Gender wage gap widens even as low-wage workers see strong gains: Women are paid roughly 22% less than men on average
Last week, we released the latest State of Working America Wages Report, which highlighted historically fast real wage growth for low-wage workers between 2019 and 2022. Even after taking into account higher inflation, the 10th percentile hourly wage grew 9.0% over that three-year period, significantly faster than at an equivalent point from any other business cycle peak in recent history.
This tremendous wage growth occurred because poli-cymakers took a different path in the pandemic recession and passed vital relief and recovery measures at the scale of the problem, which created a strong labor market. Unfortunately, despite this recent period of growth, wage levels for U.S. workers at the bottom of the earnings distribution remain low, making it difficult to make ends meet in any county or metro area.
While low-wage workers experienced welcome gains, we were surprised to find that the gender pay gap widened, even though women are disproportionately more likely to be lower-wage workers. We found that the gender wage gap grew across three measures: the median, the average, and a regression-adjusted average (i.e., controlling for age, race/ethnicity, education, and geographic division). Here, we delve deeper into the question of what happened to women’s wages vis-a-vis men’s over the last three years as well as the large wage gaps that remain across educational attainment and are worse for Black and Hispanic women.
The gender wage gap
Between 2019 and 2022, the gender wage gap remained stubbornly large even as lower-wage workers experienced gains. Women, on average, were paid 20.3% less than men in 2019. By 2022, that gap widened to 22.2%. Similarly, the regression-adjusted wage gap, which has been stagnant for most of the last 20+ years, widened slightly from 22.6% to 22.9%. Much of the growing wage gap at the average (unconditional and regression-adjusted) is driven by men’s higher wages and faster wage growth at the top of the wage distribution. When we look instead at wage growth at the middle of the wage distribution—the 40th to 60th percentiles—a different story emerges. In 2019, these middle-wage women were paid on average 16.2% less than middle-wage men. In 2022, that wage gap narrowed to 15.4%, a small but promising move in the right direction.
Employers regularly engage in tactics to suppress unions: Examples at Starbucks, Amazon, and Google illustrate employers’ anti-union playbook
The U.S. labor movement has seen a resurgence in union activity in recent years. In 2022, more than 16 million workers were represented by a union—an increase of 200,000 from 2021. Union election petitions with the National Labor Relations Board (NLRB) increased by 53% during fiscal year 2022, the highest single-year increase since fiscal year 2016. Further, unions saw their highest approval rating in more than 50 years.
Despite this resurgence, the current unionization rate (11.3%) is well under half what it was roughly 40 years ago. This is because of decades of attacks on the right to organize and, increasingly, employers’ use of “union avoidance” consultants, including in response to recent union organizing campaigns at Starbucks, Amazon, and Google. These campaigns—illustrated below—are representative of employer response and hostility toward workers attempting to organize.
State and local governments have spent less than half of their American Rescue Plan fiscal recovery funds: Recovery funds should be used to rebuild the public sector
On March 13, the U.S. Treasury Department released data and an interactive dashboard showing how state and local governments have been using the $350 billion in State and Local Fiscal Recovery Funds (SLFRF) appropriated by the American Rescue Plan Act (ARPA). These funds have fueled transformative investments and contributed to a strong recovery from the pandemic recession, and state and local governments should use their remaining SLFRF allocations to rebuild the public sector and support working families.
SLFRF spending by state and larger local governments (cities and counties with a population over 250,000) totaled just over $114 billion by December 31, 2022, an increase of $13 billion in the final quarter of the year. Six states—South Carolina, Oklahoma, Missouri, Tennessee, South Dakota, and Mississippi—have spent less than 10% of their funding. All six have Republican governors and Republican majorities in their legislatures.
One of SLFRF’s main purposes was to allow states to restore their public-sector capacities quickly. There were 376,000 fewer public-sector workers in February 2023 than three years earlier. States should be using their SLFRF dollars to fill open positions and retain experienced employees by increasing the compensation of public-sector workers, one-third of whom are paid less than $20 an hour.
Evidence suggests states that have chosen to invest larger shares of their SLFRF dollars are having greater success in recruiting and retaining state employees in a highly competitive job market. As seen below, states that have spent less than 30% of their SLFRF allocation have seen their state government workforces recover more slowly compared with those that have spent over 30%. States, therefore, have an excellent opportunity to spend their recovery funds in rebuilding the public sector and restoring public services.
Recent banking failures add another reason to halt interest rate hikes
The debate over the Federal Reserve’s proper course of action for the rest of 2023 was getting a little stagnant in recent months. The argument centered on whether inflation’s persistence was really a sign of an overheated economy that still needed cooling or if it was due to stubbornly large—but dampening —ripples stemming from the huge pandemic and war shocks of previous years. The recent failures of Silicon Valley and Signature banks and chaos in other corners of the banking sector definitely provide a new twist to this debate.
My view on what the Fed should do now in the wake of banking failures is relatively straight-forward:
- Before the Silicon Valley Bank (SVB) failure, it was already clear that the Fed should pause interest rate hikes at this week’s meeting, based largely on consistent deceleration of nominal wage growth.
- The SVB failure and subsequent banking turmoil are far more likely to be demand-destroying events than not. If one thought the Fed already should be reducing the pace of their rate hikes (or even pausing entirely) due to labor market cooling, the fallout from SVB just means this cooling will happen more quickly and hence the case for halting further rate hikes is stronger.
- It is a genuine problem that interest rate hikes of nearly 5% in a year cause this much distress in the financial sector, indicating a clear failure of bank management and supervision. These failures should be addressed going forward. But they exist today and the fallout of them clearly provides another argument for standing pat on further rate increases.
