In late May 2025, Fast Company reported a sobering statistic: nearly a quarter of U.S. working‑age adults qualify as “functionally unemployed.” The designation of “functionally unemployed” is broader than that of unemployed, a category which only includes those actively looking for work. The subset of “functionally employed” can also include the following:
- Job seekers who can’t find a position, despite persistent efforts to find work.
- Full‑time workers earning so little that their annual income falls below $25,000, which is the 2025 federal poverty threshold for a single adult.
Those defined as functionally unemployed can be at any stage of life and within any industry. However, there are a few employment types which are more likely to be classified as such. These include retail cashiers and sales associates at discount or big‑box stores, fast‑food or quick‑service restaurant workers, childcare providers, and housekeeping or janitorial staff.
While the unemployment rate as it’s often conceptualized may be low, standing at 4.2 percent in April, recent data from the Ludwig Institute for Shared Economic Prosperity (LISEP) estimates the unemployment rate to be closer to 24.3% when including those who are functionally unemployed. “Amid an already uncertain economic outlook, the rise in functional unemployment is a concerning development,” says Gene Ludwig, chair of LISEP. “This uncertainty comes at a price, and unfortunately, low and middle‑income wage earners ultimately pay the bill.”
The Great Recession’s Lingering Shadow
To understand how we arrived here, we need to rewind to the years of the Great Recession. Between December 2007 and February 2010, the U.S. economy lost approximately 8.7 million jobs, equivalent to 6.2 percent of total nonfarm employment at the time.2 While overall payroll figures finally returned to pre‑recession levels by 2014, the truth is more complex than those raw numbers convey.
Jobs Have Not Kept Up with Population Growth
At the start of the Great Recession in December 2007, the employment‑to‑population ratio, or the share of working‑age adults holding jobs, sat at around 62.7 percent. Nearly twenty years later in early 2025, that ratio has slipped to roughly 60 percent, even though official payroll counts have matched or exceeded 2007’s totals. Put simply, although payrolls have recovered in absolute terms, they have not kept pace with population growth – leaving millions of jobs “missing” on a per‑capita basis.
Disappearing Jobs, Displaced Workers
An estimated 30 million individuals lost their jobs during the recession4, and many of those who lost full‑time, career‑track roles during the recession never regained equivalent positions on the other side. Some took early retirement or shifted to part‑time schedules, while others transitioned to gig employment – options that keep them off the official unemployment rolls even while they struggle to keep up financially.
For a deeper understanding of how functional unemployment plays out in specialized sectors, see our piece on biopharma, “The Inside Scoop on Unemployment Trends in Biopharma”, which explores how even skilled professionals are facing prolonged job transitions and market volatility during the post‑2024 industry reshuffling.
Stagnant Wages vs. Rising Costs
Median wages have barely budged from 2007 to 2024, while the costs of housing, childcare, and healthcare have climbed substantially. A 2025 analysis from the UC Berkeley Labor Center noted that, if wages had simply grown by 3 percent annually (the historic norm), the average worker would be earning several thousand more dollars per year today.
All of these factors contribute heavily to the rise in functionally unemployment, while the unemployment rate as it’s often calculated leads to a false sense of economic prosperity. When policymakers rely on the 4 percent figure and may conclude that the labor market is tight, they press the Federal Reserve to keep rates high. Employers, seeing “low” unemployment, often offer stagnant wages, believing they face a genuine labor shortage rather than a mismatch between available jobs and workers’ skills or pay requirements. Until we start including functional unemployment in the unemployment rate, the public narrative of a “strong” job market will continue to overlook the millions of workers who can’t make ends meet.
The Silver Lining: Hands‑On “Certification” and Trades Careers are in High Demand
Despite these significant challenges for workers, there is still room for optimism, as certain in‑demand, hands‑on roles remain desperately short of qualified workers. These jobs often share a few key characteristics: they require specialized training or certification (though not necessarily a four‑year degree), deliver a family‑sustaining wage from day one, and cannot be easily outsourced or automated. Some of these opportunities include:
Skilled Trades (Electricians, HVAC Technicians, Welders)
According to the National Association of Manufacturers, over 80 percent of manufacturing firms reported difficulty finding qualified skilled‑trade workers in 2024. Luckily, many community colleges and technical schools now offer registered apprenticeship programs which combine classroom instruction with paid on‑the‑job training. These certifications are often able to be completed within 12 to 18 months.
Transportation (CDL-Licensed Truck Drivers)
The American Trucking Associations projects a shortage of more than 80,000 drivers in 2025. Some states, including Texas and Tennessee, have launched grant‑funded initiatives to cover training costs for individuals working towards obtaining a commercial driver’s license.
Healthcare Support (Registered Nurses, Licensed Practical Nurses, Home‑Health Aides, Medical Lab Technicians)
The U.S. Bureau of Labor Statistics estimates that registered nursing jobs will grow in number by 6 percent from 2022 to 2032, with over 200,000 new positions projected to be created in that period. Additionally, many healthcare systems reported a holiday‑season hiring surge in late 2024 for roles such as home‑health aides and CNAs, driven by an aging population and increased post‑COVID care demands.
Advanced Manufacturing (CNC Operators, Robotics Technicians, Quality Control Inspectors)
A 2024 survey by Deloitte found that 58 percent of advanced‑manufacturing companies in the Midwest reported “moderate” to “severe” talent shortages, particularly for roles requiring vocational or technical credentials.
