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Coronavirus: The Great Unequaliser

14 Apr 2020

I think it has become incredibly easy to view the coronavirus crisis in the context of aggregate statistics. Indeed, many have spoken about the coronavirus as an ‘equalizer’, with Madonna calling it ‘the great equalizer’ and Governor Cuomo saying that ‘everyone is subject to this virus. I don’t care how smart, how rich, how powerful you think you are’. However, the impacts of the crisis have been anything but equal - they have asymmetrically hurt the working class and hurt racial minorities, with this effect being particularly pronounced in the USA.

When it comes to the economic disparity, blue collar and poorer workers have been disproportionately hurt. White collar workers perform professional, managerial and administrative work that is less likely to involve interacting face-to-face with customers and more likely to be able to be done from home. The consequences are threefold - 1. they are less likely to be laid off if they can work via Zoom, compared to sales staff or bus drivers who have to be physically present 2. they are likely better paid, with more savings and private healthcare insurance available to weather the storm 3. even if they are essential workers who still have to turn up to work, they are less likely to be exposed to COVID-19 due to their reduced exposure to consumers.

This means that on average, blue collar workers will be more susceptible to getting coronavirus, as well as being more likely to lose their jobs and thus be stripped of their employer-provided healthcare (without much in savings). The need to go to work is seen in NBER working paper 26982, where location data from 20 million mobile devices in the USA was used to determine compliance with government directives to stay at home. Devices in regions with either high-income or high-speed Internet were much more likely to do so, demonstrating the inequality in one’s ability to self-isolate (Chiou and Tucker 2020). Simultaneously, many of them have little in cash reserves, with 10% of the UK population having insufficient funds to last a week if they lost their primary source of income (ONS Wealth and Assets Survey 2019). This is more likely given fewer than 10% of the bottom half in earnings can work from home, compared to around one-third in finance, insurance and business (Resolution Foundation 2020).

The dependence of their jobs on consumer demand and their employers often being small businesses mean that they are also working in the first wave of businesses that cut their workforce. For example, NBER working paper 26989 found that across a sample of 5,800 small businesses in the USA, 43% of them were temporarily closed, having reduced their workforce by 40% compared to January. Crucially, they are unlikely to be able to furlough workers, because the median firm among small businesses had less than one month’s worth of cash on hand (Bartik, Bertrand et al. 2020). These problems are only amplified for the most marginalised workers - the self-employed and those working in the gig economy.

Although fiscal responses around the world will play an important role in assisting small businesses and their employees, they are not perfect. The CARES act supplements unemployment insurance and business funding, as do the wage subsidies put in place by the UK. However, both face practical difficulties. For one, the transfer payments are will take a while to get to people, with estimates for some of the payments to arrive in June. There are also important groups being excluded, with the CARES act excluding dependents such as disabled people, seniors and children above 17. To add to that, the Coronavirus Job Retention Scheme in the UK does not help people who have had their hours cut, leaving around 16% of the workforce under-protected (Yougov March 25 2020).

The second disparity is a racial one. In Chicago, which is 30% black, African Americans account for 70% of the cases and over 50% of deaths from coronavirus. In Louisiana, African Americans make up 33% of the population but over 70% of coronavirus deaths. This has been seen more broadly across the USA, and one cause of this is because only 20% of African American workers can work from home, compared to 30% of white workers (Gould and Shierholz 2020). Their jobs are often public-facing jobs, which means they are over-represented in the risk of catching coronavirus and in the danger of being laid off without health insurance. African Americans currently face a higher chance of having high blood pressure (54% compared to 46% for white adults) and diabetes (77% more likely than white adults). These co-morbidities make them more vulnerable to the coronavirus, and in particular to severe respiratory complications.

As testing becomes more important in the response, it is likely to accentuate the inequality in health outcomes. The limited healthcare coverage of many poorer workers and African Americans makes access to testing difficult. NBER working paper 26952 has found that those in poor or immigrant neighborhoods were less likely to be tested. They were also more likely to test positive, as well as in neighborhoods with predominantly black populations (Borjas 2020). As such, any further government spending plans ought to consider the asymmetry of the coronavirus, instead of assuming a blanket policy that leaves many endangered.

[ coronavirus  economics  takes  ]