Mounting unemployment crisis fuels racial wealth gap

Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show.

The economic meltdown that has devastated the country amid the coronavirus pandemic has proven uniquely damaging for black Americans, threatening to exacerbate an already staggering racial wealth gap and fueling nationwide protests focused on racial justice.

Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show — and less than half of black adults are now employed. More than 1 in 6 black workers was out of a job in May, the Labor Department reported Friday, and the black unemployment rate continued to rise even as the overall rate ticked downward.

Black workers are also more heavily represented in frontline industries that leave them more likely to be exposed to the coronavirus — which has been killing disproportionate numbers of black Americans — and less likely to be able to work from home.

At the same time, black Americans have also historically earned lower wages, owned fewer homes and accumulated less wealth than their white counterparts, leaving them less able to weather an extended period of time with little or no income. And economists warn that long-term economic effects are likely to be more damaging for workers of color.

“Every corner of inequality has been exposed,” said Lisa Cook, an economics and international relations professor at Michigan State University who served on the Council of Economic Advisers during the Obama administration. “From the health care system, to wealth data, to income data, to occupational discrimination — all of it seems to be laid bare right now.”

The 16.8 percent jobless rate for black workers in May compares to 12.4 percent for white workers — a sizable gap but not a dramatic one for a statistic that is typically twice as high for black workers, even in strong economies. Still, it marks a stunning reversal for African Americans, who were finally starting to reap the benefits from a decade of economic expansion and hit their lowest-ever unemployment rate of 5.4 percent late last summer.

While it took 10 years for the employment rate for black workers of prime working age to climb 10 points, for example, those gains are likely to be wiped out in a matter of months, said Janelle Jones, managing director for policy and research at Groundwork Collaborative, an advocacy group promoting progressive economic causes.

“When the economy bounces back,” she said, “we know that it’s not going to bounce back as quickly for black workers.”

The composition of the labor market also leaves black workers at heightened risk of long-term unemployment compared to white workers. Workers of color are more heavily represented in jobs with higher risk of coronavirus exposure — customer service, food service and security, for example — which were hit first and hardest and are likely to be among the last to come back, according to a new analysis led by PolicyLink and funded by JPMorgan Chase.

Some of those concerns may have already begun to play out. The May jobs report showed an unexpected drop in the overall unemployment rate as the economy gained jobs in industries like hospitality and construction. But jobs in local government, where black workers are heavily employed, continued to drop sharply.

As a result, the white unemployment rate dropped nearly 2 percentage points — while the black unemployment rate rose 0.1 percentage point.

In other areas, too, black workers and families are bearing the brunt of the deep recession being felt across the country. More than 55 percent of black households report having lost employment income since mid-March, according to a Census survey released this week, as compared to 43 percent of white households.

And any signs of recovery could be just as uneven: More than 2 in 5 black households expect to continue losing income over the next month, the survey showed, while just over a quarter of white households reported the same.

“So you can imagine the financial strain that a lot of these families are under,” said Connor Maxwell, a senior policy analyst at the left-leaning Center for American Progress. “Even if they’re able to get jobs after this recovery, are they going to be able to bounce back economically the same way as a lawyer who has been working remotely for the past three months?”

Economists and analysts are increasingly calling on Congress to step in to boost recovery efforts, allocate more aid and ensure the funding that is available is being distributed evenly.

The Paycheck Protection Program, in its initial iteration, offered an early warning sign of how hundreds of billions in government-backed loans allocated to support small businesses could be less accessible for those with black owners, in part because they are less likely to have had relationships with major banks.

As a result, a Goldman Sachs survey from late April found only 79 percent of black business owners had applied for a PPP loan versus 91 percent overall. And those who did apply had more trouble earning approval: Only 2 in 5 black applicants were approved, Goldman found, compared to 52 percent of business owners overall.

In the same way that black Americans lost their homes at far higher rates than their white counterparts during the Great Recession — a factor that contributed to the uneven recovery — there’s concern that black business owners could now be more at risk of losing their livelihoods.

“This is a traditional entry point to the middle class,” Cook said. And if businesses are forced to close, “there will be another major setback to wealth accumulation in this country.”

That could worsen the already stark racial wealth gap: In 2016, the net worth of an average white family was 10 times that of an average black family — $171,000 versus $17,150.

Labor advocates and the AFL-CIO are also calling on lawmakers to extend the boosted unemployment insurance benefits that are currently set to expire at the end of July, noting that doing so would help all jobless workers but particularly minorities being hit the hardest. Democratic leaders in both chambers are also supportive of a push to automatically tie unemployment aid to the condition of the economy.

Jones of the Groundwork Collaborative noted lawmakers could go further and link benefits to regional unemployment rates, adding: “I don’t want to stop giving people help because New York and California have recovered but the South hasn’t.”

Others say Congress could take additional steps to provide rental assistance, given that people of color are less likely to own their homes, and provide hazard pay for essential workers, who are disproportionately workers of color.

“Congress knows that recessions hit black households harder, and it also knows that it has the power to take action that will weaken the recession and strengthen the recovery,” Heidi Shierholz, a senior economist at the Economic Policy Institute, wrote on Thursday. “If it doesn’t act, it will be yet another assault on black people.”

This blog originally appeared at Politico on June 5, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

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