Why These Paths Matter
Training is Measured in Months, Not Years: Certificate programs – which are often delivered through community colleges, technical schools, or industry consortia – can usually be completed in 6-18 months, rather than the years one might spend earning a degree from a traditional 4-year college or university.
Immediate Earning Power: Local labor‑market data (e.g. Indeed’s 2025 “U.S. Cost of Living Salary Report”) indicates that wages for entry‑level electricians and healthcare aides typically start around $20–$25 per hour, which is enough to cover basic living expenses for a single worker in most areas of the US.
Resilience Against Outsourcing and Automation: Skilled trades and direct care roles require in‑person, hands‑on expertise, making them inherently more stable, especially as AI becomes more capable of performing many common job functions.
Bridging the Gap: Practical Steps to Reconnect Workers with Opportunity
If nearly a quarter of working‑age adults are effectively shut out of a decent living, how can communities, businesses, and policymakers each contribute to a solution?
Expand Access to Apprenticeships and CTE Programs
Policy: Federal policymakers can increase Pell Grants (federal grants dedicated to undergrad students with high financial need) or dedicated workforce grants for short‑term (Career and Technical Education (CTE) certificates, which would allow more individuals to pursue trade training without incurring significant debt. States could also allocate workforce development funds to expand high school apprenticeship programs, enabling students to graduate with both a diploma and market‑ready credentials.
Business‑Led: Manufacturing firms, construction companies, and healthcare providers can partner with local community colleges to co‑design curricula, offer guaranteed interviews for program graduates, and provide paid internships which transition into full‑time roles.
Reduce Barriers in Licensing and Certification
Policy: States can streamline licensure requirements – particularly for in-demand roles such as welding inspectors or medical lab technicians – by accepting out‑of‑state credentials or fast‑tracking approval for experienced professionals who are willing to relocate.
Community Programs: Nonprofits and industry associations can offer bridge programs paired with resume and interview coaching for older workers or those changing careers, which will help them acquire new technical skills.
Leverage Public–Private Partnerships for Upskilling
Policy: Policymakers can offer tax credits or grant programs to small and mid‑sized employers that invest in on‑the‑job training and career‑ladder programs for frontline workers, incentivizing workers to upskill.
Business‑Led: Large employers, especially in high‑growth sectors like logistics or healthcare, could sponsor “earn‑and‑learn” fellowships, paying participants a living stipend while they complete certification courses.
Align Wage Standards with Living Costs
Policy: Local governments can be encouraged to adopt “living‑wage” ordinances for municipal contracts, ensuring that workers on city or state projects (e.g., road maintenance, food service) are earning enough to cover local living expenses.
Business‑Led: Mid‑sized firms in competitive markets (e.g., regional health systems or manufacturing clusters) can publicly commit to a minimum starting wage (e.g., $25/hour) for all entry‑level positions, improving recruitment and retention in tight labor markets.
Rewriting the Labor Market Narrative
A 4% unemployment rate may look good on paper, but it doesn’t come close to painting a full picture. Touting this low unemployment rate without taking into account functional unemployment masks the struggles of the nearly one‑quarter of working‑age Americans who cannot secure a living‑wage job. Behind that statistic are real people: a retail worker juggling two part‑time shifts just to pay rent; a technician who can’t find stable employment in his former industry and is forced to drive hours for gig pay; a college graduate with $30,000 in student loans, earning minimum wage while working at a coffee shop.
Our best chance to change the narratives lies within the sector explored above: skilled trades, healthcare support, and advanced manufacturing. The training required for these roles can be completed within months, rather than the years many workers spend in college, and often pay a solid wage from day one on the job. Perhaps most importantly, they are far less likely to be outsourced or automated away, increasing job security.
The challenge remains connecting these sidelined workers with the skills and credentials they need. This will require collaboration across policy, business, and community organizations, each of whom will play a crucial role in shifting the tide. Local colleges and technical schools can expand capacity and financial aid for high‑demand certificate programs, and employers can invest in apprenticeships, earn‑and‑learn fellowships, and wage commitments that close the gap between entry‑level pay and local living costs. Finally, policymakers can champion initiatives that reduce licensing hurdles and support targeted workforce grants.
Until we focus on diminishing the functional unemployment rate – and not just the headline jobless rate – the story of a “strong” labor market will remain inaccurate. By forging stronger pathways towards in‑demand careers, we have an opportunity to begin a new chapter, one where hard work aligns with a real chance to earn, thrive, and rebuild.
Whether you’re a policymaker, employer, educator, or community leader, we want to know: what are your ideas? Share the steps you believe can move the needle for this quarter of American workers still left behind.
References
- Bregel, Sarah. “Nearly a Quarter of the U.S. Is ‘Functionally Unemployed.’ Here’s What That Means.” Fast Company, 27 May 2025.
- “Jobs Lost and Not Returned to the U.S. Economy Since the Great Recession.” UC Berkeley Labor Center, May 2022.
- Cerullo, Megan. “Are You ‘Functionally Unemployed’? Here’s What the Unemployment Rate Doesn’t Show.” CBS News, CBS Interactive, 27 May 2025.
- Kalleberg, Arne L, and Till M VON Wachter. “The U.S. Labor Market During and After the Great Recession: Continuities and Transformations.” The Russell Sage Foundation journal of the social sciences : RSF vol. 3,3 (2017): 1-19. doi:10.7758/rsf.2017.3.3.01