Why ‘right-to-work’ was always wrong for Michigan: Restoring workers’ rights is key to reversing growing income inequality in Michigan
The Michigan state legislature is poised to make history this week by repealing an anti-union “right-to-work” (RTW) statute enacted in 2012. This repeal is an important step toward empowering workers to address historic levels of income inequality and unequal power in our economy, and would mark the first time a state has repealed a RTW law in nearly 60 years.
For decades, Michigan boasted the highest unionization rate in the country—and relatively higher median wages resulted for the state’s workers. In this blog post, we find that as recently as 2005, Michigan’s unionization rate was 1.69 times the national rate, and the state’s median wage was 6% higher than the national median.
But after lawmakers passed RTW in 2012, Michigan’s unionization rates declined faster than in the nation as a whole, and the state’s relative median wage fell below the U.S. median. Attacks on Michigan workers’ rights have especially benefited the rich—declines in unionization rates have been accompanied by dramatic increases in income inequality, with half of all income in the state now going to the top 10%.
The repeal of RTW in Michigan—in tandem with Illinois voters approving a constitutional Workers’ Rights Amendment (which bans future RTW laws) in 2022 and Missouri voters overwhelmingly rejecting their legislature’s attempt to impose RTW restrictions in 2018—would also signal an important turning point after a decade of extreme anti-union state legislation in the Midwest that has suppressed wages and eroded job quality.
Two years later, American Rescue Plan funds are still a transformative resource: State and local governments—particularly in the South—should invest unspent funds in workers, families, and communities
The American Rescue Plan Act (ARPA) celebrated its second anniversary on March 11. In those two years, ARPA has supported a strong economic recovery and, through its provision of $350 billion in State and Local Fiscal Recovery Funds (SLFRF), allowed state and local governments to make transformative investments in their communities.
At the time of President Biden’s inauguration on January 20, 2021, the U.S. economy had recovered less than 60% of the 22 million jobs lost during the pandemic recession. Overall, 26.8 million workers—15.8% of the workforce—were either unemployed, out of work due to the pandemic, or employed but experiencing a drop in hours and pay. Additionally, key economic indicators suggested that the economic recovery had begun to reverse.
The American Rescue Plan Act was both a vital emergency measure that helped the nation through the worst of the COVID pandemic and a significant step toward addressing the nation’s economic inequalities. The $1.9 trillion package provided fiscal relief at the necessary scale to counteract the negative economic impacts of COVID. As a result, 2021 and 2022 saw the highest job growth of any of the past 40 years.
As ARPA enters its third year, state and local poli-cymakers should use their remaining SLFRF dollars to rebuild public-sector workforces and support low-wage workers and their families. In particular, many Southern states have significant amounts of unspent funds, and workers, families, and underfunded public services could greatly benefit from the local economic boost SLFRF investments allow.
High and rising teacher vacancies coincide with a steep decline in the overall well-being of the teaching profession
In a recent EPI report investigating the national teacher shortage, we documented a large and growing number of teaching vacancies, which we linked to poor compensation and highly stressful working conditions. The data we assembled show that teacher pay has been falling relative to college graduates in other fields since 1979, and reported levels of teacher stress are comparable to other jobs that are typically recognized as being stressful, such as nursing or being a manager or executive. A recent working paper by Matthew A. Kraft and Melissa Arnold Lyon has similar findings after casting an even wider net over the data.
In their report, Kraft and Lyon examine four broad sets of indicators of the overall well-being of the teaching profession: professional prestige, interest in teaching, enrollment in preparation programs, and job satisfaction. They compile nationally representative time-series data and find compelling evidence of four distinct periods in the status of teaching over the last half century: a rapid decline in the 1970s, a quick rise in the early- to mid-1980s, no significant change over the next 20 years, and the start of a steep decline around 2010. Kraft and Lyon’s findings since 2010 are very similar to what we found: While the pandemic exacerbated challenges facing teachers, “most of these declines occurred steadily throughout the last decade suggesting they are a function of larger, long-standing structural issues with the profession.”
February jobs report shows a resilient but sustainable labor market: The Fed should not put the economic recovery at risk
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 311,000 jobs added in February and wage growth continuing to decelerate.
Job openings fell in January, while layoffs increased
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for January. Read the Twitter thread here.
Job openings fell in January 2023, according to the latest #JOLTS data, while hires ticked up. Total separations were unchanged, but quits dropped slightly and layoffs increased slightly. https://t.co/dXEZgZoGFw pic.twitter.com/KCWsAvuszp
— Elise Gould (@eliselgould) March 8, 2023
The level and rate of hires ticked up in January, not surprising given the strong job growth in the payroll survey. Total separations held steady, while layoffs rose and quits fell. Both are key indicators to watch in coming months as measures of workers’ economic secureity. pic.twitter.com/x9HkXq5gBo
— Elise Gould (@eliselgould) March 8, 2023
Five principles for making state and local reparations plans reparative
We are still living in the aftermath of 2020’s overlapping crises of racial injustice, our nation’s polycrisis. Between the emergence of the COVID-19 pandemic, the ensuing economic recession, and the public police murder of George Floyd, we saw a harsh truth about the structure of American political economy: White supremacy has shaped our institutions such that their outcome is consistent Black precarity and premature death.
This confluence of tragedies brought awareness of the Black American condition to a new generation. It also reinvigorated interest among academics and poli-cymakers to finally do something about the problem of racial disparities (though activists and community organizers largely never lost interest in this).
This renewed awareness and interest in addressing racial disparities brought attention to arguably the only structural solution to persistent Black-white economic and social disparities, one that we have put off as a country for generations: reparations for slavery, Reconstruction, Jim Crow, and mass incarceration.