Analysis: Blue collar workers in service and other industries bearing the economic brunt of the pandemic

They were already suffering stagnant wages amid rising rents; they need help

Workers in retail and hospitality, already suffering from low wages and paltry benefits, are suffering the most from the pandemic. Photo by Jill Nolin/Georgia Recorder.

As Congress considers another COVID-19 relief package, let’s hope lawmakers realize whose fortunes are most at risk from the pandemic and the economic pain it’s caused. 

Broadly speaking, it’s people on the bottom half of the income ladder. 

The pandemic has divided the American economy into two groups, and for the most part their fortunes have diverged sharply:

  1. Workers who can do their work remotely;   
  2. Workers who have to be physically present. 

In Minnesota, roughly 10% of the labor force works in retail, and another 7% in leisure and hospitality. (Most of these are in small businesses, which are being hit hardest, as noted previously here.) So one out of every seven Minnesota workers has faced severe economic uncertainty since March. 

Even while the Paycheck Protection Program has allowed some hospitality businesses to stay afloat, workers are facing drastically reduced hours and low volume of patrons — a severe impact to those who rely on tips for their true wage. 

This has implications for the existing trend of income inequality, which has been exacerbated by the pandemic. Recent Reuters reporting cited a study done by Dingel and Nieman from O*NET — an occupational research database that gathers information on labor trends — that highlighted the inequality.  

The study found that 37% of jobs in the United States can be performed at home. These jobs pay more than work that cannot be done from home and account for 46% of all U.S. wages. Think: office jobs, including finance, corporate management, professional and scientific services. 

The study’s authors also found that nearly two-thirds of jobs that cannot be performed from home are concentrated in traditional blue-collar sectors like agriculture, construction, food preparation, manufacturing and transportation. 

These jobs tend to pay lower wages, and employees have to be on site and work in close proximity to others, the study found.

In other words, in the pre-pandemic world we had an existing trend of lower wage jobs with limited wage growth and limited economic mobility. And now those jobs are the most susceptible to layoffs and uncertainty in the pandemic era.  

So those workers who were already struggling — living from paycheck to paycheck due to stagnant wage growth — are those very same workers who find themselves unemployed. 

The $1,200 economic relief checks sent to those workers have long run out. For these workers, they must seem like a token sympathy card amid the desperate economic climate. 

American society has barely absorbed the lesson pertaining to frontline workers: They are indispensable and are not paid according to the value they provide and the risk they take. 

Republicans in Congress proposed what they call the HEALS Act, which would provide the following benefits:

  • $1,200 check for individuals;
  • $2,400 for married or joint filers;
  • $500 for each dependent;
  • $200 in extra unemployment insurance.

The last benefit listed is where there’s the most disagreement. Originally Democrats called for a continuation of the $600 in enhanced unemployment benefits that first arrived in the March CARES Act, but Republicans balked at this figure and proposed that it be dropped to $200. 

As the study from Dingel and Nieman makes clear, unemployed workers come mostly from blue collar fields and can’t work remotely. These are people with stagnant wages who struggled to pay rising rents and increasingly expensive health and child care pre-pandemic, and have likely been out of work for several weeks or months now. 

Republicans argue the enhanced unemployment money acts as a disincentive to go find work.

A new report by Yale University economists looked into whether the increased unemployment payments led to a drop in employment: 

“We find that workers facing larger expansions in UI benefits have returned to their previous jobs over time at similar rates as others. We find no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time.”

Moreover, even if every person who is currently unemployed wanted to work, there are simply not enough job openings. As of June 2020, there were 17.8 million people unemployed. According to the Bureau of Labor statistics, at the end of May there were only 5.4 million job openings. This means that there are more than three people out of work for every one job available. Certainly we should help workers return safely to the workforce, but that does little for the other 12.4 million people who would still be unemployed.

What often gets lost in these statistics is that these are real people with families, children and spouses. We can deem these 12.4 million people as just “victims of the pandemic” and do nothing, but it is better for our fellow Minnesotans and Americans — and better for the overall economy — if we provide support to keep households solvent.

Consumer spending rose 8.2% in May, due in part to the relief money supplied by the CARES Act. This suggests putting money into the pockets of consumers is a valid strategy to keep afloat companies which are open. The payments have propped up the economy decently, all things considered, and prevented a feared ballooning of the poverty rate. 

If the enhanced unemployment benefits are not renewed, expect a calamity. Early estimates from the Federal Reserve predict that as many as 15% of Americans could fall below the poverty line — the highest in the 53 years the metrics have been used.

Federal pandemic relief has included major outlays to large corporations — with little to no oversight. 

So we ought to be providing a cushion for the people who purchase their products.