How Congress decides to help the tens of millions of unemployed workers during the pandemic could determine whether the stark gap between America’s rich and poor will continue to widen amid a crisis that has already hit the lowest earners the hardest.
Economic downturns historically have been more damaging for the poor. But in the coronavirus-induced recession, low-income workers are disproportionately dependent on enhanced unemployment benefits in part because shutdowns have wiped out low-wage, in-person job opportunities in industries like hospitality and retail — and have made it dangerous if not impossible to search for other gigs.
More than two-thirds of those earning a salary of less than $25,000 are now out of a job, according to the most recent Census survey data — a number that has risen in recent weeks even as higher-wage sectors have shown potential signs of recovery
The bottom quarter of wage earners comprise a full third of all recipients receiving jobless benefits, a larger proportion than any other sector, the Congressional Budget Office found. And they are the least likely to have savings to lean on to weather the crisis.
Now Congress appears poised to dramatically reduce a federal program that has been providing an extra $600 per week for jobless workers since the spring, the consequences of which will fall heavily on the lowest-wage employees, economists warn. That could exacerbate already staggering wealth and income divides, which have been growing for decades and which are larger in the U.S. than in any other nation in the G-7, a group of major developed countries. And it could hurt workers of color in particular, who are overrepresented in low-wage jobs.
“There’s a great risk that it will compound the existing inequalities,” said Chuck Collins, a director with the Institute for Policy Studies, a progressive think tank. “Depending on how both the emergency stimulus response and recovery are designed, it could throw oil on the inequality fire.”
Spiraling inequality has significant ripple effects, economists say, and could contribute to political and financial instability in the country while worsening the economic recession. Moody’s, the credit ratings service, this month flagged persistent and growing racial and income inequalities in the U.S. as “potent forces” that are heightening social risk and could adversely affect the country’s economic and institutional strength.
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