expect a chance of at least 78–88 percent that its violation would be detected in order to have an incentive to comply with the FLSA. In practice, the probability of detection many firms can expect to face is likely much lower than this. In the case of the NLRA, a firm that fires a worker illegally is required to reinstate the worker with back pay if the violation is detected. Based on empirical estimates of the effect of unionization on firm profits, a typical firm may have an incentive to fire a worker illegally for union activities if this illegal firing would reduce the likelihood of unionization at the firm by as little as 0.15–2 percent. These analyses illustrate that neither the FLSA nor the NLRA penalty and enforcement regimes create sufficient incentive to comply for many firms. In this context, the substantial evidence of minimum wage and overtime violations, and of illegal employer behavior toward unions, is not surprising.”

2. This event, I think, went very well. I certainly learned an enormous amount. And, indeed, it made me think of that I had underestimated for nearly my entire career how important nowcasting was (relative to forecasting). Watch “Equitable Growth Presents: Opportunities and challenges of real-time economic measurement,” which “convened experts on the analysis and application of real-time data … Austin Clemens, Director of Economic Measurement Policy, Washington Center for Equitable Growth; Erica Groshen, Senior Economics Advisor, Cornell University; Jeehoon Han, Assistant Professor, Zhejiang University; Dana Peterson, Chief Economist, The Conference Board [all of whom discussed how] … The coronavirus recession led to a crop of economics working papers trying to understand the effects of the pandemic in real time. … The incredibly short turnaround time of much of this research was unprecedented. … The severity of the COVID-19 crisis, the availability of administrative data sources, and new statistical tools combined to produce an enormous amount of nearly real-time data.”

Worthy reads not from Equitable Growth:

1. Only once in my lifetime—1994—has the U.S. Federal Reserve successfully attained a “soft landing“ by maintaining price stability and tightening monetary policy without sending the economy into a recession, and so prematurely cutting short a useful and beneficial expansion. The fear of a repeat of the inflationary 1970s has indeed imposed heavy long-term costs on American economic growth. Read Antonio Fatás, “The short-lived high-pressure economy,” in which he writes: “In 2019, the U.S. economy had reached levels of employment that ensured that the gains of the economic expansion were shared across many segments of the labor market. Unfortunately, the benefits of this high-pressure economy were short-lived thanks to the recession that started in March 2020. This column argues that this pattern fits all previous U.S .cycles. Expansions end too early to allow for long periods of stable and low unemployment.”

2. I did not see this letter when people were looking for people to sign on, and that leaves me a little bit sad. The only thing I would add is that the social-spending package is only going to counter a small proportion of the harm done by the substantial decades of underinvestment by the public sector that began back in the days of Richard Nixon. It will take a much greater effort, and be a much heavier lift, to get the public capital stock and its pace of growth back to where it really ought to be. Read Juliana Kaplan and Ben Winck, “61 Economists including a Nobel call on Congress to pass Biden’s social spending framework,” in which they write: “The package would ‘counteract decades of underinvestment,’ the group said in a letter organized by Invest in America Action. The plan includes funding for universal preschool, affordable housing, and clean-energy projects, among other provisions.”

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Testimony by Michelle Holder before the Joint Economic Committee

Posted on by Maria Monroe

Michelle Holder, the current president and CEO of the Washington Center for Equitable Growth, testified before the Joint Economic Committee of the U.S. Congress this past summer, when she was an associate professor of economics at John Jay College at the City University of New York. Her testimony is below.

Michelle Holder
Testimony before the Joint Economic Committee,
“The Gender Wage Gap: Breaking Through Stalled Progress”

June 9, 2021

Good Afternoon Chairman Beyer, Senator Lee, and Distinguished Members of the Joint Economic Committee,

Thank you for the opportunity today discuss the gender wage gap. My name is Dr. Michelle Holder, and I’m an Associate Professor of Economics at John Jay College, City University of New York. I’m a labor economist by training, and my research centers around the position and status of the Black community and women in the American labor market. In my remarks today I will focus on the impact of the gender wage gap on Black women in the United States. To do so I will largely draw on original quantitative research I conducted last year on Black women and the gender wage gap in the economic report “The Double Gap and The Bottom Line: African American Women’s Wage Gap and Corporate Profits” which I prepared for the Roosevelt Institute in NYC. 

