Economists Weigh In On Covid-19 And Inequality

Covid-19 is rubbing “salt in the wound of inequality,” I heard Dr. Utsha Khatri from the University of Pennsylvania say on NPR in March 2020, an observation many economists have found as the profession focuses on the sad unequal effects of the Covid-19 disease and the pandemic-induced recession. Race, income, and gender inequalities have gotten worse and new ones have been created in employment, schooling, death, evictions and debt. I summarize some of the most important findings so far.  

Employment: Economists have recognized the inequality of job loss in what is called the K-shaped recession. A K-shaped recovery is weird. The top segment of society begins to climb back upward while another segment continues to suffer: a graph of economic growth would roughly resemble the two diverging diagonal lines of the letter "K" — hence the name.  Peter Atwater at William and Mary call a K-shaped recovery, “Stacked inequity on one side and stacked privilege on the other.”

In Covid-19 women lost more employment than men. And the gains in equalizing unemployment rates made by nonwhite workers in the 2009- 2019 expansion nearly disappeared. We all know recessions force out marginal workers — who are reluctantly hired— first. These workers are often called “LIFO” — “Last in and First out” workers. See this Federal Reserve study of previous recessions. Women and nonwhites lose more jobs as a share of their employment than white men in recessions. Because so many women had to drop out of the labor market to do care work, the Covid-19 recession is called the she-cession.  To bring back women and recover some losses, we need expanded school days and more equal gender division of care work.

Schools: Covid-19 policies have caused deep inequalities at school. The effects of school closures during the Covid-19 pandemic was studied carefully by researchers  from the University of Pennsylvania, Yale, Amsterdam, and Northwestern NWE . School closures are having a large and persistent effect on educational outcomes. Students from poor neighborhoods are suffering great losses whereas children from rich neighborhoods remain unscathed. The reasons being differences in the quality of schools, the income levels of peers, and how equipped parents are to help. These factors all contribute to growing educational inequality during the pandemic. If we couldn’t keep the schools open, we could have considered the extra resources children of essential workers need and how much more aid poor schools need to keep their students on track. Some countries are providing childcare specifically for the children of essential workers.

Covid-19 has Caused Unequal Life Expectancies: This is clearly very bad news. Researchers Theresa Andrasfay and Noreen Goldman from University of Southern California and Princeton University published an alarming statistic in February 2021. Covid-19 has caused a disproportionate number of deaths occurring among the Black and Latino populations. Researchers found Covid-19 will reduce U.S. life expectancy in 2020 by 1.13 years, and the estimated reductions for the Black and Latino populations are 3 to 4 times than those of whites. Consequently, “Covid-19 is expected to reverse over 10 year of progress made in closing the Black−White gap in life expectancy and reduce the previous Latino mortality advantage by over 70%.” The famed Latino paradox is gone, writes Rogelio Sáenz from the University of Texas at San Antonio and Marc A. Garcia from the University of Nebraska. And because the disease doesn’t work in such a way that you get it and you either die or are well, Covid-19 leads to disability, including expensive neurological long-term disability. More reduction in life expectancy is expected beyond 2020 because of continued Covid-19 mortality and long-term health, political, social, and economic impacts of the pandemic.

Bright Spots

Moratorium on Evictions Saved Lives and Helped Stem Inequality: Had eviction policies been in place across all counties (i.e., adopted as federal policy) from early March 2020 through the end of November 2020, researchers concluded policies that limit evictions could have reduced Covid-19 infections by 14.2% and deaths by 40.7%. “For moratoria on utility disconnections, Covid-19 infections rates could have been reduced by 8.7% and deaths by 14.8%. Housing precarity policies that prevent eviction and utility disconnections have been effective mechanisms for decreasing both Covid-19 infections and deaths,” according to five Duke researchers.

Debt: Some good news, the people who got stimulus money spent their money. Lower-income people were likely to pay off debt which helped equalize their wealth minus debt.  The New York Federal Reserve found that people who are non-white, without a college degree, in lower-income households, and in households experiencing negative employment shocks or income drops since the start of the pandemic are more likely to use substantially larger shares of their economic impact payments to pay down their debts.

Communities all over the nation are grappling with their own source of inequality. The Santa Cruz County Pajaro Valley Save Lives coalition must grapple with agricultural worker access, for example. Disparity task forces in Oakland, New York, Los Angeles, Chicago, Dallas, Houston and other places have their own specific issues. All may want to know that economists and other social scientists are gathering relevant information about how painful local realities are not just local, idiosyncratic stories.

The escalation of inequality caused by the Covid-19 disease and recession is not a result of the virus, which we hadn’t even heard about in 2019, but rather the result of the underlying structural forces whose health and economic consequences emerge when times are tough.