Update 444 — A Startling Statistic to Open
The Summer of Our Legitimate Discontent
On Friday morning, Americans will confront the statistical reality of the coronavirus’ impact on jobs. If you wonder what 20 percent unemployment feels like, this is it. If it takes some getting used to, we all will have that chance — a return to single-digit unemployment is not expected until sometime next year.
But we will not share equally in the pain and damage. The BLS report on unemployment for May might shock, but it will also elucidate the impact of the virus on income inequality. Below, we examine what we are likely to find out on Friday morning.
On Friday, the Bureau of Labor Statistics (BLS) will release its May jobs report, which may show the unemployment rate near or surpassing 20 percent. Top-line numbers can be shocking, but aggregate statistics obscure the full picture of who is feeling the economic pain.
An unemployment crisis disproportionately affects lower-income Americans, women, and communities of color. Here, both the COVID-19 pandemic and the government response are exacerbating inequalities within our economy and will have lasting effects.
Below, we break down the unemployment figures, detail rising inequality, and analyze policies that could help close these gaps.
Unemployment Data: The Top-lines
While we wait for May’s official unemployment figure, we know that over 40 million workers have filed for unemployment insurance (UI) since the crisis began. In just the first week of April, nearly 6.9 million workers filed jobless claims. While we seem to be over that peak (2.1 million unemployment claims were filed last week), the number of unemployed Americans is swelling to Depression-era levels. Most data omit those who do not file for benefits, the underemployed, the self-employed, undocumented workers who’ve lost their jobs, and recent high school and college graduates entering the labor force.
BLS and other government data show that pain is not distributed equally. More than one in five workers have filed for unemployment in Hawaii, Kentucky, Michigan, Rhode Island, Pennsylvania, Nevada, Georgia, and Louisiana. In Texas, which has been comparatively spared, nine percent of the workforce (1.3 million people) have filed for unemployment since mid-March — almost a 1,900 percent increase from February.
Map: Andrew Soergel for USN&WR Source: Labor Department
Another layer to the mounting job losses relates to inequality. Per the London School of Economics, states with greater income inequality (based on their Gini coefficients) tend to report more COVID-19 cases and fatalities.
As we head toward 20 percent unemployment, some groups have carried a larger share of the burden than others.
- Low-income Americans: Higher-income white-collar workers can generally work from home, staying safe from the virus and collecting a paycheck at the same time. But low-income workers face the potentially life-threatening dilemma of going in-person to an essential job or being laid-off.
Per Gallup, 95 percent of workers making less than $36,000 were laid off or lost income as a result of the pandemic. Thirty-seven percent of these workers report being laid off compared to just eight percent who make more than $180,000 a year. Low-income workers are also less likely to receive unemployment benefits. Only 30 percent of laid-off workers making under $36,000 were approved for UI benefits in contrast to 47 percent of workers making between $90,000 to $180,000.
- Women: In April, women accounted for 55 percent of all job losses. Women work at higher rates than men in hard-hit sectors such as leisure and hospitality and accounted for 83 percent of the job losses in healthcare, per the National Women’s Law Center.
- Communities of Color: April’s jobs report found that the unemployment rate for African Americans and Hispanics was 16.7 and 18.9 percent, respectively, while the white unemployment rate stood at 14.2 percent. Jared Bernstein and Janelle Jones project that African American unemployment may hit close to 30 percent during this crisis. African American and Hispanic Americans are also disproportionately employed in jobs unsuited for working from home.
Response to Date
The CARES Act’s expanded UI benefits are generous, but as we noted above, less than half of low-income workers report that they’ve qualified to receive UI. Even many who do qualify wait weeks to receive their benefits due to the flood of claims to chronically underfunded UI systems.
As families wait, they must draw down on savings — if they have any. African American families, on average, have significantly less wealth due a long history of being shut out from wealth-building opportunities. EPI found that African American families on average have $8,762 in liquid assets compared to $49,539 for white families.
As unemployment drags on, workers’ skills deteriorate and they become less attached to the labor force. UI benefits provide a short-term lifeline, but making sure that workers remain attached to their employers may have greater long-term benefits.
Keeping People on Payrolls
In addition to expanding UI, the federal government stood up the Paycheck Protection Program (PPP) to keep small businesses afloat and workers employed. The PPP was beset with glitches and delays from the onset. The first round ran out of money in 13 days. While large companies were able to qualify, small businesses were forced to queue up. It’s still unclear whether businesses will receive loan forgiveness, and this uncertainty translates into costs for small businesses.
While the PPP sets strict terms for small businesses for how they have to rehire workers, the Fed’s corporate lending facilities place no requirements on large firms to maintain employment levels. Big businesses and investors reap benefits from the Fed’s propping up of the corporate bond market while their workers remain vulnerable.
Some in Congress are pushing for more comprehensive solutions to the unemployment crisis that would keep workers tied to their employers. They look to Europe, where, in Germany for instance, unemployment has only risen from 5.1 to 6.1 percent due in large part to its work-sharing program. The following proposals are gaining momentum in Congress:
- Rebuilding Main Street Act (RMSA) (Sens. Merkley, Murphy, Van Hollen): Under work share, employees remain formally employed but collect partial UI benefits to make up for lost wages. These programs are currently available in 26 states. The CARES Act encourages the remaining states to adopt work share programs, but the PPP penalizes recipients who also use work sharing. The RMSA addresses this unintended policy outcome and significantly expands work-sharing programs, with the federal government covering up to 80 percent of workers’ hours.
- Paycheck Recovery & Security Acts (Rep. Jayapal, Sens. Blumenthal, Jones, Sanders, Warner): Rep. Jayapal and a gang of Democratic Senators advocate a more creative approach. Under Paycheck Recovery (House) and Paycheck Security (Senate), if a company, regardless of size, can demonstrate that it is dealing with challenges tied to the coronavirus, it could be eligible for a grant or tax credit that covers payroll costs with a cap of $90,000 per worker.
Relief Somewhere over the Rainbow
While President Trump tweets, Senate Majority Leader McConnell is leading the GOP’s legislative effort. Republicans oppose relief to states and localities at the forefront of the crisis and are seeking to strip away the CARES Act’s UI increases. Work share expansion is off the table, and Steve Scalise, House Minority Whip, denounced wage replacement proposals as “radical socialism.” It’s no mystery why unemployment continues to rise. Meanwhile, inequality soars, and citizens across the country are voicing their legitimate discontent.