Posts Tagged "coronavirus"

Covid vaccine ornament

A Splendid Holiday Gift: a Vaccine

Rather than look back on a bizarre and painful 2020, let’s look ahead to the bright side: a vaccine.

It is truly remarkable that top-notch scientists have been able to create several vaccines in record time. Producing and delivering them will be another hurdle, and questions remain about side effects and how long a vaccine will protect us. Many Americans’ reluctance to strictly adhere to public health standards will unfortunately slow our ability to put the virus completely behind us.

But scientists and public health officials seem confident the vaccines can eventually snuff out this once-in-a-lifetime pandemic.

Only then can we get back to our normal activities, such as traveling, eating at restaurants, and shopping – in person, rather than online. More important, increasing our consumer spending will give a shot in the arm to the economy and help put many Americans back to work after months of unemployment.

Have a joyful but subdued holiday – and enjoy the anticipation of a happier 2021!

Squared Away will return on Jan. 5 with a round-up of our readers’ favorite blogs in 2020.

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

Video Documents Nursing Home Tragedy

When COVID-19 started spreading through nursing homes last spring, the United States had no first-hand experience battling a coronavirus.

That’s a fair point but an inadequate explanation for a tragedy in which more than 100,000 nursing home residents and staff to date have died of COVID-related causes.

There is plenty of blame to go around. Governments either wouldn’t or couldn’t provide enough personal protective equipment, forcing the certified nursing assistants to don garbage bags and recycle masks. A shortage of tests limited the ability to detect asymptomatic cases and contain outbreaks. The Centers for Disease Control, prior to the pandemic, had documented poor infection control practices. This made nursing homes a petri dish for spreading the virus. Acute staffing shortages compounded the dangers.

This video by AARP is a chronology of what went wrong. It’s a horror story of panic, chaos, and blunders. It’s also a start on understanding how we can do better in the future to protect our most vulnerable population – the elderly.

“We need to continue to raise alarms and demand action to prevent anything like this from happening again,” said Bill Sweeney, a senior vice president of AARP.  AARP is a corporate partner of the Center for Retirement Research, which sponsors this blog.

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

The Economics of Being Black in the U.S.

Unemployment DisparitiesThe COVID-19 recession demonstrates an axiom of economics. Black unemployment always exceeds the rate for whites, the spikes are higher in recessions, and, in a recovery, employment recovers more slowly.

A record number of Black Americans were employed in 2019. But when the economy seized up in the spring, their unemployment rate soared to 17 percent, before floating down to a still-high 12.1 percent in September.  Meanwhile, the white unemployment rate dropped in half, to 7 percent.

The much higher peaks in the unemployment rate for Blacks than whites and the slower recovery are baked into the economy.

This phenomenon occurred during the “jobless recovery” from the 2001 downturn. When the economy had finally restored all of the jobs lost in that recession, the Black jobless rate remained stubbornly higher.

And after the 2008-2009 recession, as the University of California, Berkeley’s Labor Center accurately predicted at the time, Black unemployment hovered at “catastrophic levels” longer than the white rate did.  This disparity is now the issue in the COVID-19 recession.

Geoffrey Sanzenbacher, a Boston College economist who writes a blog about inequality, gives three interrelated reasons for Black workers’ higher unemployment rates.

First, “The U.S. still has a tremendous amount of education inequality, and the unemployment rate is always higher for people with less education,” he wrote in an email. Despite the big strides by Black men and women to obtain college degrees, roughly 30 percent have degrees, compared with more than 40 percent of whites, he said.

Second, Black workers without degrees are vulnerable because they are more likely to earn an hourly wage. An hourly paycheck means that a company can cut costs by simply reducing or eliminating a worker’s hours. “It’s much easier to lay off hourly workers, whose employment is more flexible by nature, than salaried workers,” Sanzenbacher said. …Learn More

More Gen-Zers are Living with Parents

When Millennials’ unemployment rate spiked during the Great Recession, millions of them alleviated their financial problems by moving in with their parents.

Now the coronavirus is chasing Generation Z back home.

Gen z chartSome 2.6 million adults, ages 18 to 29, who had been living on their own moved back home between February and July, the Pew Research Center reports. This pushed up the share of young adults living with one or both parents to 52 percent, which exceeds the rate reached during the Great Depression.

Pew’s analysis included some Millennials. But members of the younger Generation Z account for the vast majority – more than 2 million – of the young adults who’ve returned to the financial security of their parents’ homes this year. [This count does not include college students who came home and attended classes remotely after their schools shut down last spring.]

As was the case for Millennials, what sent Gen-Z back home was a sharp rise in their unemployment rate, Pew said. For example, the rate for people in their early 20s has more than doubled this year to 14.1 percent.

No age group escapes the impact of a recession. The current downturn is the second in a decade for baby boomers, who have faced these major setbacks just as they are trying to square away their finances for retirement.

