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Jill on Money: Pandemic underscores economic inequality in the United States

The coronavirus pandemic has exacerbated economic inequality in

The coronavirus pandemic has exacerbated economic inequality in the United States. Credit: Dreamstime/TNS/Andrii Zastrozhnov

Analysts and investors like to use letters to describe the condition of the U.S. economy and markets. V-shaped is a sudden drop followed by a surge; W, the ultimate fake out, is when output sinks, rises and then falls again; U, in which after a sudden shock, the economy meanders and then starts to rise; and then the dreaded L, a drop followed by a sluggish, sideways economy that never returns to its previous glory days. (One more that is fun for math geeks is the square root, wherein output drops, rises and then levels off.)

Here's one more letter to consider when thinking about the financial and economic impact of the coronavirus: K. The sudden stop in the economy impacted the entire country, as jobs vanished and the stock market crumbled. Fortunes soon diverged: white-collar workers who could stay at home and continue to earn money were doing pretty well, as were their retirement accounts, after the stock market quickly bounced back and soared from the March lows; while tens of millions of nonessential service and gig workers were sidelined (more than 30 million Americans were receiving unemployment benefits, as of this writing toward the end of July).

If the pandemic has acted as an accelerant to such business trends as the growth of online shopping and the demise of the department store, it has also become an accelerant to income and wealth inequality. Last year, before the onset of the coronavirus, the Census Bureau found income inequality was at its highest level in 50 years, with two-thirds of the total wealth in the country owned by the richest 5%. Meanwhile, four out of 10 American adults said they would have difficulty covering a $400 unexpected expense, more than 38 million Americans were living in poverty, and more than 14 million children went hungry last month.

When discussing these facts and figures, it is important to remember that there are people behind the numbers. I hear from them every day as they struggle to find their footing in an economy that feels like quicksand. They are fearful of what might happen with the expiration of the government's $600 weekly unemployment benefit at the end of July; and how they will cope with demanding landlords and lenders when eviction moratoriums and forbearance arrangements sunset. They care little about technology stocks reaching new highs and mortgage rates dropping to new lows. They simply want to know how the richest country in the world will help take care of those who, through no fault of their own, are struggling.

Meanwhile, as lawmakers return to Washington, D.C., the focus will be another round of government stimulus. It is hard to keep track of all of the plans and programs enacted thus far. The nonpartisan Committee for a Responsible Federal Budget has identified around $2 trillion that has been disbursed or committed through the various congressional bills that have been passed thus far.

Treasury Secretary Steve Mnuchin recently told CNBC that the administration does "support another round of economic impact payments" and would consider expanded unemployment benefits, but unlike the $600 weekly payment, the next round will attempt to provide "no more than 100 percent" of what a worker was previously earning on the job. One criticism of the original plan has been that more than two-thirds of recipients are receiving more than what they previously earned at work, according to an analysis by economists at the University of Chicago.

Whatever the next round of support entails, it will continue to act as a lifeline to lower-paid workers who, according to former Federal Reserve Chairs Janet Yellen and Ben Bernanke, "have borne a disproportionate share of the job and income losses."

Jill Schlesinger, CFP, is a CBS News business analyst. She welcomes comments and questions at askjill@jillonmoney.com.

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