Introduction

The gender wage gap is typically a straightforward comparison of the average or median full-time wages/earnings of all working men in the U.S. and the average or median full-time wages/earnings of all working women in the U.S. According to the Department of Labor’s Bureau of Labor Statistics (BLS), as of June 2020, men working full-time earned a median of $1,087 per week ($56,500 annually), and women earned $913, ($47,500 annually), or about 84 cents for every dollar men earn. According to the Institute for Women’s Policy Research (IWPR), in 2019 women’s median annual earnings were about 81 percent of men’s. However, this simple formulation masks complex factors which play a role in the gender wage gap; occupational crowding based on sex, gender socialization, employer bias, historical exclusionary practices on the part of unions, the “motherhood penalty,”1 and human capital disparities.

One prominent narrative that’s been advanced regarding the gender wage gap is that it is not due to discriminatory treatment on the part of employers in this country. Instead, the fault lies primarily with women due to voluntary choices we make. Women choose not to pursue STEM fields in college, women choose to stop out in the careers to have and raise children, women choose occupations that allow more flexibility for parenting obligations, and these occupations are inevitably lower paying. While I do not dispute that women are clearly capable of making informed choices about their careers, what I hope to show is that even when women do seemingly do all the things that should result in equitable pay outcomes there are long-held practices in American work life that leave women vulnerable to unequal pay.

If we were to rank median or average annual pay in the U.S. by race and gender, women of color, including Black women, would be at the very bottom of that rank. As of June 2020, median wages of full-time workers according to the Bureau of Labor Statistics:

White Men—$1,115 weekly, $58,000 annually
Black Men—$828 weekly, $43,000 annually
White Women—$929 weekly, $48,300 annually
Black Women—$779 weekly, $40,500 annually (70 cents for $1 for white men)

Black women earn the least due to the effects of both the “racial wage gap” (overall, Blacks earn on average less than whites in the U.S.—this is called the racial wage gap) and the gender wage gap; this is an effect I term the “double gap” in wages/earnings of Black women. According to the National Partnership for Women and Families, Black women earn about 61 cents for every dollar non-Hispanic white men earn. The takeaway here is that the gender wage gap has the largest absolute negative impact on the earnings of women of color.

The Impact of the Gender Wage Gap on Black Women and Black Communities

In original research I conducted using descriptive as well as regression analysis most of the most important factors that could contribute to wages/earnings differentials between Black women and non-Hispanic white men, such as educational attainment of years of work experience, have been taken into account, or, “controlled for,” which means that in my research I compare full-time working Black women and non-Hispanic white men with similar educational attainment, similar work experience, and many other similarities with regard to the skills they bring to the job. Thus, I am comparing “apples to apples.” I examine the earnings differences by occupation between Black women and non-Hispanic white men, and, with few exceptions, non-Hispanic white men earn considerably more than Black women in almost all 22 major occupational categories and almost all 77 minor occupational categories. For an individual Black woman who’s a worker, the gap ranges. It can be as low as $5,000 in certain low-wage occupations, or it can be as high as $50,000 to $75,000 in some high-wage occupations. More or less, on average, the gap in earnings between Black women and non-Hispanic white men ranges between $10,000 to $20,000 for your typical Black woman worker in the U.S. workforce. In the aggregate, I estimate that Black women workers in the U.S. “involuntarily forfeit” approximately $50 billion in wages/earnings due to the gender wage gap each year, a large and recurring loss to the Black community.

Causes of Large Differentials in Full-Time Annual Earnings between Black Women and White Men?

Several factors can contribute to the gender wage gap faced by all women, and by Black women in particular. Contributing factors to the gender wage gap that Black women face include their historically subordinate position in the American labor market, the role of networks, differences in college completion rates between Black and white Americans (there is still a large educational attainment gap between Blacks and whites—over 35% of non-Hispanic whites have a college degree compared to about 25% of Blacks), the use of prior earnings history in determining wages (in the 2018 Ninth Circuit Court of Appeals case Rizo versus Yovino, subsequently vacated by the U.S. Supreme Court on a technicality, the common practice of requesting previous salary histories from job applicants was found to be discriminatory against women), the lack of wages/earning transparency in the American workforce, and discrimination.

Black women, in line with women generally in the U.S. workforce, are crowded into low-wage occupations, in part due to the kinds of occupations that were historically open to African American women. This, of course, has an influence on the magnitude of wage gaps African American women face in the workforce. Conrad (2005) noted that, prior to the passage of the 1964 Civil Rights Act, particularly Title VII of the Act which prohibited race and gender-based discrimination in employment, the occupation with the highest share of Black women in the U.S. (38 percent in 1960) was private household (i.e., domestic servants). Conrad pointed out that by 1980, the occupation with the highest share of Black women had changed from private household to clerical (also, see Albelda 1985 for more on this change). Indeed, in 2015, about one in five African American women worked in office and administrative support occupations, and an additional 17 percent worked in healthcare practitioner and healthcare support occupations, which includes jobs such as nurses, nursing assistants, medical records technicians, home health aides, and medical assistants.

