April 23, 2020

COVID-19 Could Increase US Inequality

A growing number of Americans can’t pay their rent, and the queues forming outside food banks hint at human need on the scale of the Depression. For Americans who were already living paycheck to paycheck prior to the pandemic, the $1,200 relief checks the government has deposited into their bank accounts are too little and came too late.

Few are being spared the financial fallout from the COVID-19 economic contraction. But economists predict the damage being done to working and middle class people will cause another surge in U.S. inequality, just as the previous recession did.

The big unknown is whether this downturn, which is unfolding more violently than the previous one, will do even more damage to livelihoods and produce an even bigger increase in inequality. Some economists say the unemployment rate is approaching 20 percent – double the peak reached in 2009.

New York University’s Edward N. Wolff, who has studied inequality for decades, predicts wealth inequality will spike again within the next two years. In the last recession, wealthy people lost money in the stock market, but the middle class did much worse.

The typical U.S. household’s net worth – their assets minus their debts – plunged by 44 percent between 2007 and 2010. This ended a 15-year period of stability relative to wealthier households, pushing inequality to historic highs.

The vulnerability in middle America’s finances back then remains a vulnerability today: debt. The Federal Reserve Bank of New York was already reporting early signs of growing financial distress among credit card borrowers prior to the current contraction, and Wolff said that the ratio of debt to net worth in the middle class is currently higher than it is for other groups. This debt, when combined with a fall in investment portfolios and an expected decline in house prices, will push up wealth inequality, he said.

Another form of inequality – the disparity in incomes – widened after the last recession and Boston College economist Geoffrey Sanzenbacher worries that it will increase again. Between 2008 and 2018, the top 1 percent of U.S. families received nearly half of the increase in incomes for all U.S. families, adjusted for inflation. …Learn More

March 17, 2020

Privilege in the Age of the Coronavirus

I appreciate how privileged my husband and I are that we are able to remain in our home, where we feel fairly safe.

He is a retired Boston high school teacher. I have a good job that also provides me with some degree of flexibility when needed, and my boss didn’t resist, because of my autoimmune condition, when I asked to work at home early last week.

A young couple in my condo building with a new baby fled last weekend to a relative’s house in rural Connecticut, where the husband will be able to telecommute to his high-paying job in Boston.

Yes, our 401(k)s are getting pummeled. But this national crisis is immediate and far more consequential for the millions of Americans who must work even in a pandemic. Workers have two concerns, and they are intertwined: health and money.

Think about the first responders, service-industry workers, or post office employees who are in contact with the public, constantly exposing themselves and, as a result, their families to the coronavirus.

Low-income people are also very vulnerable. Research shows that they are less healthy for reasons ranging from less access to employer health insurance to higher rates of smoking and obesity. Diabetes is more pervasive in low-income populations too.

Yet public health officials tell us that people with underlying conditions are far more vulnerable to getting seriously ill if they contract the virus – and these are the same people who usually don’t have the luxury to telecommute. Many low-income workers also live in crowded conditions, often with older relatives in fragile health.

Many workers are grappling with the realization that the economy is starting to slow down – and they will be the first to feel it. Consider the cleaning ladies or dog walkers whose clients are asking them not to come to the house this week or the servers at the restaurants shutting down in Manhattan, Massachusetts, Illinois, and across the nation. …Learn More