How the pandemic turbocharged inequality

The income gap is widening at a frantic pace one year into the pandemic, raising tough questions for policymakers as the recovery starts to take hold.

Even before COVID-19, the difference between the haves and have nots was striking. The bottom 50 percent of U.S. households in 2019 accounted for just 1 percent of the country’s total wealth, while the top 10 percent owned 76 percent of assets.

In the past 12 months, the country’s 664 billionaires saw their wealth increase 44 percent, or $1.3 trillion, according to an analysis by Americans for Tax Fairness, a left-leaning advocacy group.

Meanwhile, weekly jobless claims have exceeded their pre-pandemic record every single week since last spring. More than 18 million Americans are claiming unemployment benefits of some kind or another.

The most recent census data found that nearly 81 million Americans say they’re having trouble paying for regular household expenses, 51 million expected a loss in income in the coming month, 22 million did not have enough food, and 11 million don’t think they’ll be able to make their next housing payment on time.

“This gulf between the top and the bottom of income and wealth has gotten wider,” said Mark Zandi, chief economist at Moody’s Analytics.

“Recessions are generally hard on the weak, the people who don’t have a cushion. But this pandemic recession is unique and very idiosyncratic,” he said.

Whereas most economic downturns hit a broad swath of sectors, the pandemic ended up devastating low-income workers, due in large part to the associated lockdown measures and a drop in demand from a frightened public.

Restaurants, retail stores and other consumer-facing businesses that tend to employ lower-income workers shuttered by the thousands as most Americans stayed indoors.

Women, who were overrepresented in the hard-hit leisure and service industries, were also hammered as schools went virtual and family responsibilities fell disproportionately on their shoulders.

Many white-collar workers thrived during the lockdown period by staying employed, saving money and working from home. They also benefited from the Federal Reserve taking emergency actions, sending interest rates to zero while stocks and home prices soared.

“Folks who can work from home, have nice salaries, and have industries that are doing well are doing at least as good as they were pre-pandemic, and some are doing far better than they were,” said Frank Clemente, executive director of Americans for Tax Fairness.

”And folks who are hourly employees, lower-wage jobs, service jobs are suffering. It just exacerbated the underlying inequities in the economy, so it requires us to have much greater attention to the fault lines that were exposed by the pandemic.”


Kristen Broady, policy director of the Brookings Institution’s Hamilton Project, said the economic effects of the coronavirus recession disproportionately hit communities of color.

“If you look at the economy overall, the unemployment rate has decreased, but the rates for some groups are still very high,” she said.

The February jobs report found that while the jobless rate has receded to 5.6 percent for white people, it’s at 9.9 percent for Black Americans and 8.5 percent for Hispanics.

“From the small business impacts to paid leave policies to workforce participation, it is extremely clear that the economic harm hit communities of color and women especially hard, just as we warned it would,” said Rep. Don Beyer (D-Va.), chairman of the Joint Economic Committee.

While many economists expect the economy to bounce back swiftly as the pandemic gets under control, Broady says the virus has nonetheless accelerated changes that are likely to worsen inequality down the line.

Key among them is automation, which companies invested in heavily as COVID-19 complicated daily operations. Many of those jobs, she said, aren’t coming back.

“The No. 1 job at risk of being automated is cashiers,” she said, noting that companies from Whole Foods to Walmart have installed more self-service checkout lines during the pandemic.

“Blacks and Hispanics are concentrated in these jobs that are going away because of automation,” she added.

Her research found that of the 30 jobs most vulnerable to automation, Black workers are overrepresented in 11 of them and Hispanic workers are overrepresented in 13 of them.

Moreover, even as some parts of the economy begin opening back up, many big companies that have relied on telework and Zoom meetings over the past year are allowing for more remote work going forward.

“When you think about the people who work at the dry cleaners, the nail salons, the custodial staff, the wait staff — as long as the knowledge class is working from home, they won’t have a customer base,” Broady said.

In addition to keeping their jobs, many middle-class workers also received stimulus payments, and those who still have student loans enjoyed a freeze on required monthly payments.

“Many of them have saved the stimulus and paid down debt,” Zandi said.

Still, Democrats argue that the government’s response to the pandemic is an opportunity to provide long-term solutions to structural problems, starting with the $1.9 trillion COVID-19 relief bill passed by Congress.

“Democrats, and specifically the Ways and Means Committee, are capitalizing on this crisis, by making bilateral investments in helping those who are struggling stay afloat and in proven programs that will serve as sustained support for the better days that lie ahead,” said House Ways and Means Committee Chairman Richard Neal (D-Mass.).

That approach drew howls from Republicans, many of whom complained that the relief package was laden with provisions unrelated to the coronavirus, deriding it as a “liberal wish list.”

Democrats have not shied from some of the criticism, arguing that increases to the earned income tax credit and child tax credits will cut child poverty in half.

Many Democrats also see the explosion in billionaire wealth as a perfect source to fund expanded programs for lower-income households.

“Working-class Americans are facing Depression levels of joblessness while billionaires and mega-corporations are doing better than ever,” said Senate Finance Committee Chairman Ron Wyden (D-Ore.).

“Over the long term, addressing income inequality requires an overhaul of our tax code so it’s mandatory for billionaires to pay tax on their capital gains income, just like it’s mandatory for grocery store clerks risking their health to pay tax on their wages.”