It has been estimated that about half of jobs in the U.S. are filled through social contacts (Granovetter 1995). One potential explanation for this is such a process for filling jobs can be beneficial for, primarily, employers at no added human resource cost; Fernandez, Castilla, and Moore (2000) conceptualized the “richer pool” theory which indicates that, by tapping its employees for referrals for company vacancies, employers obtain a better and larger pool of candidates for job openings. Employers can reap other benefits from hiring individuals who were referred to the firm by incumbent employees, including referrals of candidates trusted by employees. Incumbents place their “reputation on the line,” provide other information about candidates not easily assessed during the hiring process, and help acclimate referral hires to their new work environment (Elliot 2001; Fernandez, Castilla and Moore 2000; Granovetter 2005). In addition, other research posits that African Americans tend to rely on formal routes in employment (Holzer 1987, Elliot 2001). Holzer (1987) argues that Blacks are more likely to rely on formal routes to employment because it is harder for ascriptive characteristics to play an outsize role in hiring, given the professionalization of the human resources occupation. Importantly, other researchers (Stainback 2008) have pointed out that networks can serve to maintain racially (or gender, for that matter) segregated labor markets since job information is shared through homogeneous networks, leading employers to draw from homogeneous pools. The point here is that, given the long-standing exclusions of all women and Black men from equal competition in the American labor market, white male networks in the workforce have an historical and potent reach. Presumably, not only is job vacancy information shared through homogenous white male networks, but also salary information.

Policy Approaches that Have Potential to Narrow the Gender Wage Gap for Black Women

The following policy approaches have the potential to narrow the wage gap faced by Black women in the U.S.:

  1. Passage of state and/or federal laws which prohibit employers from requesting previous salary histories from job applicants.
  2. Passage of state and/or federal laws requiring pay transparency in the private, for-profit sector; economist Marlene Kim (2015), the other economist providing testimony today, has found that in states where pay secrecy practices are banned the gender wage gap is lower among highly educated women.
  3. Revision of the “EEO-1 Form” to include compensation data. This form, required to be submitted regularly by employers, already reports the demographic and occupational makeup of most workers in the U.S., and this data is used by the EEOC to “support civil rights enforcement.” Under former President Obama an executive order implemented a revision to the form to include compensation data; this was jettisoned under former President Trump’s administration. I am calling for this revision to be re-implemented.
  4. The likelihood of acquiring student debt is a disincentive to attending college—making tuition free at community and public colleges throughout the U.S. would incentivize more Black women to complete college, raising this group’s median educational attainment level which will likely narrow their wage gap.
  5. Raise the federal minimum wage. The majority of minimum wage earners in the U.S. are women, and proportionally more Black women earn the minimum wage than Black men. Economist Marlene Kim has found a small but positive effect on the gender wage gap is likely to occur by raising the minimum wage.

Conclusion

It’s easy to attempt to scapegoat women in general for the wage gaps they endure by asserting that they, as a group, lack, for example, adequate negotiating skills. But it would be incorrect to do so. Research by Gerhart and Rynes (1991) as well as Laura Crothers et. al. (2010) shows that even when women engage in the same salary negotiating strategies as men their economic returns are lower. Research also shows that when Blacks attempt to assertively bargain fair salaries they are perceived as aggressive, and risk either losing employment offers or being offered lower salaries for violating employer’s expectations, when compared to their white male counterparts engaging in the same behavior (see Hernandez et. al. 2019).

The burden of shrinking the double gap lies primarily with employers who must recognize and acknowledge that they are underpaying Black women, writ large, and take measures to rectify this. But CEOs are not going to do this of their own volition, so we need our policy advocates, policymakers, and legislators to push corporate America in the right, and fair, direction.

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Equitable Growth launches A Visual Economy: Our newest tool to showcase thousands of visuals on economic inequality and growth

Posted on by Emilie Openchowski

The Washington Center for Equitable Growth last week launched A Visual Economy, a new tool to explore thousands of graphics, charts, and figures created by our staff over the past 3 years. The visuals included in this new tool cover a range of topics related to economic inequality and equitable growth, from antitrust enforcement to job mobility, and from monetary policy to the economics of place.

