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  • Writer's pictureHolly Corbett

What The Pandemic Means For The Wealth Gap

Updated: Nov 10, 2021

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Income inequality is not new, but the current pandemic and recession are amplifying the wealth gap

“The ugly reality is that lower-wage workers are bearing the brunt of the pain,” says Cristina Alesci, CNN business and politics correspondent. “Federal Reserve Chairman Jerome Powell was very blunt about this dynamic, saying that 40% of households earning less than $40,000 a year have lost jobs in March alone.”

More than 36 million Americans have filed for unemployment in the past two months, with the current unemployment rate now at 14.7%, according to the U.S. Bureau of Labor Statistics

Just as with the Great Recession in 2008 and 2009, when unemployment rates peaked at 10%, people of color are among the hardest hit. From systemic bias to credit inequality, here are some of the factors that are widening the wealth gap.

The majority of frontline workers are people of color who are struggling financially. Women and minorities make up the majority of the frontline and essential workers. Essential workers are also more likely to live below or just at the federal poverty line, and to live with other frontline workers, according to an Associated Press analysis of census data in the country’s 100 largest cities.  

“April’s jobs report offered more evidence of the disproportionate impact on lower incomes,” says Alesci. “Perversely, hourly wage increased.  But that’s not because of an increase in wages; it’s because so many low-income workers lost jobs, which skewed the data.”

Frontline workers, such as grocery store cashiers and healthcare workers, are often not able to work from home. This means they have to choose between going to work and risk infection, or sheltering in place and risk losing their jobs. This may be one factor for blacks being disproportionately infected: In the U.S., nearly 30% of COVID patients are black even though blacks make up only 13% of the population.

“When you go to the grocery stores, [people of color] are often the ones who are ringing you up,” says Jennifer Streaks, financial expert and commentator for CNBC.  “They're the ones that are stocking the shelves. When you order from a restaurant, they are the ones that are washing the dishes in the back. When you put people in a position where they have to choose between their life and their income, that’s repugnant.”

Minorities are among the first to be fired, last to be rehired. Minorities remain underrepresented in leadership positions, which can make women and people of color more vulnerable to layoffs. Research finds that workers of color are the most likely to be fired during an economic downturn, and the last to be rehired during recoveries, according to the Center for American Progress

This contributes to many minorities’ reliance on the stimulus checks issued from the CARES Act.  “You still have individuals that are waiting to receive their [stimulus] check, but I don’t know where the $1200 figure came from,” says Streaks. “Most people can’t cover their expenses with that number. [Politicians] need to do an analysis, not talk about it all day, but get a vote together quickly, and send out another stimulus check that's at least $2,500.”

Credit inequality is real. The data shows the median household income for whites is 10 times greater than for blacks ($171,000 and $17,100 respectively), according to Pew Research Center.

One reason people of color face greater barriers in accumulating wealth is that they’re more likely to be denied credit, especially for mortgages, and receive worse rates when they are approved. With a housing supply that can’t keep up with the demand and home prices holding relatively steady even in the middle of a recession—in addition to homeownership by white Americans already being 30 percentage points higher than blacks before the pandemic—people of color may be at a further economic disadvantage.

“Credit inequality is problematic in communities of people of color in that there has been systemic bias in how things are reported to the credit report, and how long it stays on the credit report,” says Streaks. “The fact that you may not have a house or a personal loan to report means it's going to be hard to get a loan from the bank or buy a home because you don't have the credit.”

One way to shrink the wealth gap would be to reform the way we calculate credit scores, allowing for on-time rent, cell phone and other bill payments to factor into credit scores. 

The rich get richer and the poor get poorer. “The Fed has successfully staved off a full-blown financial crisis and a crisis of confidence in our markets,” says Alesci. “But the Fed’s assurances of supporting healthy financial market function have also caused the stock market to rally. The benefit of that will flow to higher-income earners, who have more assets invested in stocks, rather than flow to lower-wage earners, further amplifying income inequality.”

This public health crisis is shining a light on the inequalities that have long existed. It’s also shining a light on how we are interdependent on one another for our very survival. Martin Luther King Jr. once said, “No one is free until we are all free.” There is much truth in those words: A widening wealth gap is not good for anyone—regardless of socioeconomic status—because it contributes to greater societal problems and instability. None of us can afford to let that happen: The time to reverse income inequality is now.

Article originally published in Forbes on May, 26, 2000.


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