Losing a job and financial independence as a young adult also has long-term consequences. … Learn More

Recession’s Hit to Cities Varies Widely

The COVID-19 recession is unlike anything this country has seen.

If the second-quarter contraction were to continue at the same pace for a full year, the economy would shrink by a third! This is the deepest downturn since the Great Depression, and low-income Americans are feeling the brunt of it.

Chart about two California citiesWhat makes this recession unique, however, is that the low-income people living in the most affluent metropolitan areas are worse off than low-income residents of less affluent cities, Harvard economist Raj Chetty explained during a recent interview on Boston’s public radio station, WBUR.

“What’s going on is that affluent folks have the capacity to self-isolate, to work remotely, to not go on vacation,” he said. “So in affluent areas, you see enormous drops in consumer spending and business revenue.”  In these areas, more than half of the lowest-income workers have lost their jobs, and many of them worked in small businesses, he said.

In less affluent cities, people have to go to work and “are out and about more, and business revenue hasn’t fallen nearly as much,” he told his radio host. “In previous recessions, we haven’t seen those sort of patterns.”

Chetty’s point is demonstrated by comparing what happened to consumer spending this year in San Francisco and Fresno, California, on the tracktherecovery.org website he and other economists have created. (Visitors can sort the spending data by state, industry, and consumer income levels, as well as by city.) …Learn More

Photo of a leaky pipe

401ks are a Source of Cash in Pandemic

The U.S. retirement savings system has always been a little leaky. But the leaks seem to be getting bigger.

Some Americans are eyeing withdrawals from their 401(k) plans as the best of a few bad options for paying their rent or solving other cash-flow problems.

As of May 8, 1.5 percent of retirement plan participants had taken some money out of their 401(k) plans under new federal legislation permitting penalty-free withdrawals, The Wall Street Journal reported. An April survey by the non-profit Transamerica Institute put the number of savers responding to the pandemic much higher – about one in five.

Chart of adults most likely to use 401ks as cashBut the data included people who took out loans from their 401(k)s, in addition to withdrawals from 401(k)s and IRAs. Further, Transamerica reported not only on what people have already done but what they say they plan to do. Younger workers and men were the most likely to resort to this desperation move.

Prior to the pandemic, many workers were already behind on their retirement savings and still had not fully recovered from the recession a decade ago.

The current economic downturn will only set them back further as the layoffs, reduced hours and sales commissions derail or curtail their efforts to save. Employers having to lay off workers are also conserving cash by suspending their matching contributions to their employees’ 401(k)s.

“The negative economic effects of the pandemic are further threatening retirement savings and security,” said Catherine Collinson, chief executive of the Transamerica Institute, a partner of the Center for Retirement Research, which funds this blog.

The Coronavirus Aid, Relief, and Economic Security Act passed in March made it easier to withdraw money by waiving the standard 20 percent income tax withholding and 10 percent penalty, which usually applies to people under age 59½. But one estimate made prior to the pandemic shows this is a costly strategy: prematurely taking money out of 401(k)s and IRAs reduces the average amount of money available for retirement by about one-fourth.

People who still have jobs are also saving less. One in five workers have reduced their 401(k) contributions, a Magnify Money survey shows. The informal poll isn’t representative of the population but is certainly an indication of the financial strain the pandemic is putting on workers.

Employers are pulling back too. At last count, some four dozen companies reeling from a drop in revenue – including big names like AutoNation, Best Buy, Hilton Grand Vacations, and Tripadvisor – are temporarily halting their matching contributions, according to a list compiled by the Center for Retirement Research. …Learn More

Puzzle of heads

Disability Applications Spike in Recession

During the Great Recession, the record numbers of Americans who applied for disability included many people who lost their jobs – and it might happen again as the COVID-19 recession plays out.

A 2018 study estimated that 1 million people applied who would not have done so if there hadn’t been a recession. By October 2009, as the jobless rate was peaking, the additional applicants increased the total applications to the U.S. Social Security Administration by 16.5 percent.

The average age of these applicants was 53, and they tended to have impairments that were musculoskeletal or cognitive in nature. Because these impairments are less severe, they were more likely to be denied benefits, often resulting in an appeal.

In contrast, the people who would’ve sought disability benefits even in a strong economy tended to have serious medical conditions such as Crohn’s or chronic kidney disease that usually qualify them automatically under the disability program’s vetting system.

Ultimately, among the applicants who applied in response to the recession, 42 percent were awarded benefits, according to the study funded by the Social Security Administration and based on an analysis of the agency’s disability records.

When they did receive benefits, they were more often awarded on the basis of having a functional limitation and no transferable skills. As a result, many people who used to work were nevertheless approved for benefits, because their options for transferring their skills from their old job to a new job were limited.

Adding so many people to the disability system carried a steep price in terms of an increase in administrative and benefit costs. But the formerly productive workers also paid a price.

“Once people qualify” for disability benefits, the researchers said, “they rarely re-enter the labor force.” …Learn More