Owing largely to rising prices and stagnant wage growth during Q1 2024, American workers saw the biggest drop in median earnings in three years — and although the percentage of living-wage jobs in the workforce rebounded slightly in March, "functional unemployment" is also trending upward, according to a report by Ludwig Institute for Shared Economic Prosperity (LISEP). 

LISEP issued its monthly True Rate of Unemployment (TRU) for March in conjunction with the Q1 2024 True Weekly Earnings (TWE) report. TRU is a measure of the "functionally unemployed" — the jobless, plus those seeking but unable to secure full-time employment paying above the poverty line, while TWE is a measure of median weekly earnings (after adjusting for inflation) for all members of the workforce. This includes part-time workers and the jobless who are seeking work. By comparison, the BLS headline numbers only include those who are employed at full-time jobs.

The overall TWE dropped $23 a week in Q1, from $974 to $951 — a 2.4% decrease, the largest quarterly drop since the Great Recession in Q1 2009. This drop effectively erased all of the post-COVID wage gains, with TWE now at its lowest level since Q1 2021 ($945/week). However, March's functional unemployment rate, as measured by TRU, improved by 0.7 percentage points, falling from 24.9% to 24.2%. While a positive trend, this is less than half of what was lost when functional unemployment jumped 1.6 percentage points in February. The average rate of the last quarter of 24.1% was a full 0.7% above Q4 2023.

"Any time we see wages trending down it is a troubling sign, and if we take some noise out of the monthly data for TRU, this tells a similar picture," said LISEP Chairman Gene Ludwig. "We know the labor market remains a challenge for middle- and low-income workers in terms of wages and the availability of living-wage jobs. We can only hope the more recent trends in living-wage employment serve as a better indicator than the quarterly wage data."

All racial and ethnic demographics saw decreases in median weekly earnings, with Black workers seeing the single largest drop — 5.6%, from $829 to $780 a week. This is the largest quarterly decrease in TWE since 1984, according to LISEP. Hispanic workers saw a drop from $774 to $761 a week, while the TWE for White workers fell from $1,084 to $1,072. This is a decline of 1.6% for both categories.

From a jobs perspective, the percentage of living-wage jobs for March rebounded from a decline the previous month, with LISEP's TRU dropping from 24.9% to 24.2%. The functional unemployment rate for Black workers rose by 0.3 percentage points, from 27.7% to 28.0%, while the rate for Hispanic workers improved by a percentage point, dropping from 29.3% to 28.3%. The TRU for White workers remained unchanged at 22.7%. The TRU for women fell 1.2 percentage points, to 28.8%, while the TRU for men dropped from 20.2% to 20.1%.

"One thing is for certain — the economic situation for most middle- and lower-income families remains dire," Ludwig said. Even if wages start to rise again, this quarter's losses will force many families to make difficult choices about affording basic necessities. Policymakers must focus on this simple reality and prioritize the creation of sustainable, good-paying jobs."