Coronavirus wipes away recent wage gains
In the five years before the pandemic, low-income Californians had begun to see substantial wage gains, chipping away at the income inequality gap between California’s haves and have-nots that has widened over the past 40 years. But the coronavirus pandemic is “likely stripping away many of these gains,” researchers at the Public Policy Institute of California found in a new report.
The current coronavirus-induced recession has hit low-income workers the hardest, and higher-income workers, largely able to work from home, have escaped relatively unscathed. And those acute job losses among low- wage workers — particularly African Americans, Latinos, workers without college degrees and women — have stayed worryingly high through the fall and into the winter, the researchers found.
This could be “exacerbating that kind of pattern of recession and recovery that’s worse for low- income families,” said lead author Sarah Bohn, who is the vice president of research at PPIC. “In fact, these unemployment rate differences across income are a bit worse today than they were during the Great Recession.”
T he findings were underscored by troubling new estimates of monthly poverty rates in the Golden State from a group of researchers led by Zachary Parolin at Columbia University’s Center on Poverty and Social Policy.
“The monthly poverty rate in October was actually higher than rates during April and May, despite the fact that the unemployment rate declined over that time,” said Parolin at a livestreamed data release. That’s because the federal CARES Act stimulus checks and expansion of unemployment benefits have mostly expired. With unemployment ticking up as California’s new regional shutdown orders go into effect, the picture is likely worse now.
Parolin’s estimates replicate the Census Bureau’s annual Supplemental Pover t y Measure, which accounts for safety- net benefits and the cost of living, unlike the Official Poverty Measure. It’s a measure that California consistently tops.
Taken together, the two sets of research painted an alarming picture of deepening poverty and inequality that could take years if not decades for California to dig itself out of.
California lawmakers already are mulling solutions, though ambitious proposals made now often get reigned in by fiscal realities later in the spring.
Assembly member Phil Ting,
D-San Francisco, who chairs the budget committee, announced this month his priorities for the session. They included transitional kindergarten for all 4-year- olds, more financial aid for college students, more money for low- income families through the state’s Earned Income Tax Credit and making parents who don’t work eligible for the state’s Young Child Tax Credit of up to $1,000.
“Our major priority is making sure we do everything to get money into the pockets of the most vulnerable Californians,” Ting said. “So many Californians are struggling. They’re on the brink of homelessness.”
Toni Sy monds, chief consultant for the Assembly Committee on Jobs, Economic Development, and the Economy, speaking on a panel about the new poverty data, said that lawmakers are considering expanding subsidized child care for essential workers, salary subsidies for part-time workers at businesses reopening after regional shutdowns, and food assistance, such as the $365 the state gave to families with children last spring.
Matt Fleming, spokesperson for the Assembly Republican Caucus, said that Republican lawmakers, too, are focused on getting money into people’s pockets as quickly as possible. They are considering bills to repeal AB 5, redirect funding for California’s floundering highspeed rail to education and fix the state’ s beleaguered Employment Development Department. Above all, he said, they’ll advocate keeping businesses open and schools in person as much as possible in the coming months.
“Gov. (Gavin) Newsom’s COVID (-19) shut downs have disproportionately targeted those industries that provide jobs to low- income families,” said Senate Republican Leader Shannon Grove of Bakersfield in a statement. “Democrat policies have left them with fewer jobs, more unpaid bills and less opportunity for their children.”
Economic inequality
The gap between California’s haves and havenots has yaw ned open since 1980, with the loss of manufacturing jobs, more automation, rising incomes for highly educated workers, declining collective bargaining power and rising numbers of less educated immigrants, the PPIC researchers wrote.
In 1980, wages for 10% of families with the highest incomes was 7.4 times larger than families in the bottom 10%. By 2019, that ratio was 9.8.
Recessions historically have made inequality worse.
The highest-income families generally take a hit of up to 7%, then recover within a few years. Meanwhile, the lowest-income families often face “much steeper and deeper declines” of up to 20% in wages, PPIC’s Bohn said. In three of the past four recessions, it has taken them a decade on average to recover their pre-recession wages.
But following the recovery from the Great Recession, things were looking up. A historically long period of economic growth had seen incomes for the poorest Californians rise from $20,000 in 2014 to $27,000 in 2019, a 34% increase that outpaced income growth for the highest earners.
Then the pandemic hit, putting entire low- wage sectors out of work, like restaurants, retail, entertainment, tourism, beauty and barbershops. In the spring, as many as 44% of workers in families with incomes below $ 30,000 were either unemployed, working part-time though they preferred to work full time, or had stopped looking for jobs, according to the report. By the fall, the number hadn’t dropped much, at about 37%.
Solutions on horizon?
T he billions of dollars that the CARES Act pumped into Cali fornia lifted an estimated 3.5 million Californians out of poverty in April, Columbia’s Parolin said. But that number dropped to 600,000 in October as unemployment benefits dried up.
An additional 750,000 Californians stand to lose unemployment benefits Dec. 26, Parolin said.
Whether California’ s short- term poverty rates stay high largely will depend on how Congress and the incoming Joe Biden administration negotiate future stimulus packages.
Parolin said the federal government could quickly reduce monthly poverty by increasing the maximum benefit for food stamps by at least 15%, which it did during the Great Recession.
‘We need another round of stimulus’
“What is clear to me is we need another round of stimulus last month and the month before, if not right now,” said Amy Everitt, president of Golden State Opportunity, a nonprofit that has advocated for expanding the state’s earned income tax credit.
This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California. CalMatters.org is a nonprofit, nonpartisan media venture explaining California’s policies and politics.