The Atlanta Journal-Constitution
Emotional, financial tolls will be tough to overcome
Experts fear recovery could increase inequality
The pandemic threatened to spin Basia Taylor’s life from a low-wage struggle into impoverished disaster.
Taylor was a $12-an-hour emergency room caregiver who made patients comfortable and alerted nurses when there was trouble. She was afraid of the coronavirus but expected to have more hours, more work, more money.
Instead, like many health care workers dealing with nonvirus issues, she lost her job last spring.
She and her partner, a security guard, were already straining to pay rent, utilities and up to $300 a week for their twin toddlers’ day care, she said. “I could pay my bills, but there were some weeks where I wasn’t 100% comfortable that I was going to.”
The 27-year-old Kennesaw resident received unemployment benefits for a time, worked in a crafts store and is becoming certified as a dental hygienist. She just landed a job that pays better than the emergency room.
“I would say I’m optimistic,” she said. “I try to be, anyway.”
Her hope could presage improved lives for millions of lower-income workers as vaccinations become widespread and the economy restarts.
But massive federal relief programs
are slated to expire by autumn and there are fears many Americans could end up in even worse shape while those at the upper end of the income spectrum thrive.
Inequality was rising even before the pandemic. It could accelerate again after a year of job losses skewed toward low-income workers, big gains in stock markets and a widening disparity between homeowners and renters.
Before COVID-19, the gap between the bottom and top rungs of the economic ladder grew over many years. Between 1979 and 2015, the top 1% saw its income grow 229% in the U.S., according to the Economic Policy Institute. Income for the bottom 90% increased 46%. Federal tax cuts in 2017 disproportionately benefited the wealthy.
As the coronavirus triggered shutdowns of businesses and fear among consumers, tens of millions of jobs were lost all at once, the lion’s share of them modestly paid service positions that depended on in-person transactions.
According to Harvard researchers, employment in higher-paying jobs — above $60,000 annually — is up 5.2% in Georgia since the start of the pandemic, compared to a drop of 8.6% in jobs paying less than $27,000.
Yet inequality by some measures did not surge. The share of wealth among the poorer half of the U.S. population actually grew to 2% in the fourth quarter of 2020 from 1.8% a year earlier, evidence that some of the more generous federal aid benefits went to savings, according to data compiled by the Federal Reserve.
The $2.1 trillion CARES Act in March of 2020, the $900 billion Consolidated Appropriations Act in December and last month’s $1.9 trillion American Rescue Plan Act hiked jobless benefits and sent out stimulus checks, among other measures. Combined with a moratorium on most evictions, the government help prevented many jobless from plunging into hunger and homelessness.
But now what? With vaccines being rolled out and more companies hiring again, will the economy rise robustly enough to lift jobless Americans as pandemic benefits expire?
History is not encouraging. The Great Recession in 2008 was devastating for many households and a large federal stimulus package spurred only modest growth. Meanwhile, inequality continued to grow.
And Atlanta is no stranger to inequality. Using 2018 data — the most recent available for Atlanta — Forbes magazine ranked the city as the most unequal economically in the nation. That year, the lowest fifth of Atlantans had an average income of just $9,211 compared to the highest fifth, which had an average income of $300,067.
“If you look at the last 100 years, we were already at peak inequality between the wealthy and the poor and then the pandemic started disproportionately hitting the poor,” said Caroline Fohlin, professor of economics at Emory University. “The impact was not equally shared.”
But the size of the federal response was much larger this time, so there is hope that it not only kept inequality at bay, but set the stage for a worker-friendly recovery, said Heather Boushey, a member of President Joe Biden’s Council of Economic Advisers.
“We should be able to get back to a pre-pandemic unemployment rate by the end of the year,” she told reporters last month. “Coming out of this, I think we will see a decline in inequality.”
Much of the American Rescue Plan Act is targeted at children, especially those in families with low incomes. Experts estimate the tax credits and other support for parents could cut child poverty in half.
While not directly responding to a question about inequality, a spokeswoman for Georgia Gov. Brian Kemp said the state will help those hardest hit by the pandemic and that a healthy economy is good for all.
“As more Georgians get vaccinated, we look forward to seeing the economy continue to rebound and for more Georgians to be able to return to normal,” said Mallory Blount, the spokeswoman.
