Economic crises shine a
spotlight on a society’s inequities and hierarchies, as well as its commitment
to support those who are most vulnerable in such grievous moments. The calamity
created by Covid-19 is no exception. The economic fallout from that pandemic
has tested the nation’s social safety net as never before.
Between February and May
2020, the number of unemployed workers soared more than threefold — from 6.2
million to 20.5 million. The jobless rate spiked in a similar fashion from 3.8%
to 13.0%. In late March, weekly unemployment claims reached 6.9 million,
obliterating the previous record of 695,000, set in October 1982. Within three
months, the pandemic-produced slump proved far worse than the three-year Great
Recession of 2007-2009.
Things have since improved. The Bureau of Labor Statistics (BLS) announced in December that unemployment had fallen to 6.7%. Yet, that same month, weekly unemployment filings still reached a staggering 853,000 and though they fell to just under 800,000 last month, even that far surpassed the 1982 number.
And keep in mind that grim
statistics like these can actually obscure, rather than illuminate, the depths
of our current misery. After all, they exclude the 6.2 million Americans whose
work hours had been slashed in December or the 7.3 million who had simply
stopped looking for jobs because they were demoralized, feared being infected
by the virus, had schoolchildren at home, or some of the above and more. The
BLS’s rationale for not counting them is that they are no longer part of what
it terms the “active labor force.” If they had been included, that jobless rate
would have spiraled to nearly 24% in April and 11.6% in December.
Degrees of Pain
To see just how unevenly
the economic pain has been distributed in America, however, you have to dig far
deeper. A recent analysis by the St. Louis Federal Reserve did just that by
dividing workers into five separate quintiles based on their range of incomes
and the occupations typically associated with each.
The first and lowest-paid
group, including janitors, cooks, and housecleaners, made less than $35,000
annually; the second (construction workers, security guards, and clerks, among
others) earned $35,000-$48,000; the third (including primary- and middle-school
teachers, as well as retail and postal workers), $48,000-$60,000; the fourth (including
nurses, paralegals, and computer technicians), $60,000-$83,000; while employees
in the highest-paid quintile like doctors, lawyers, and financial managers
earned a minimum of $84,000.
More than 33% of those in
the lowest paid group lost their jobs during the pandemic, and a similar
proportion were forced to work fewer hours. By contrast, in the top quintile
5.6% were out of work and 5.4% had their hours cut. For the next highest
quintile, the corresponding figures were 11.4% and 11.7%.
Workers in the bottom 20%
of national income distribution have been especially vulnerable for another
reason. Their median liquid savings (readily available cash) averages less than
$600 compared to $31,300 for those in the top 20%.
Twelve percent of working
Americans can’t even handle a $400 emergency; 27% say they could, but only if
they borrowed, used credit cards, or sold their personal possessions.
Under the circumstances, it
should scarcely be surprising that the number of hungry people increased from
35 million in 2019 to 50 million in 2020, overwhelming food banks nationwide.
Meanwhile, rent and mortgage arrears continued to pile up. By last December, 12
million people already owed nearly $6,000 each on average in past-due rent and
utility bills and will be on the hook to their landlords for those sums once
federal and state moratoriums on evictions and foreclosures eventually end.
Meanwhile, low-income
workers struggled to arrange child-care as schools closed to curtail
coronavirus infections. Women have borne the brunt of the resulting burden. By
last summer, 13% of workers, unable to afford childcare, had already quit their
jobs or reduced their hours, and most held low-wage jobs to begin with.
Forty-six percent of women have jobs with a median hourly wage of $10.93 an
hour, or less than $23,000 a year, far below the national average, now just shy
of $36,000. In some low-wage professions, like servers in restaurants and bars,
women are (or at least were) 70% of the workforce. A disproportionate number of
them were also Black or Hispanic.
Before the pandemic, 57% of
women in low-wage occupations worked full-time and 15% of them were single
parents. Close to one-fifth had children under four years old and contend with
full-time care that, on average, costs $9,598 yearly. If that weren’t enough,
at least 25% of such low-wage jobs involved shifting or unpredictable
schedules.
Much has been made recently
of the wonders of “telecommuting” to work. But here again there’s a social
divide. People with at least a college degree, who are more likely to possess
the skills needed for higher-paying jobs, have been “six times more likely” to
telecommute than other workers. Even before the pandemic, 47% of those with
college degrees occasionally worked from home, versus 9% of those who had
completed high school and a mere 3% of those who hadn’t.
