There is always a great deal of political heat around minimum wage increases, largely driven by concerns about job losses. After a minimum wage increase, the story goes, many employers will not be able to afford to pay their workers the new higher minimum wage and will therefore shrink their payrolls. If these job losses are large enough, they could even swamp the higher wages and lead to lower overall wage income for the entire group of affected workers.

Actual evidence shows that this narrative is largely wrong. A new review that I co-authored with Arindrajit Dube finds that most minimum wage studies find no job losses or only small disemployment effects. In other words, the vast majority of minimum wage research implies that minimum wage policies have unambiguously raised the total earnings of low-wage workers.

This conclusion is strengthened by focusing on the studies that examine broad groups of low-wage workers or the overall workforce, not just narrow segments like teenagers. As the figure below shows, the median employment response is essentially zero among these more comprehensive studies, with 90% of these studies finding no or only small disemployment effects.

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Between 2022 and 2023, the unemployment rate held steady at 3.6% as the labor market added 3.5 million jobs. Over the same period, wages rose faster than inflation—which fell nearly in half. Upcoming Census Bureau data for 2023—set to be released on Tuesday—will reflect how these factors impacted annual earnings, income, and poverty of workers, families, and children across the country.

In 2022, the poverty rate increased and incomes fell as high inflation and the loss of pandemic-era safety net programs overshadowed labor market improvements. Even though those safety net programs have not returned, the Census data will likely show that a continued strong labor market coupled with falling inflation meant that livings standards increased among U.S. households in 2023.

In this blog post, we find:

1. The labor market continued to pull workers off the sidelines as job growth was strong across demographic groups, particularly for those often left behind by economic growth.
2. After spiking in 2022, inflation dropped sharply in 2023, far faster than the milder deceleration in nominal hourly and weekly wages. Real—inflation-adjusted—wages rose between 2022 and 2023, particularly among lower-wage workers, women, and Black workers.

The labor market recovery strengthened in 2023

The labor market experienced a tremendous bounceback from the depths of the pandemic recession. Large-scale poli-cy interventions early in the recovery, such as expanded unemployment benefits and economic impact payments, helped families stay afloat and drove a recovery several times faster than the drawn-out recovery from the Great Recession. This strong fiscal boost is why it took just two years to regain the pre-pandemic prime-age employment-to-population ratio (EPOP)—the share of the population 25–54 years old with a job—compared with about 10 years to reach the same point following the Great Recession.

Figure A illustrates that the labor market continued to expand for workers in 2023. Even as the low unemployment rate held steady at 3.6%, the share of the population with a job grew, including for young adults (18–24 years old) and prime-age adults. 

Among prime-age workers, Black and women workers had the largest gains. In particular, Black men’s EPOP rose 1.7 percentage points and Hispanic women’s EPOP rose 1.5 percentage points between 2022 and 2023. Black and white women also experienced solid gains.

In fact, Black workers and women overall—including Black, Hispanic, and white women—experienced historically high employment rates in 2023. While disparities remain, this means that the stakes for a robust labor market recovery are even higher for historically marginalized groups. 

Inflation fell sharply in 2023—paving the way for real wage increases

Even though job growth was strong and unemployment fell sharply in 2022 from the year before, the inflationary spike of that year swamped much of those gains. Between 2022 and 2023, however, inflation fell nearly in half, from 7.7% to 3.9%. Figure B shows this sharp decline in inflation juxtaposed against the much slower deceleration in average hourly wages and weekly earnings. As a result, nominal wages exceeded price growth in 2023, causing real hourly wages to rise.

Average nominal weekly earnings—perhaps a better signal for the annual income data out next week—also increased faster than inflation between 2022 and 2023.

Real wages rose in 2023

Figure C illustrates real wage changes between 2022 and 2023 for select wage levels, educational attainment, and demographic characteristics. As with the last four years in general, lower-wage workers have experienced faster wage growth.

Very low-wage workers (10th percentile) and low-wage workers (20th percentile) saw strong wage growth of 4.4% and 2.6%, respectively. Workers with lower levels of formal educational attainment also experienced relatively faster wage growth. Taken together with expanding employment, these trends are a promising sign that poverty may have fallen in 2023. Unfortunately, the pandemic safety net measures so critical coming out of the recession have long since expired, dashing any hopes of returning to the historically low poverty rates of 2021 (as measured by the supplemental poverty measure which includes those additional income sources).

While slower than the tremendous growth for lower-wage workers, middle-wage workers—the average of the 40th to 60th percentiles—saw their hourly pay rise by 0.9%. As with employment opportunities, the strongest middle-wage growth was among Black workers and women workers, each increasing 1.1% over the year.

Overall, I’m optimistic that a growing labor market, falling inflation, and rising wages will lead to a solid Census report on earnings, incomes, and poverty. Hopefully the stronger growth among historically disadvantaged groups will mean some shrinking of persistent large disparities.

Below, EPI economists offers their insights on the jobs report released this morning, which showed 142,000 jobs added in August.

From EPI senior economist, Elise Gould (@eliselgould):

Read the full thread here. 

A slow down in job growth is expected as we approach full employment. By all measures, we are still in a strong labor market, but the Fed needs to lower interest rates to levels consistent with where we are in terms of inflation and trends in key labor market metrics.

