Steve September 24, 2020
how-the-pandemic-has-exposed-—-and-exacerbated-—-america’s-class-divide

Alex Cruff’s life turned around in March. She had just wrapped up about three months of training to become a manager at a travel agency in Carlsbad, California, when the company laid off 90 percent of its staff as the coronavirus spread, shutting down nearly all travel.

Her unemployment benefit amounts to about $1,200 a month — but her expenses add up to $1,700. With little savings, Cruff has been living off of ramen and peanut butter-and-jelly sandwiches so she can cover her bills and feed her 2-year-old daughter.

Alex Cruff, 26, pictured here with her two-year-old daughter, lost her job at a travel agency in March after the coronavirus pandemic shut down nearly all travel. Since then, she says she has applied for more than 400 jobs and is struggling to make ends meet.Courtesy Alex Cruff

“Luckily I have enough money to pay rent and my car — then after that it’s like I have to pick and choose between food for me and my daughter and my phone bill,” said Cruff, who is 26 and has worked full time since she was 18. “I’m holding back tears talking about it.”

Kiel Winters, of Austin, Texas, also lost his job this year as a recruiter for GoDaddy.com, along with about 800 other employees. The news was devastating, but his wife’s work as a supply chain manager at a small natural cleaning supply company has been booming under the pandemic, affording the couple additional income through her performance bonuses. They are now planning to build a house in Austin.

“GoDaddy gave us a pretty decent severance package, but really what I’ve been using is my stock that I was given when I first signed on,” he said. “I’ve been watching the stock market and cashing that out little by little and doing that to keep us afloat.”

Six months in, the coronavirus outbreak has left more than 13 million people unemployed. Data released Thursday from the Department of Labor show that almost 26 million people are still filing for some form of unemployment aid. Many are scrambling to salvage their economic lives. Some have exhausted their savings, moved in with family, and, in the case of Cruff and others, narrowed down their spending to essentials like food.

But not all unemployed are equal. The sudden mass joblessness and economic devastation from the pandemic has exposed the country’s deep-rooted class divide, and threatens to leave a whole class of lower-wage earners in longer-term financial distress than wealthier white-collar workers, according to several economists.

“The consequences of this will be long lasting. The deeper the hole you dig now, the harder it is to dig out.”

“The amount of wealth you hold serves as an insurance,” said Greg Leiserson, director of tax policy and chief economist at the Washington Center for Equitable Growth, a nonprofit research and grant-making group. “The consequences of this will be long lasting. The deeper the hole you dig now, the harder it is to dig out.”

A recent study by the International Monetary Fund of previous pandemics — including the Spanish flu of 1918 but also more recent outbreaks such as SARS, MERS and Ebola — found that after five years, the share of wealth going to the bottom tiers of society had decreased. Additionally, unemployment for workers with basic education had increased — which was not the case for people with advanced degrees.

Without protections for the most vulnerable workers, the pandemic’s impact on wealth inequality may be larger than previous outbreaks because of the number of workers without college degrees who have been laid off, according to Prakash Loungani, assistant director in the IMF’s Independent Evaluation Office and co-author of the study.

“People with advanced degrees see little effect on job prospects and find a way to keep jobs or are able to find a new one fairly quickly,” he said. “People with only a high school diploma go through long periods of joblessness, which has a scarring effect on their incomes and health and family situation, and even prospect for their kids.”

Cruff said she has applied to more than 400 jobs in the last few months at restaurants, call centers and customer service companies, but she’s always told they found a better candidate for the position, she said. She rents a room in Oceanside from her mother, who is terminally ill with cancer and also a renter living on disability. Her brother lives in the third bedroom and is healing from a car accident that left him with one lung.

“My unemployment runs out at the end of September,” Cruff said. “I’m sitting here wondering, ‘Am I going to get a job? What if I don’t get a job and my unemployment and extension runs out? What am I going to do?’”

The pandemic has pummeled the country at a time when it had already been suffering growing inequality. Over the last 50 years, socioeconomic mobility has been on the decline, according to Harvard University’s Opportunity Insights, a nonpartisan research and policy group.

More than 90 percent of people born in the 1940s grew up to earn more than their parents. But today only half of children grow up to earn more, which Opportunity Insights attributes to an increase in the unequal distribution of economic growth rather than a broad slowdown.

“People have been concerned about inequality for some time and we’re going in reverse at the moment,” said John Friedman, an economics professor at Brown University and a founding co-director of Opportunity Insights.

Early data already shows how the country has split in two. The employment rate for high-wage workers has almost entirely recovered to its pre-pandemic levels, while it is just 16 percent for low-wage workers, according to Opportunity Insights’ economic tracker. About 26 percent of people said in August that they had paid down debt faster than usual while the same proportion said they were unable to make a rent or mortgage payment or pay a bill, according to the Associated Press-NORC Center for Public Affairs Research.

The personal savings rate hit a record of 33 percent in March, according to the Bureau of Economic Analysis. Around the same time, people were lining up in cars for miles at food banks because they couldn’t afford food.

Kiel Winters of Austin, Texas, lost his job this year as a recruiter for GoDaddy.com. His severance package and sales of company stock has helped keep him afloat, he said. Winters is pictured here with his wife, Ashley.Courtesy Kiel Winters

In Austin, Winters has become frustrated with the job market. He’s done dozens of interviews with companies who said they are looking to hire, only to be told that they are pausing on hiring. Ultimately, a friend in the real estate industry offered him an opportunity to do recruiting. Between his job searches, Winters is working toward getting his real estate license.

“I try to keep a positive mindset,” he said. “But I’m frustrated right now with how things are playing out.”

The couple had planned to buy a home before the pandemic, but they have since decided to build one on their own. They’ve dipped into his stock options with GoDaddy, which they had originally planned to use for their retirement or a future child’s college fund.

Low-income households didn’t have savings to benefit from the stock market increase, and they haven’t benefited from employment recovery.

“Instead of having that safety net in the future, it’s our safety net now,” he said.

But whereas Winters can lean on the stock market, which has reached record gains over the course of the pandemic, Cruff’s only investments are $1,200 in a 401(k) and about $950 in the bank.

Already, the stock market boom has been shown to hasten the economic recovery for the wealthy and middle class, leaving low-income households struggling. The Federal Reserve said Monday that American households’ net worth jumped nearly 7 percent over three months ending in June. But it was concentrated mainly in affluent households.

“Wealth stocks were affected but recovered, so on savings and employment we’re back where we were,” Friedman said. “Whereas low-income households — they didn’t have savings to benefit from the stock market increase and they haven’t benefited from employment recovery, and there is no sign that things will get better for them any time soon.”

For Cruff, she’s not concerned with the long term, but more about how she will make it to October.

“If it was just me, it would be a different story. But I have to take care of my mom and kid and brother,” she said. “I feel like I’m alone. But I know I’m not alone.”

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