Now, add to the economic
inequities highlighted by the pandemic slump those rooted in race. Black and
Hispanic low-income workers have been doubly disadvantaged. In 2016, the median
household wealth of whites was already 10 times that of Blacks and more than
eight times that of Hispanics, a gap that has generally been on the increase
since the 1960s. And because those two groups have been overrepresented among
low-wage occupations most affected by unemployment in the last year, their
jobless rate during the pandemic has been much higher.
Unsurprisingly, an August
Pew Research Center survey revealed that significantly more of them than whites
were struggling to cover utility bills and rent or mortgage payments. After
Covid-19 hammered the economy, a much higher proportion of them were also
hungry and had to turn to food pantries, many for the first time.
In these months Americans
who are less educated, hold low-income jobs, and are minorities — Asians
excepted, since they, like whites, are underrepresented in low-wage professions
— have been in an economic Covid-19 hell on Earth. But isn’t the American
social safety net supposed to help the vulnerable in times of economic
distress? As it happens, at least
compared to those of other wealthy countries, it’s been remarkably ineffective.
Sizing Up the Social Safety
Net
In a Democratic
presidential debate in October 2015, Bernie Sanders observed that Scandinavian
governments protect workers better thanks to their stronger social safety nets.
Hillary Clinton promptly shot back, “We are not Denmark. We are the United
States of America.” Indeed we are.
This country certainly does
have a panoply of social welfare programs that the federal government spends
vast sums on — around 56% of the 2019 budget, or nearly $2.5 trillion. So, you
might think that we were ready and able to assist workers hurt most by the
Covid-19 recession. Think again.
Social Security consumes
about 23% of the federal budget. Medicare, Medicaid, and the Children’s Health
Insurance Program together claim another 25% (with Medicare taking the lion’s
share).
Social Security and
Medicare, however, generally only serve those 65 or older, not the
jobless. With them excluded, two critical
areas for most workers in such an economic crisis are healthcare and
unemployment insurance.
About half of American
workers rely on employer-provided health insurance. So, by last June, as
Covid-19 caused joblessness to skyrocket, nearly eight million working adults
and nearly seven million of their dependents lost their coverage once they
became unemployed.
Medicaid, administered by
states and funded in partnership with the federal government, does provide
healthcare to certain low-income people and the 2010 Affordable Care Act (ACA)
also required states to use federal funds to cover all adults whose incomes are
no more than 30% above the official poverty line. In 2012, though, the Supreme
Court ruled that states couldn’t be compelled to comply and, as of now, 12
states, eight of them southern, don’t. (Two more, Missouri and Oklahoma, have
opted to expand Medicaid coverage per the ACA, but haven’t yet implemented the
change.) People residing in non-ACA
locales face draconian income requirements to qualify for Medicaid and, in
almost all of them, childless individuals aren’t eligible, no matter how meager
their earnings.
While Medicaid enrollment
does increase with rising unemployment, not all jobless workers qualify, even
in states that have expanded coverage. So unemployed workers may find that they
earn too much to qualify for subsidies but not enough to purchase private
insurance, which averages $456 a month for an individual and $1,152 for a
family. Then there are steeply rising out-of-pocket expenses — deductibles,
copayments, and extra charges for services provided by out-of-network doctors.
Deductibles alone have, on average, gone up by 111% since 2010, far outpacing
average wages, which increased by only 27%.
The American health care
system remains a far cry from the variants of universal health care that exist
in Australia, Canada, most European countries, Japan, New Zealand, and South
Korea. The barrier to providing such care in the U.S. isn’t affordability, but
the formidable political power of a juggernaut healthcare industry (including
insurance and drug companies) that opposes it fiercely.
As for unemployment insurance,
the American version — funded by state and federal payroll taxes and
supplemented by federal money — remains, at best, a bare-bones arrangement.
Coverage used to last a uniform 26 weeks, but since 2011, 13 states have
reduced it, some more than once, while also paring down benefits (especially as
claims soared during the Great Recession).
So if you lose your job,
where you live matters a lot. Many states provide benefits for more than half a
year, Massachusetts for up to 30 weeks. Michigan, South Carolina, and Missouri,
however, set the limit at 20 weeks, Arkansas at 16, Alabama at 14. The weekly
payout also varies. Although the pre-pandemic national average was about $387,
the maximum can run from $213 to $823, with most states providing an average of
between $300 and $500.