Equitable Growth’s ever-expanding library of visuals has never been so easily accessible. A Visual Economy offers a number of filtering options. One option is filtering by the 31 different subtopics from our website—such as anticompetitive conduct, GDP 2.0, business taxation, or monopsony. Another is by our signature Jobs Day and JOLTS Day features. And another is by a particular timeframe. (See video below.)

Video demo

This tool, years in the making, allows users to explore, sort through, and view nearly all of the graphics that Equitable Growth has produced since the start of 2019—all in one place. It also easily enables users to download the visuals or share them on Facebook and Twitter. All graphics included in A Visual Economy are standalone, which allows them to be easily digestible and used independently.

A Visual Economy

The tool has a featured visualizations sections at the top of the page to highlight six of Equitable Growth’s favorite graphics. These six figures will be updated periodically to showcase both our most recent work and some of our more classic designs.

A Visual Economy is meant to be a resource for those interested in economic inequality and growth to find graphics that visualize the various ways that evidence-backed policies create strong, stable, and broadly shared growth, as well as the many obstacles to equitable economic growth in the United States. It also is a bountiful resource for those who wish to learn visually about any of the subtopics on our website or the general state of the economy in the United States.

We hope you find it useful, and we can’t wait for you to start exploring it.

A Visual Economy
Posted in Uncategorized

Brad DeLong: Worthy reads on equitable growth, October 19-25, 2021

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

1.  Highlighting this from a year and a half ago from Equitable Growth’s new president & CEO. Read Michelle Holder, “The “Double Gap” and the Bottom Line: African American Women’s Wage Gap and Corporate Profits,” in which she wrote: “Though African American women have historically had the highest labor force participation rate among major female demographic groups in the United States, they face both the gender wage gap and the racial wage gap—a reinforcing confluence that I term the ‘double gap’… [showing] that both the share of women in the labor force and the crowding of women into low-wage jobs are negatively correlated with the labor income share.”

2. Check out Equitable Growth’s new “A Visual Economy,” which features “visuals on a particular topic related to economic inequality and equitable growth … [and] offers a way to sort through thousands of figures produced since the beginning of 2019. The six ‘Featured Visualizations’ … showcase some of our most recent work and older classics. Filter and download our visuals using 31 different economics topics as well as by our signature ‘Jobs Day’ and ‘JOLTS Day’ features.”

3. Read Liz Hipple and Alix Gould-Werth, “Weak income support infrastructure harms U.S. workers and their families and constrains economic growth,” in which they write: “People in the United States access income support from a wide range of programs … [yet] many … who need this support are blocked from accessing it. During the COVID-19 crisis, the existing income support infrastructure has been wholly insufficient. … While … pandemic-specific income supports … blunted some of the worst pain … they also failed to deliver for all … due to sustained underinvestment in these key income support programs over the past half-century.”

Worthy reads not from Equitable Growth:

1. The very sharp Ryan Avent hammering home the point that the failure of equitable growth to happen in the 2010s was not due to any structural or supply-side failures of human and other resources to exist or be mobilized, but just to prolonged, sustained weakness in aggregate demand. Read his “Revenge of the robots,” in which he writes: “If the Fed doesn’t overreact to inflation and other events don’t blow up the recovery, then this labor market has some room to run. Workers at the bottom of the distribution are getting better money, which should support continued demand growth, which should keep the economy humming, which should prevent the emergence of lots of new slack—for now. … In many industries we already have in place business models that use less labor more productively, but which have not yet become dominant because broader conditions haven’t been sufficiently encouraging. … The technological capacity to automate the work of large swathes of the labor force has been building over time but hasn’t materially affected labor markets yet because there’s been no incentive to make use of it. … Alternatively, industry shake-ups and the occasional adoption of labor-saving methods and technologies begin to undercut the earning power that workers enjoy, and after a glorious few years wage growth decelerates. As it does, and the share of purchasing power held by those with a high propensity to spend declines, the old macroeconomic malaise sets in again. … The current labor-market boom demonstrates that weak demand was the thing that made the 2010s so crummy.”

2. Lots of us have been seeing a silver lining in our belief that China’s rapid growth will soon lead it to become a major source of demand for products made by U.S. workers. Here, however, is more evidence that that hope may be vain—that China is already running into the middle-income growth trap. Read The Economist, “A triple shock slows China’s growth,” in which the magazine writes: “From the sublime to the subpar: A triple shock slows China’s growth: Power cuts, the pandemic and a property slowdown: all have taken a toll.”