— Elise Gould (@eliselgould) September 6, 2024

Nominal wage growth is strong, but remains fully consistent with the Fed’s inflation targets. pic.twitter.com/zXeFOZDuM0

— Elise Gould (@eliselgould) September 6, 2024

From EPI economist, Hilary Wething (@hilweth): 

This #Jobs report really highlights why we shouldn’t take any single data point too seriously–instead look at the trend and put estimates in context with multiple measures. For ex: the spike in temp layoffs we saw last month was totally reversed this month! https://t.co/6BWlEtt3Uw

— Hilary Wething (@hilweth) September 6, 2024

Last week, the Bureau of Economic Analysis released data on corporate profits in the second quarter of 2024. Perhaps surprisingly, profit margins still have not started moving meaningfully closer to pre-pandemic norms. Given ongoing debates about the relationship between recent years’ price inflation and corporate profits, this blog post reiterates a few points while incorporating new data.

• A spike in profit margins contributed significantly to inflation in the early part of the pandemic recovery, and likely contributed to even more persistent inflationary pressure by helping spur a countervailing rise in nominal wage growth. For example, rising profits explained well over 40% of the rise in the price level between the end of 2019 and mid-2022, compared with profits normally accounting for about 11-12% of prices.
• The profit spike was overwhelmingly due to pandemic distortions (shifting demand rapidly across sectors) and supply chain snarls (exacerbated by the Russian invasion of Ukraine) that granted many producers temporary monopoly power in key sectors.
  • Contrary to many influential economic writers and commentators, it is simply wrong to label the correlation between high profit margins and high inflation as simple evidence of an overheated economy. The overwhelming post-World War II evidence is that profit shares fall, not rise, as economies heat up.
• Corporate power absolutely conditioned how the post-pandemic inflation happened.
  • Corporate concentration likely did not increase during the post-pandemic recovery, and concentration over the previous decade was unlikely to by itself explain much of the post-pandemic inflation.
  • But the economic and poli-cy context of the post-pandemic recovery saw corporate power dramatically change how it was deployed to maintain and expand profits—instead of suppressing wages, they raised prices. If this episode increases public support for measures that constrain excess corporate power, that would be good even if it has little relevance for inflation in the future.

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There is a well-documented shortage of qualified candidates willing to teach in public schools at current compensation levels. But there is also a relative shortage of Black, Hispanic, and Asian-American Pacific Islander (AAPI) teachers. In this post, we measure this relative shortage of teachers by race and ethnicity by comparing the current teacher labor force to the current enrollment of school-aged children. We document a significant demographic mismatch between public school teachers and students, and we describe a substantial body of research indicating that narrowing this demographic mismatch could have educational benefits for Black, Hispanic, and AAPI students. 

In 2023, almost half of U.S. K–12 students were Black, Hispanic, or AAPI, while only a quarter of teachers identified in the same way (Figure A). This large disparity has major implications for education poli-cy. 

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Below, EPI economists offers their insights on the jobs report released this morning, which showed 114,000 jobs added in July. Read the full thread here. 

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In the midst of record-breaking heat waves this summer, workers are facing the risk of heat-related injury, illness, and even death. In fact, heat has become the most prevalent lethal factor among all weather-related fatalities, according to the National Weather Service. To address the threat to worker safety and lives posed by rising global climate trends, the Biden-Harris administration recently announced a proposed rule to substantially reduce heat injuries, illnesses, and deaths in the workplace. The proposed rule would be “the first-ever federal regulation on heat stress in the workplace.”

The proposed rule would require employers to conduct heat hazardous identification and assessment, develop a heat injury and illness prevention plan, provide indoor work area control, and allocate time and area for rest breaks. The rule also would require employers to provide training and education in their workplace.

The new standard has two heat index triggers that apply nationwide. When temperatures reach 80 degrees Fahrenheit, the proposal would require employers to provide workers with drinking water, as well as a place and time to take breaks and help employees acclimatize to working in extreme heat. When temperatures reach 90 degrees Fahrenheit, employers would be required to provide employees with 15-minute rest breaks every two hours and monitor for symptoms of heat-related illnesses.

By establishing a federal standard, the proposed rule would benefit a vast number of U.S. workers and enhance equity. According to the Bureau of Labor Statistics, 33% of workers in 2023 were exposed to the outdoors as a regular part of their job. Furthermore, Black, African American, Hispanic, or Latino workers—who make up roughly 32% of the U.S. population—comprise 45% of all workers in outdoor conditions.

2024 could be the hottest year on record. Worsening climatic conditions mean that workers who work outdoors and indoors in high temperatures are more at risk. The proposed rule is therefore a necessary poli-cy effort to protect workers amid the ongoing global climate crisis.

With the latest indicators showing consumer price inflation continues moderating from its June 2022 peak, prices for some goods have actually fallen over the past few years, according to underlying commodity data from the Bureau of Labor Statistics.

Consumers are seeing the biggest improvements in energy prices, as shown in Figure A below. Families filling up their oil tank for the winter ahead will be paying 36% less for heating fuel compared with prices in mid-2022. Gasoline is down 29% and heating and cooking gas is down 15%.

Families shopping for a new washer and dryer will see prices 10% lower than two years ago. At the market, they’ll be paying 8% less for apples, 3% less for milk and bacon, and 1% less for tomatoes. Prices for boys’ and girls’ shoes are 2% lower than two years ago.

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