Except in unusual times
like these, when the federal government provides emergency supplements,
unemployment benefits replace only about a third to a half of lost wages. As
for the millions of people who work in the gig economy or are self-employed,
they are seldom entitled to any help at all.
The proportion of jobless
workers receiving unemployment benefits has also been declining since the
1980s. It’s now hit 27% nationally and, in 17 states, 20% or less. There are
multiple reasons for this, but arguably the biggest one is that the system has
been woefully underfunded. Taxes on wages provide the revenue needed to cover
unemployment benefits, but in 16 states, the maximum taxable annual amount is
less than $10,000 a year. The federal equivalent has remained $7,000 — not
adjusted for inflation — since 1983. That comes to $42 per worker.
The $2-trillion Coronavirus
Aid, Relief, and Economic Security Act and the subsequent $900-billion Pandemic
Relief Bill did provide federal funds to extend unemployment benefits well
beyond the number of weeks set by individual states. They also covered gig
workers and the self-employed. However, such exceptional and temporary rescue
measures — including the one President Joe Biden has proposed, which includes a
weekly supplement of $400 to unemployment benefits and seems likely to
materialize soon — only highlight the inadequacies of the regular unemployment
insurance system.
Other parts of the social
safety net include housing subsidies, the Supplementary Nutrition Assistance
Program (SNAP, formerly the Food Stamp Program), Temporary Aid to Needy
Families, and childcare subsidies. After surveying them, a recent National
Bureau of Economic Research study concluded that they amounted to an ill-funded
labyrinthine system rife with arcane eligibility criteria that — the elderly or
the disabled aside — actually aids fewer than half of low-income families and
only a quarter of those without children.
This isn’t an unfair
assessment. The Government Accountability Office reports that, of the 8.5
million children eligible for child-care subsidies, only 1.5 million (just
under 18%) actually receive any. Even 40% of the kids from households below the
poverty line were left out.
Similarly, fewer than a
quarter of qualified low-income renters, those most vulnerable to eviction,
receive any Department of Housing and Urban Development subsidies. Because
median rent increased 13% between 2001 and 2017 while the median income of
renters (adjusted for inflation) didn’t budge, 47% of them were already “rent
burdened” in the pre-pandemic moment. In other words, rent ate up 30% or more
of their annual income. Twenty-four percent were “severely burdened” (that is,
half or more of their income). Little wonder that a typical family whose
earnings are in the bottom 20% had only $500 left over after paying the monthly
rent, according to the Bureau of Labor Statistics, even before Covid-19 hit.
SNAP does better on food,
covering 84% of those eligible, but the average benefit in 2019, as the Center
for Budget and Policy Priorities noted, was $217, “about $4.17 a day, $1.39 per
meal.” Mind you, in about one-third of recipient households, at least two
people were working; in 75%, at least one. Not for nothing has the term
“working poor” become part of our political vocabulary.
Is Change in the Air?
During crises like the
present one, our moth-eaten safety net has to be patched up with stopgap
legislation that invariably produces protracted partisan jousting. The latest
episode is, of course, the battle over President Joe Biden’s plan to provide an
additional $1.9 trillion in relief to a desperate country.
Can’t we do better? In
principle, yes. After all, many countries have far stronger safety nets that
were created without fostering indolence or stifling innovation and, in most
instances, with a public debt substantially smaller relative to gross domestic
product than ours. (So much for the perennial claims from the American
political right that attempting anything similar here would have terrible
consequences.)
We certainly ought to do
better. The United States places second in the Organization for Economic
Cooperation and Development’s overall poverty index, which includes all 27
European Union countries plus the United Kingdom and Canada, as well as in its
child-poverty-rate ranking.
But doing better won’t be
easy — or perhaps even possible. American views on the government’s appropriate
economic role differ substantially from those of Canadians and Europeans.
Moreover, corporate money and that of the truly wealthy already massively
influence our politics, a phenomenon intensified by recent Supreme Court
decisions. Proposals to fortify the safety net will, therefore, provoke
formidable resistance from armies of special interests, lobbyists, and
plutocrats with the means to influence politicians. So if you’re impatient for
a better safety net, don’t hold your breath.
And yet many landmark
changes that created greater equity in the United States (including the 13th
Amendment, which abolished slavery, the 19th Amendment, which guaranteed women
voting rights, the New Deal, the creation of Medicaid, and the civil rights
legislation of the 1960s) once seemed inconceivable. Perhaps this pandemic’s
devastation will promote a debate on the failures of our ragged social safety
net.
Here’s hoping.
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