Pandemic-Driven Layoffs Led Low-Paid Workers to Better Pay, Finds Report

Pandemic-induced government support combined with layoffs helped the lowest-waged workers in the US find better-paying and safer jobs, a report from the Economic Policy Institute (EPI) found. The EPI analyzed low, middle, and high wages from pre-pandemic to 2022 and found that low-waged workers saw the fastest growth in real income since 1979, up 9%. Layoffs and a lack of friction in finding new jobs aided the gains, said EPI’s Elise Gould. High-wage workers also saw sizeable gains, with the top 0.1% seeing wage growth of nearly 30%.

The COVID-19 pandemic has had several negative effects on the economy, but a new report by the Economic Policy Institute (EPI) found that it had one positive effect on some Americans. The lowest-paid workers in the US saw their wages grow at the fastest rate in 40 years, interrupting a long period of stagnation. The reasons for this were twofold.

US Low-Paid Workers Pandemic
US Low-Paid Workers Pandemic

Unemployment Benefits, Tax Credits, and Assistance

The first reason for the growth in wages was that government support in the form of unemployment benefits, enhanced tax credits, eviction bans, and rent assistance helped keep millions of lower-income Americans financially afloat. This meant that workers could afford to be more selective about which jobs they took.

Elise Gould, EPI senior economist and one of the report’s authors said that the policy measures made people less desperate, giving them more choice about which jobs they took. During a pandemic, individuals were understandably hesitant to take jobs that put them in danger. Therefore, they had the freedom to find safer and better-paid jobs.

New Job Opportunities

The second reason for the wage growth was that the pandemic forced workers to find alternative jobs. The huge number of layoffs among lower-paid service workers created a sense of urgency to secure alternative employment. This urgency removed barriers such as geographical constraints that previously hampered workers from finding better jobs closer to home, due to limited options.

Workers who were no longer employed were no longer tied down to their employers, creating an opportunity to find better-paying jobs without having to worry about the friction that often held people back from considering new opportunities.

Wage gains

The historic wage growth comes off a low base, with the lowest-paid 10% of workers earning barely enough to subsist on. Meanwhile, the highest-paid 1% of workers have also seen significant increases in pay during the COVID-19 pandemic. However, experts are not optimistic about the longevity of this wage growth, with reductions in unemployment benefits, slowing wage growth, the possibility of a recession, and the Federal Reserve’s latest interest-rate hike all set to put pressure on workers’ wages.

According to the report’s authors, the gains for low-wage workers could dissipate should any recession hit, making workers scarcer, and leaving employers with fewer financial incentives to retain staff.

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