Why are 24% of Americans still “Functionally Unemployed” in a growing economy?

Amid headlines touting low unemployment and strong hiring numbers, a deeper, more troubling narrative is taking root across the American workforce. According to a report by the Ludwig Institute for Shared Economic Prosperity (LISEP), 24.3% of working-age Americans are "functionally unemployed"—a term that recasts the traditional definition of joblessness to reflect a far grimmer reality (LISEP, 2024).Unlike the official unemployment rate reported by the Bureau of Labor Statistics (BLS)—which stood at 4.2% as of May 2025—LISEP’s metric includes individuals who are technically employed but still unable to secure full-time, living-wage work. That’s more than 66 million Americans trapped in jobs that do not cover even the most basic cost of living.

Redefining unemployment: What the numbers miss

The federal government considers anyone who worked at least one hour in the past two weeks to be employed (BLS, May 2025 Report).

But this narrow framework fails to capture underemployment and wage insufficiency.LISEP’s True Rate of Unemployment (TRU) seeks to fill that blind spot by counting individuals as fully employed only if they work full-time (at least 35 hours per week) and earn at least $20,000 annually, adjusted for inflation, or are voluntarily in part-time roles and content with their hours.More than just a statistical tweak, this reframing exposes the widening chasm between having a job and making a living.

A crisis in plain sight: The toll of functional unemployment

The 24.3% “functionally unemployed” rate represents workers in three key categories:

Full-time workers earning below $25,000 per year before taxes, below the federal poverty threshold for many households according to LISEP, 2024.

Not just a number: Disparities across race and gender

The crisis does not strike equally. Women experience a functional unemployment rate of 29.9%, compared to 19.3% for men, according to LISEP’s latest analysis. The racial breakdown is equally stark: Black and Hispanic Americans consistently face higher rates of functional unemployment than their white counterparts.These disparities point to deep-seated structural inequalities, from occupational segregation and pay gaps to reduced access to education, transportation, and caregiving support. The traditional employment metrics gloss over this hidden labor divide. TRU, in contrast, brings these injustices to the surface.

A shrinking job market or skills mismatch?

Much of the national discourse has fixated on the so-called skills gap—the idea that workers lack the training needed to compete in a modern economy.

But that explanation oversimplifies the problem. Many Americans are skilled but remain locked out of sectors where automation, outsourcing, and wage compression have reduced the availability of viable work.

The bigger question: What counts as work in America today?

At its core, the issue of functional unemployment is about more than data; it's about how we value labour and human dignity in a 21st-century economy. LISEP’s findings force policymakers to confront the uncomfortable truth: Tens of millions of Americans are technically employed, yet economically invisible.

It’s not just a matter of training workers better. It’s about rebuilding pathways to meaningful, sustainable employment, jobs that pay living wages, provide benefits, and allow for upward mobility.