Points of View

Economic Disparities are Widening, Who’s Vulnerable?

Economic Disparities are Widening, Who’s Vulnerable?

Alex Andrews

Impact by Gender

Men typically lose work early in a recession because they tend to be employed in industries that are more cyclical. However, the early stages of the pandemic saw rapid declines in female dominated industries — such as Leisure and Hospitality, an industry in which 53 percent of workers were female in February. Cuts in this sector made up more than half of the decline in March 2020 nonfarm payrolls, and women comprised 57 percent of these. By April, nearly half the jobs in this sector had disappeared from payrolls and once again women made up a disproportionate share of these job cuts. A similar pattern emerged to a lesser extent in Education and Health Services, although this is an industry in which 78 percent of the workers in February were women. Job loss began in March, but primarily occurred in April, at which point employment had declined by 11 percent. Women accounted for 82 percent of the lost jobs in that industry.

 

Impact by Race & Ethnicity

Similar to the patterns for women, minority workers are concentrated in Leisure and Hospitality (37%) and Retail Trade (31%), which are the sectors with the lowest hourly earnings. These sectors contracted by 21 percent and 15 percent, respectively, with Black and Hispanic workers comprising 41 percent of total job cuts in Leisure and Hospitality and 15 percent in Retail Trade. As a result, unemployment among workers with lower levels of education and among Black and Hispanic workers skyrocketed. The unemployment rate among Hispanic workers rose to 18.9 percent in May, and for the first time exceeded that of Black workers, whose unemployment rate hit 16.7 percent. In comparison, the unemployment rate for White workers peaked at 12.8 percent in April and fell to 10.7 percent in May.

Similar trends were seen in labor force participation, which fell significantly among minorities. Looking along racial lines, the labor force participation rate among Hispanic workers fell the most with a drop of -2.8 percent since March, followed by that of Black workers at -1.8 percent — compared to just -1.1 percent for White workers. In each case, labor force participation fell by substantially more than it fell during the Great Recession and hit modern lows. These declines come after a period of rising labor force participation among Hispanic and Black workers. The historic gap in which White workers tended to have higher labor force participation than Black workers has reemerged after having been nearly eliminated pre-pandemic.

Hispanic and Black workers were also more likely to experience a spell of nonemployment, with about 1 in 3 who were employed in February experiencing a month or more of nonemployment. Nonemployment among those who had been employed in February peaked in April, when 29 percent, 27 percent, and 20 percent of Hispanic, Black, and White workers, respectively, were no longer employed.

 

Impact by Age

Millennials have borne the brunt of the economic hardships induced by COVID-19 in part because they are incredibly diverse, with 44 percent being people of color, suggesting their economic situation is more broadly affected by financial inequalities when compared to older generations. Not only is this the second financial crisis millennials have endured through their professional lifetimes, many of whom had yet to recover from the Great Recession before the pandemic struck, but they also lack the experience required to remain competitive during this period of heightened layoffs and most have yet to reach their peak earning years while contending with massive student debt. Indeed, millennials were more likely to experience layoffs at the onset of the pandemic — with 35 percent indicating they or someone in their household had been laid off, compared to 28 percent for adults overall — and were also the most likely cohort to experience pay cuts, with 45 percent reporting reduced wages in their household, compared to 33 percent overall.

It is not by chance that millennials are among those most affected by layoffs, furloughs, and wage reductions, as they are disproportionately represented among the industries most disrupted by COVID and those slowest to return to their normal levels of profitability following the lockdown. Nearly 59 percent of all Accommodation and Food Service jobs were held by millennials last year, and 53 percent of jobs in Arts, Entertainment and Recreation — both industries have lost nearly a quarter of their jobs since the onset of the pandemic, leaving over 1 in 4 millennials unemployed.

 

Impact by Education

Low-education, low-wage workers have borne the brunt of the economic pain of the pandemic predominately because low-education work activities are more likely to involve in-person tasks that cannot be performed remotely, these workers endured a double hit from the pandemic. Many low-wage workers were initially laid off as in-person work slowed and eventually halted for nearly all industries, aside from those deemed essential amidst the ‘Stay Home, Stay Safe’ order. Those employees who were kept on payroll — often as essential workers — faced new health risks for which there was little additional compensation. However, nearly all Health Care and Manufacturing employers have since reported the use of essential worker premiums, and/or attendance and hiring bonuses in an effort to improve talent attraction and retention during this period of heightened labor shortages.

