The rising cost of living continues to take a toll on working families, with a growing percentage of American workers unable to find a living-wage job or their current job fails to boost them over the poverty line after adjusting for inflation, according to the monthly True Rate of Unemployment (TRU) report by the Ludwig Institute for Shared Economic Prosperity (LISEP).
The TRU for the month of October topped 23.6%, a 1.3 percentage point increase over the previous month. This is the biggest month-over-month increase since the beginning of the pandemic in April 2020, and an indication that low- and middle-income workers are having a tougher time just to cover basic necessities, according to LISEP Chair Gene Ludwig.
“Until the last quarter, this administration has been doing well raising living standards for many middle- and lower-income Americans. However, both inflation and the Fed’s response to it – a precipitous rise in interest rates – are taking a big bite out of this progress. American families are hurting due to a combination of higher prices and wages failing to keep up,” Ludwig said. “Policymakers from both sides of the aisle would be well served to take heed and implement proactive policies creating good-paying jobs capable of supporting a family, and at a bare minimum, cover basic needs and provide for a reasonable quality of life.”
TRU tracks the “functionally unemployed,” defined by LISEP as the jobless, plus those seeking but unable to secure full-time employment paying above the poverty line after adjusting for inflation. LISEP’s TRU is in stark contrast to the official government unemployment rate issued by the U.S. Bureau of Labor Statistics (BLS), which reported a more modest increase of 0.2 percentage points from September to October, from 3.5% to 3.7%.
LISEP reports that functional unemployment increased for all major demographics, with Black workers experiencing the largest increase of 3.4 percentage points, from 24.8% to 28.2%. Functional unemployment for Hispanic workers increased 2.4 percentage points, from 23.5% to 25.9%, with the TRU for White workers increasing 0.75 percentage points, from 21.8% to 22.5%. The TRU for men jumped 1.9 percentage points (17.2% to 19.1%), while the TRU for women increased 0.4 percentage points, from 28.1% to 28.5%.
Ludwig notes that a rising TRU can spell particularly bad news for low- and middle-income workers when one considers that the Consumer Price Index (CPI) is understating the impact of inflation on middle- and lower-income households. Last week, LISEP released data supporting its True Living Cost (TLC) Index, a measure of the effect of rising prices on the ability of families to pay for minimum adequate needs in seven categories: food, housing, healthcare, transportation, basic technology, childcare, and apparel/personal care. LISEP found that from 2020 to 2021, the price of necessities has increased 5.8% versus the CPI’s 4.7%. And from 2001 to 2021 the TLC rose 50% faster than the CPI, 78.8% versus the 54.4% reported by the CPI.
“If we are to address the kitchen table issues most important to American families, it must begin with addressing how we measure the economy – one size does not fit all,” Ludwig said. “The sooner we understand the dire and very real challenges facing middle- and lower-income households, the sooner we can work together for meaningful, sustainable solutions.”