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Dispatch from EconCon 2021: Addressing racial and gender stratification in the U.S. economy is key to an equitable and sustainable recovery

Posted on by Maria Monroe
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The 2-day EconCon 2021 conference, held virtually from October 6–7, featured speakers, panelists, and moderators from across the progressive policy and academic landscape. They were tasked by the co-hosts of the event, including the Washington Center for Equitable Growth, with examining “once-in-a-generation policy changes and transformative investments” to address U.S. economic inequality perpetuated most severely by the consequences of racial and gender stratification stretching back centuries and hobbling the U.S. economic recovery to this day.

The co-hosts put together an engaging schedule specifically to “underscore how fragile and unequal our economy has been, especially for communities of color, women, and other vulnerable people” in the wake of the coronavirus recession and the continuing pandemic in order to raise up policy solutions to “ensure an equitable, full recovery and a stronger, more sustainable economy for the future.” One central theme within this broad conference template that rose to the fore of the discussions were three words penned last summer by Janelle Jones—now the chief economist at the U.S. Department of Labor and previously a leader at Groundwork Collective, the leading co-sponsor of the EconCon 2021 event.

Those three words—“Black Women Best”—underpin Jones’ observation that when those who are last to recover from economic recessions—Black women—prosper equitably in the U.S. economy, then everyone will prosper in the process. These three words were repeated in multiple sessions and fireside chats over the course of the 2-day event.

One of the sessions, titled “Centering Black Women in our Economic Recovery to Ensure a Full Recovery for All,” zeroed in directly on this issue. The panel featured Taifa Smith Butler, Rebecca Dixon, and Michelle Holder—three Black women who are executive leaders of nonprofit organizations in the nation’s capital. Holder, the president and CEO of Equitable Growth, opened this session by fielding a question from moderator Anna Gifty Opoku-Agyeman, one of the co-founders of Sadie Collective: How are women of color experiencing the U.S. economy amid the pandemic?

Holder set the scene by noting that Black women on average earn the lowest wages and salaries yet can boast the highest rate of labor force participation in the country. She said this “conundrum” is the result of past racial and gender stratification, amplified over the centuries and exacerbated by the coronavirus recession and ongoing pandemic. The legacy of Black women’s enslavement, conditioned by their “exclusion from the cult of domesticity” embraced by White society for only White women in the post-Civil War era, especially in the Jim Crow South, still influences Black women’s employment and wealth-creating opportunities in the present.

“Black women kept working,” said Holder of the post-slavery era extending into today’s modern economy. “Black men were earning so little that Black women had to work to make ends meet,” she added. Similar conditions prevail today, where Black women, more often than White women, are either co-breadwinners or the primary breadwinners in their families.

Holder then juxtaposed Black women’s “strong attachment to the U.S. labor force” even when they earn the least in the U.S. economy, noting that they disproportionately hold the low-wage jobs that are now the most disrupted by the coronavirus pandemic. Given that a third of women who work in the United States are mothers, and that about 66 percent of Black children are raised in single-parent homes primarily by single moms—compared to about 25 percent of White children—disruptions to, or lack of, child care options raise particular challenges for Black working moms.

Holder’s co-panelist Rebecca Dixon at the National Employment Law Project added that Black women are held back in the U.S. economy because 90 percent of occupations are racially segregated due to the historical legacy of not just slavery but also sharecropping, property market redlining, and the agricultural and domestic work they did that was excluded—and still is excluded among some care professions—from Social Security. This occupational segregation, Dixon said, “is a perfect Venn diagram of discrimination past and present.”

Holder put a number on the cost of this gender and racial wage divide, which she terms the “double gap”: $50 billion a year in involuntarily forfeited earnings by Black women. This $50 billion (measured in 2017 dollars) probably accrued to a mix of corporate shareholders and executives, and to some extent to White workers, she said, though the breakdown isn’t clear. But the result is that Black women earn 60 cents on the dollar of what White men earn in the U.S. economy today.

Dixon then pointed out that the joint federal-state Unemployment Insurance program adds economic insult to discriminatory injury because Southern state UI programs were “in tatters” even before the pandemic; the majority of Black Americans currently live in the U.S. South.

Taifa Smith Butler of Demos then fielded a question from the Sadie Collective’s Opoku-Agyeman on policy solutions for this “double gap.” Smith Butler said that U.S. policymakers need to “reimagine economic democracy to give Black women the agency to make their own decisions without systems of oppression in place.” Black women, she said, need to get off the “hamster wheel creating wealth for other people.”