Yet some critics warn that the magnitude of the government’s aid itself may keep inequality high.
The massive payments did ease hardship but will give some people an incentive to stay out of work, said Angela Rachidi, a poverty scholar at the right-leaning American Enterprise Institute, in recent testimony to the U.S. Senate. “These short-term gains will mask long-term negative consequences that will be difficult to reverse.”
And there are some signs already of a widening gap. A Gallup survey published this month showed most complaints about deteriorating job quality coming from lower-income workers. At the same time, the sources of wealth for upper-income Americans has soared.
Over the past 12 months, the S&P 500 index has risen nearly 50%, benefiting those who had savings to put into stocks. A Forbes report on super-wealth this past week showed billionaires getting 64% richer last year.
The value of homes is also a key source of wealth to many Americans, and the vast majority of homeowners did not lose jobs during the pandemic. In metro Atlanta, home prices rose an average of 9.6% in the past 12 months, according to Re/Max. That’s equity that can be used to take out new loans and spend on other things.
In contrast, lower-income workers are typically renters, and about 1.8 million households in March were significantly behind on rent nation
‘If you look at the last 100 years, we were already at peak inequality between the wealthy and the poor and then the pandemic started disproportionately hitting the poor. The impact was not equally shared.’ Caroline Fohlin Economics professor, Emory University
‘Once evictions are allowed again, a lot of people who couldn’t pay the rent are in trouble. Recovery is not going to happen in one fell swoop. I can’t imagine that inequality won’t be higher.’ Elise Gould Senior economist, Economic Policy Institute
ally, owing an average of $6,100 each, according to a study by the Federal Reserve Bank of Philadelphia.
The current national eviction ban is not complete. And it expires in June. Meanwhile, pastdue rents have continued to pile up for many, forcing a reckoning at some point.
When the government paid pandemic benefits, most low-income people used them to cover very basic needs. More than half used the money to buy groceries and nearly as many for utility bills, said Guillermo Cantor, senior director of applied research at Prosperity Now, a nonprofit advocacy group.
Those people are in trouble if benefits end before they have work, and not even a robust rebound will immediately provide all the jobs needed, said Elise Gould, senior economist at the left-leaning Economic Policy Institute.
“Once evictions are allowed again, a lot of people who couldn’t pay the rent are in trouble,” she said. “Recovery is not going to happen in one fell swoop. I can’t imagine that inequality won’t be higher.”
The ranks of the vulnerable are large — and concentrated among generally lower-income workers.
Georgia’s economy in February had 213,600 fewer jobs than before the pandemic, and 86,300 of them in were in leisure and hospitality.
“It’s been a roller-coaster ride — and that goes for everybody I know who’s receiving benefits,” said Adam Neelly, 45, of Athens. “I am not one of the people making more on unemployment than if they were working.”
Before the pandemic, he worked several jobs, the most lucrative for a company that produced events on cruise ships. A return to normal would mean a flood of work, but it’s the meantime that is troublesome, he said. “The debt comes in waves. I have run up and paid off credit cards maybe three times.”
It’s just too soon to predict the direction of inequality, said Ryan Bourne of the libertarian Cato Institute. The keys to post-pandemic incomes will be consumer and business spending because they determine demand for workers, said Bourne, author of “Economics In One Virus.” Will consumers’ pandemic habits become permanent? Will businesses keep many employees working from home? “If the answer is a yes, a lot of low-wage workers will have to retrain, find new jobs, or move, and there will be painful shortterm consequences for their incomes,” he said.
Short-term consequences have long-term effects, said Earl McCarthy, 46, of Atlanta. When the pandemic hit, he was working in sales for a senior living community, his wife was an adjunct professor, and the bills got paid. Then they lost their jobs. After months of wrangling, McCarthy got unemployment benefits, the family signed up for food assistance and dug into savings. The last year has rewritten plans for their children’s college education and the couple’s retirement.
“The pandemic truly exposed how vulnerable we were,” he said. “The security of having gainful full-time employment with health benefits was snatched way, exposing our worst fears as parents — not being able to provide for your children.”
If they hadn’t lost their jobs, they would have been able to save and “be in a better position overall,” McCarthy said. “This pandemic has done a hard reset.”