New York during COVID-19

Money Culture

Struggling Workers’ Financial Woes Mount

The COVID-19 economy is really a tale of two worlds.

The stock market and housing market have largely shrugged off the economic slowdown. But severe financial problems are brewing for millions of workers who have lost their jobs or are earning less in a lackluster economy.

The assistance passed by Congress will certainly help. Still, half of all workers reported in a Transamerica Institute survey late last year that they are experiencing at least one employment disruption, whether a layoff, reduced work hours, shrinking paychecks and commissions, or an early retirement. A crisis also looms for thousands of renters if the Centers for Disease Control allows its eviction moratorium to expire at the end of this month.

Paying taxes is another big worry. When the pandemic struck and unemployment spiked last spring, the IRS postponed the deadline for filing federal taxes by three months, to July 15.

COVID-19 hasn’t gone away – and neither has concern about paying taxes. More than half of taxpayers said they might have to borrow money to pay their 2020 taxes this April, according to a LendEdu survey last month.

Other aspects of Americans’ financial problems were captured in two more surveys about the pandemic’s impact:

The Millennials who are still saddled with student loans have struggled for years to pay their other living expenses. The COVID-19 relief bill gave them a respite by suspending their monthly payments for most of 2020, and the U.S. Department of Education extended that at least through January. But one financial problem has been replaced by others for the young adults who are unemployed or earning less.

About one in five people in their late 20s and 30s reported in a 2020 survey by Georgetown University’s business school that the pandemic forced them to take a variety of stopgap financial measures. These have included dipping into retirement funds, delaying or reducing credit card payments, and getting food and rental assistance from non-profits.

Millennials who have started a family are worse off than single people. For example, 26 percent of young parents have applied for food stamps, Medicaid, or other government assistance, compared with 19 percent of single Millennials.

The financial disruptions facing this generation could have “lasting, long-term impacts,” the report concluded.

The retirement outlook was shaky prior to the pandemic for about half of Americans. The slowdown due to COVID-19 hasn’t made the situation materially worse, because two of the biggest sources of workers’ future retirement wealth – retirement saving accounts and their homes – have increased in value over the past year.

But the pandemic is, once again, falling hardest on the Americans who have the least – lower-income workers who have suffered the brunt of the layoffs or have seen their hours cut. One in five workers of all ages said the pandemic has hurt their confidence in being able to retire, according to the non-profit Transamerica Institute.

“It will take years for many workers to financially recover – and some may never recover,” said Catherine Collinson, chief executive of the Transamerica Institute, a partner of the Center for Retirement Research, which sponsors this blog.

Read our blog posts in our ongoing coverage of COVID-19.

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4 Responses to Struggling Workers’ Financial Woes Mount

  1. Tony says:

    Workers who have lost their jobs will almost certainly be due a tax refund.

  2. Larry Littlefield says:

    I guess why the federal government needs to increase current Social Security benefits, not do anything about the future solvency of the program, cut income taxes for non-poor seniors, bail out retroactively increase public employee pensions (while pretending those increases didn’t happen), increase Social Security benefits for some retired public employees, send each retired couple that hasn’t lost any income checks totaling $5,200 over 12 months, and send a couple of public employees with seniority the same.

    All with borrowed money that poorer, later-born generations will have to pay back before ending their lives in poverty and ill health. Frankly, if your organization was not concerned with those late born generations for the past 30 years, other than as a funding source, it’s a little disingenuous now.

    Those now over age 62 may have cut deal after deal to take more out and put in less, but most of them spent it all, and are used to having more. So, doesn’t that make them truly needy after all? They certainly seem to think so.

  3. Jimbo F says:

    Tony, I don’t know if I’d be so certain about a tax refund. Many who lost a job probably received unemployment benefits. And much of those benefits are likely taxable. If they didn’t pay taxes on the benefit during the year, any refund may get eaten up by taxes due.

  4. Brian says:

    Tax relief for the unemployed isn’t a solution. Still want police services? That’s paid for with taxes. Still want your fire department? That’s paid for with taxes. K-12 schools? Taxes. You want your streets maintained? Taxes. Still want your trash picked up? Taxes (usually). Public services at every level of government are paid for with taxes.

    The solution? For those workers who have lost their jobs or are earning less in a lackluster economy, there are other jobs available requiring similar skills. As an example, in the metro area I live in (Dayton, Ohio), the latest official state numbers show that there are 20,300 unemployed; at the same time, the latest official state numbers show that in this metro area there are over 6,000 available jobs within the city itself (11,000 jobs within a 5 mile radius; 12,000 jobs within 10 miles; 17,000 within 20 miles; and 22,000 within 30 miles).

    Each metropolitan area nationwide should be tracking similar opportunities and connecting the unemployed with these available positions. Many of these jobs can be easily applied for online.

    Yes, it’s certainly easier to just sit and wait for relief from Congress, as has happened a few times in recent decades. But, this is a fundamental change from earlier American attitudes. Why don’t these unemployed Americans simply seek out these new job opportunities? As a nation we seem to lack the get-up-and-go of previous generations that it takes to resolve even the simplest of problems.

    Unemployed people have a tough time paying taxes, resulting in a struggle for each level of government to maintain public services. Employed people pay taxes. Employed people pay their student loans. Unemployed people do not.

    The focus should always be about finding solutions. The solution is fairly straightforward. But, just as everyone else, we’ll be getting another stimulus check from Congress, very likely within the next month.

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