Underneath all the economic reporting of 2021, there was a hidden story: Aided by the American Recovery Act and other stimulus measures, low-wage workers launched a small-scale revolution. Employees and contractors used the additional resources of the past year to successfully demand better pay and working conditions. This occurred alongside giant job gains—over 6 million new jobs this year—creating a recovery about eight times faster than the one that followed the Great Recession of 2008-9. The way in which this is happening is one of the more important and hopeful stories about the labor market today.
Typically, labor conditions are quite bad during the initial recovery from a recession. This was especially true following the Great Recession, when stories of people being unemployed for more than 99 weeks or having to sign noncompete agreements to work at sandwich shops were common well into the middle of the 2010s. It wasn’t until 2018, when unemployment got below 4 percent, that employers had to start seeking out workers and offering better terms. For most of the previous decades, recoveries were slow and featured particularly terrible conditions for workers at the bottom of the income scale.
That isn’t happening now. Unemployment is lower than people had predicted both at the beginning and in the middle of 2021, and employers are having to improve conditions to attract workers. And not just by paying more; reporting shows that workers are able to demand more on-the-job training, more control over and advance knowledge of their working hours, and many other benefits often denied to working people. This is a direct pushback to the economic model of the past several decades. As the labor economist David Autor described it in The New York Times: “For the past 40 years, our economy has generated vast numbers of low-paid, economically insecure jobs with few prospects for career advancement.” Right now, this economic model is starting to change.
To the extent that the media is following this, it’s being covered almost as a lifestyle issue. The phrase “Great Resignation” has dominated many of these stories. They tend to use the rate at which workers are quitting their jobs as a sign that those workers are exiting the labor market. But those numbers come from surveys of employers, and they miss that those workers are going to new jobs. It’s more like a “Great Switching,” in which workers are leaving jobs for better opportunities. For decades economists worried about the lack of employee mobility and the long-term impact that this had on wages and growth. And yet, during this recovery, people are changing jobs like almost never before.
Dry economic statistics don’t describe what is happening on the ground, which is a wave of worker activism. There were over 980 strikes and labor protests in 2021, with 13 involving more than 1,000 workers. We’ve seen activism across a wide variety of gig workers and others in the “fissured economy”: those who work in the legal gray zones that have been created and exploited by employers. In the last few months, overall increases in wages have struggled to keep pace with inflation, but that isn’t the case for most low-income earners. The bottom 70 percent of workers have seen growth in real wages over the past two years. Younger workers saw a 9.7 percent increase in real wages, and the bottom 25 percent of earners saw a 5.1 percent rise.
This is happening because of policy. Checks, unemployment insurance, and a swift recovery created through aggressive fiscal stimulus have ensured that workers could claim a larger part of the economy as it came back online. This is less about a labor shortage and more about bargaining over who benefits from the recovery.
Bosses hate this, but it might also be generating a reaction among higher-end consumers, who have been enjoying a kind of labor arbitrage, with cheaper services built on the brutal conditions of workers. Because of this opposition, it is possible this moment could pass without cementing workers’ gains further into place. Labor law needs to be overhauled through legislation like the PRO Act, as do the legal practices that employers use to set the terms for their workers through reforms like banning noncompete clauses in labor contracts. But to do that, we first need to realize that things can be different. This recovery shows that they already are, even during this difficult time.