The current economic crisis is bringing the rock and the hard place closer together for millions of American households.
In December 2019, weeks before the economic shutdown and tidal wave of unemployment, surveys found that 40 percent of U.S. households lacked the cash to manage a $400 emergency expense. About 60 percent couldn’t borrow enough or cash in enough assets to meet three months of basic expenses.
Financial assets owned by households earning the bottom 20 percent of incomes have shrunk by 34 percent since the beginning of the Great Recession in 2008. Middle-income earners are only 4 percent better off now than then.
Debt among the poorest Americans doubled during the housing bubble of the early 2000s, according to Federal Reserve data. Many then spent years paring down those debts, giving them little or nothing to set aside in savings.
Data shows that income for all but the highest earners has been virtually stagnant, or actually declining, for more than 20 years.
Now 22 million Americans are newly out of work, with the U.S. economic shutdown erasing the same number of jobs that were created in the nine-and-a-half years before the pandemic began.
That shutdown has taken the hardest toll on those earning the least: low-level retail and food-service workers, where full-time employees in both categories gross about $27,000 a year.
With jobs disappearing higher up the organization chart, even more workers are seeing their savings, or even their hopes of saving, disappear.
The shutdown is highlighting the two pre-coronavirus American economies.
One could boast the lowest unemployment rate in 50 years, stock markets at record highs, and the longest economic expansion on record.
The other is a patchwork of part-time jobs with no benefits, stagnant wages, shrinking purchasing power, and more and more workers consigned to the gig economy, where there is no certainty of another payday and employee benefits are a fantasy.
Since this century began, workers’ compensation adjusted for inflation has decreased by about $3,000, according to the McKinsey Global Institute.
That has led to an economy staffed by the working poor.
Seven of every ten people enrolled in publicly-funded health care in New England were employed as of February, as were half the people who apply to the government for temporary cash assistance.
Many of the working poor spend at least half their income on housing costs; a rising proportion of middle-income families spend at least a third of their income on rent or house payments.
The 2017 federal tax cuts were promoted as a way to give corporations more cash to improve worker productivity and raise wages. However, studies show that businesses have used at least $1 trillion of the cuts each year to buy back their own stock, raising share prices and fattening executives’ bonuses.
Destination: Home, a California nonprofit working to prevent homelessness, had a pool of $18 million to help persons impacted by the economic lockdown. The agency received 4,500 requests in three days and had to stop taking applications.
“This is incomprehensively catastrophic,” said Jennifer Loving, the agency’s CEO.
PUBLISHER’S NOTE: The virus pandemic hasn’t shut the economy, destroyed careers, and diminished people’s lives. Politicians’ reaction to the virus did that.
Measures to quarantine or sequester high-risk persons – the elderly, the obese, those with chronic health conditions – would have minimized deaths while keeping businesses open, keeping people working, and saved incalculable hardship and debt that will endure for a lifetime.