Low-education, low-wage workers are concentrated among Leisure and Hospitality and Retail Trade, which are the sectors with the lowest hourly earnings, lowest educational attainment, and least capacity for remote work. As a result, unemployment among workers in these industries has skyrocketed since the pandemic. The unemployment rate of those with only a high school diploma rose from 3.6 percent in February to 17.3 percent in April, while the rate for those with at least a four-year college degree went from 1.9 percent to 8.4 percent. Similar trends were observed for labor force participation which dropped significantly more for adults with less education, substantially more than it fell during the Great Recession, and achieved modern lows.

 

AI, Automation, and the Rise of Digital & Social-Emotional Skills

Even those who continued working have found that their jobs have changed. New technology was thrust upon workers who had to learn how to do virtually what they once did in person, and new challenges emerged for those tasks with managing both virtual and in-person teams. This unprecedented surge in the use of technology has permanently changed people’s knowledge of, and comfort with, remote-working substitutes. As a result, the pandemic will likely cause permanent changes in how people work and the technology they use, ultimately accelerating the need to reskill workforces at scale — increasing demand for new technical and social-emotional skills, while reducing demand for activities requiring mainly physical, manual, and basic cognitive skills.

These changes have yet to fully percolate through the labor market to affect staffing decisions, however, making it difficult to determine precisely which skills will differentiate jobseekers. Will business meetings that once required travel permanently transition to Zoom meetings? Will medical practices continue with virtual appointments long after COVID has passed? If so, the skills demanded of administrators will most certainly ascend into the realm of higher-order digital proficiencies and will require refined social-emotional intelligence when every interaction occurs within a computer screen. These changes will ultimately lead to a group of workers who will need assistance in transitioning to new jobs and developing new digital and social-emotional skills which are becoming increasingly desired among remote, distributed workforces.

 

Labor Market Recovery Strategies

The pandemic has highlighted the fact that child care is not a women’s issue, it is not a personal issue, it is an economic issue; parents cannot fully return to work until they are able to ensure that their children can safely return to child-care and educational arrangements. Parents will continue to struggle with child-care issues, particularly with the potential of children out of school and without childcare this fall and the risk to grandparents of relying on them for childcare. The child-care crisis spurred by the pandemic could force families to make difficult decisions that will lead to lower labor force participation and lower earnings for decades to come.

The solution to preventing large-scale permanent scarring is to prioritize safe returns to in-person education and to ensure that child-care centers do not go bankrupt and have the resources necessary to adapt their buildings and practices to new protocols — like improved air flow, increased surface disinfecting, and encouraging workplace flexibility. In addition, job-protected paid sick leave as well as medical and family leave are more important than ever. People will continue to get COVID and will need to quarantine themselves and care for others. Keeping parents, caregivers, and those who get sick integrated with the labor force will be key to minimizing the scarring effects of the pandemic.

Additionally, COVID-19 has emphasized the need for a renewed sense of urgency to focus public efforts towards greater access to higher education, in order to ensure better economic resiliency and mobility for the future of West Michigan and its residents. While there were preexisting disparities in the labor market caused by differences in educational attainment, these inequalities have only deepened as a result of the pandemic. Individuals with no postsecondary education were much more vulnerable to the initial COVID-19 economic shocks, and these risks were compounded by the types of jobs these individuals held and how those jobs were affected by social-distancing and shelter-in-place measures. It is also critical to acknowledge that access to education is not equal, and not everyone has the same opportunity to insulate themselves from job loss. The inequity in access to education is persistent across generations and makes attending college a heavier burden for those who start out with less income, often those in minority groups. The impact of the economic turmoil surrounding responses to COVID-19 presents an imperative to make access to learning more equitable. Increasing educational attainment can directly improve individuals’ work outcomes, both in and out of crises.

 

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