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September 6, 2020

COVID-19 and Inequality

The recession that began formally in February continues to weaken the economy. While the early burst of lay-offs has passed, a more permanent loss of jobs and businesses is settling into a record pace. The call-back of those temporary lay-offs is welcomed, but it masks the fact that continuing job losses remain at a pace not seen since the Great Depression. Despite the cheerful claims of the Trump Administration and its supporters, just last week we lost jobs at twice the rate of the worst period of the Great Recession. The pandemic continues to exert a historic effect on our economy, and we must confront it with honesty, facts and determination. 

The uneven experiences of many families during this downturn may prove a more lasting effect of this downturn. Over the past six months, cumulative job losses tell a stark story of this recession. Cumulative employment for college graduates is down 1.7 percent. This is horrendous and is more than twice the cumulative loss of jobs for college-educated workers we experienced during the 2007-2009 downturn. Despite this, they are the lucky ones. 

Job losses for less well-educated workers are far worse. Among those adults who have been to college but did not earn a bachelor’s degree, cumulative job losses nationwide are at 9.0 percent. Employment among those with only a high school diploma is down 13 percent, and jobs for high school dropouts are down almost 25 percent. The past six months have seen the fastest widening of economic conditions across levels of education in U.S. history. 

This bears repeating. Over the past six months, cumulative job losses for college graduates are the worst since the Great Depression, but cumulative job losses for workers without a college degree are between five and 15 times worse. 

Other factors exaggerate this divergence of economic prospects. A byproduct of monetary policy efforts to stimulate the economy was a soaring stock market. That is not unwelcome. The Fed policies are progressive, in that they boost employment at the risk of inflation, which is generally better for lower-income workers. However, at any period in time, stockholders are older and have more wealth than those without stocks. So, the short-run effect is to erase the deep stock losses from last winter. This aspect benefitted richer and better-educated workers.

Still, the worse and surely longer-term consequence of the COVID-19 downturn is its effect on public services, especially education. The shift from in-person to online instruction is a direct consequence of our failure to contain the disease. This will be most harmful to poorer students with less family support or technology. A long string of high-quality studies identify educational disruption as a major factor in lower educational achievement. Studies of events as small as a bad winter with many snow days, to the two-month summer break, find that they contribute to widening educational attainment gaps. 

These interruptions fall most heavily on poorer Americans, whose single best hope to better their lives comes through schooling. COVID is, right now, the single most disruptive event on education in U.S. history. The effect is so clear, we need not wait for a study or test results to begin planning to remediate students. My guess is that something like 400,000 Hoosier students will need supplemental instruction to catch up from the COVID mess. 

We should not be too surprised that this pandemic has such disparate effects on American families. The consequences of government failure are rarely borne equally by citizens. Our nation’s wars are primarily fought by very young men. Inflation hurts those with the foresight and discipline to save money, while tariffs hurt young consumers. This is the way of the world. 

We cannot remedy inequality through some change to our COVID response. That is not within the realm of government. But, we must be mindful that in this instance, the failure of government to deal effectively with this pandemic has not resulted in equal treatment in labor markets, in financial markets nor in the provision of public services. In at least one of these areas, government has a direct role. It should be the top consideration for state and federal lawmakers for the next year or longer. 

Link to this commentary: https://commentaries.cberdata.org/1072/covid-19-and-inequality

Tags: covid, recession, society, state and local government, the middle class, pres. trump administration, education, workforce and human capital


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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