Holder then suggested a way to measure the economic well-being of Black women in the United States, harkening back to Janelle Jones’ “Black Women Best.” Holder said U.S. policymakers need to pay close attention to race and gender data on Black female employment and implement measures that move the country in the direction of more wage transparency in workplaces. Smith Butler added that disaggregation of employment and earnings data along race and gender lines must also be broken out by region.

An important session on the second day of the conference added critical details to the need for economic data disaggregation by race, ethnicity, and gender in all its forms. The session, titled “Defining Success: Reimagining Data Measurement,” was moderated by Equitable Growth Director of Economic Measurement Policy Austin Clemens, with panelists Algernon Austin of the Center for Economic and Policy Research and Tracey Ross of PolicyLink. Austin set the table with three figures showing the inequitable economic recovery from the Great Recession of 2007­–2009. (See Figure 1.)

Figure 1

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The three slides show various dimensions of the slow recovery from the Great Recession to put the coronavirus recession of 2020 and its aftermath in focus amid today’s uneven economic recovery and continuing pandemic. Clemens and the two panelists then dove into a discussion of the indicators of racial stratification that are essential to discern in U.S. economic data, so that policy solutions can be identified to create strong, broad-based economic growth across the country. They all noted that there can be no understanding of persistent and rising economic inequality without acknowledging racial, ethnic, and gender inequality.

PolicyLink’s Ross said that policymakers, economists, and the press alike “need to reframe what it means to recover” from the coronavirus recession, so that “it’s not just back normal, which was not good enough for too many people.” Recovery, she said, needs to be about “fixing the broken economy, focusing on Black unemployment as one metric, on rural healthcare as another, and other indicators that show that the U.S. economy and society are stronger than they were before going into the crisis.”

The Center for Economic and Policy Research’s Austin noted that policymakers can’t improve what isn’t measured, and what is measured and reported on by the press doesn’t “reflect the lived experiences of average Americans.” He says that federal economic statistical agencies need to move away from average measures and adopt disaggregated ones that will capture more telling trends in Black workers’ employment rates. “Recovery is not the goal post, as that was a society with deep inequalities,” he said. “The Black unemployment rate goes from high, to really high, to high. It never goes to low.”

Expert Focus

Expert Focus: Leading Black scholars on U.S. economic inequality and growth

By Christian Edlagan, Maria Monroe,

June 22, 2020

Coronavirus Recession

Scholars and advocates say racial disparities and worker power are key to the coronavirus recession and to long-term U.S. economic recovery

By Shanteal Lake,

October 30, 2020

Expert Focus

Expert Focus: Intersections between racial equity and disaggregation of data

By Aixa Alemán-Díaz, Christian Edlagan, Maria Monroe,

June 14, 2021

Clemens, Ross, and Austin discussed other key measures to capture the extent of racial stratification in the U.S. economy and then measure the results of new policy solutions in the subsequent data. They suggested a variety of new metrics, among them housing affordability disaggregated by race and income and by home rental and purchase prices, as well as a breakout of employment by wage category to see when low-wage jobs are recovering, compared to the already-recovering high-income and middle-income jobs. Then, there is the simple measure of paid sick leave. “Everyone is better off if everyone can get paid sick leave,” said Austin.

The panel ended with a discussion on regional economic inequality and its intersection with the baleful consequences of climate change on communities of color in particular. Clemens noted that the federal statistical agencies don’t always have the statistical power to monitor poverty and other economic outcomes in small geographic areas. And Austin pointed to racist and historically anti-Black policies in Mississippi that cascade across high levels of poverty and inequality, and are then exacerbated by poor infrastructure investment in mitigating climate change, which is causing more heat- and asthma-related health problems and more flooding that disproportionately harms Black Mississippians.

All in all, the 2 days of discussion and generation of policy ideas underscored the need for policymakers and economists alike to embrace new measures of economic inequality to understand how structural racism manifests in policies and institutions, and how this deep racial stratification in the U.S. economy and society can be reversed to create a stronger and more sustainable economic recovery for everyone.

As Tracy Williams of the Omidyar Network (another co-host of the event) said when opening one of the first sessions of the conference, “a key part of reimagining capitalism is to center Black women inside an equitable economy.” EconCon 2021 went a long way toward making the case that a smart way to define that success is to understand and measure how Black women are experiencing economic prosperity.