The Covid-19 economic collapse is just like all the others: It will hit the poor hardest.
In the years before coronavirus, inequality was looming larger in American policy discussions. Income and wealth inequality had been rising for decades. That was temporarily masked by the housing boom of the early 2000s, but the crash of 2008 put an end to such illusions. And with celebrity billionaires interacting ever more directly with average Americans on social media, these vast inequalities were becoming ever more glaringly apparent. Most measures show U. S. inequality at all-time highs. The commonly-used Gini Index is just one example:
Now the coronavirus pandemic threatens to make an already bad situation worse. Some have called the virus a great equalizer, because it can strike even the rich and powerful. But in terms of the long-term effect on economic outcomes, the disease is likely to be anything but an equalizer. Here are some of the ways that the pandemic will probably exacerbate inequality.
No. 1. Unemployment
Research by economists Davide Furceri, Prakash Loungani, Jonathan Ostry and Pietro Pizzuto has found that income inequality tends to rise for five years after a country suffers an epidemic. Unemployment — now more than 14% in the U. S. and still rising quickly — is obviously a big part of this. Low-wage workers tend to be the first to lose their jobs and the last to be hired back. The economists found, unsurprisingly, that workers with lower education suffer much more unemployment after a pandemic.
Unemployment also hurts lower-income people more because they’re less financially equipped to manage it. A high-earning worker who gets laid off usually has a cushion of savings they can rely on until new opportunities become available. If not, it’s generally not too hard for them to borrow. But for poorer workers who have less savings and can’t borrow at low interest rates, a spell of unemployment can mean eviction, the loss of their car or other long-term damage that prevents them from bouncing back.
