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The Rise of Functional Unemployment in America

In a troubling development, the Ludwig Institute for Shared Economic Prosperity (LISEP) has reported that the percentage of American workers unable to find full-time, living-wage jobs has ticked upward, marking the fourth consecutive month that functional unemployment remains alarmingly high. According to LISEP's May 2025 True Rate of Unemployment (TRU) report, approximately 24.3% of the labor force is now classified as functionally unemployed, highlighting a stark contrast to the government’s official unemployment rate of 4.2%.

Understanding Functional Unemployment

Functional unemployment encompasses not only those actively seeking jobs but also includes individuals stuck in poverty-wage roles. This broader measure reveals a more accurate picture of the economic challenges facing workers across the United States. As Gene Ludwig, chair of LISEP, states: “Over the past four months, we've seen stagnation in job opportunities paying above poverty wages, particularly for low- and middle-income workers.” This growing uncertainty is pushing more Americans into precarious financial situations as wages fail to keep pace with the rising cost of living.

Demographic Insights

The report offers a mixed outlook across various demographics. While men, Black, and Hispanic workers have shown some improvement in their employment prospects relative to the previous month, women and White workers have faced increasing challenges. For instance, the true rate of unemployment for Black workers fell to 26%, while the rate for Hispanic workers dropped to 27.3%. Conversely, the unemployment rate for White workers surged to 23.6%, indicating a worrying trend where certain groups are experiencing a worsening economic outlook.

When examining gender disparities, the report highlights an increase in functional unemployment for women, which rose by 1.3 percentage points to nearly 30%. This marks a significant gap compared to men, whose rate decreased to about 19.3%. The three-month average gender gap stands at 10 percentage points, underscoring persistent inequalities in the workforce.

Economic Implications

The implications of rising functional unemployment are profound. The stagnation of wages coupled with a shrinking availability of jobs that provide a living wage intensifies the strain on working families. This situation calls for urgent action, as the job market’s health directly impacts overall economic stability and growth. Ludwig emphasized the importance of identifying trends that shape the economy's direction, remarking that current shifts indicate increasingly challenging conditions for low- and middle-income workers.

Moving Forward

The LISEP’s mission is to enhance understanding of economic challenges facing various segments of the population through innovative research. Since its inception in 2019, LISEP has focused on developing transparent metrics that shine a light on economic disparities, especially for those in lower-income brackets. The findings serve as crucial data for policymakers aiming to address the economic needs of all Americans.

As Gene Ludwig continues to advocate for better economic policies, he highlights significant upcoming work, including his forthcoming book, "The Mismeasurement of America", which promises to delve deeper into the economic struggles faced by many. Released in September 2025, it aims to shed light on the pressing issues of the American workforce.

This ongoing analysis of functional unemployment is vital. By better understanding these dynamics, we can advocate for more effective economic policies and solutions that prioritize the welfare of America’s working families. As the landscape evolves, ensuring that job opportunities flourish—paired with adequate wages—becomes imperative for the nation’s sustainable future.

For the latest findings, the full TRU report is available on the LISEP website, providing a detailed exploration of the current labor market’s state and its myriad challenges.