Click through national news stories these days and you could be easily confused about how our economy is doing. Click one story and you can read that the stock market is soaring — a “record-breaking” year, some call it. Click another and read that one in six Americans struggle to get enough to eat.
Readers are likely to find themselves reflected in one or the other of those recent stories, not both.
While no income group or community has been untouched by COVID-19, the economic recession it has triggered may be the most unequal in modern history. Underlying economic and racial disparities have been heightened.
Soaring stock prices and property values, as well as a recovering job market for higher-wage jobs, have helped increase assets for those who already had the means to possess them. For these Americans, the recovery is well underway.
On the other side of the equation, the recession is deep and ongoing: Lower-wage workers, people of color, and women have struggled mightily and suffered serious hardships in the midst of record levels of job loss, hunger and housing instability.
If an economist were to translate these experiences, the resulting graph – showing one segment of the economy on the upswing and the others moving downwards – sort of looks like the letter “K” and is sometimes referred to as “K-shaped recovery.”
It might look something like this:
Two areas that illustrate Americans’ divergent experiences are the job market and the stock market.
The pandemic’s start was accompanied by a shocking rise in unemployment. But as time has passed, that K shape has emerged. A majority of Americans who have lost jobs during this pandemic work in low-wage industries. The lowest wage industries make up 30% of all jobs, but represented 58% of jobs lost between February and November 2020.
The unique nature of the pandemic-driven downturn plays a role here, including the ways that restaurants, shops, hotels, entertainment and travel were especially affected by the virus’ spread. Workers from communities of color were more likely to have lost jobs during the recession and face higher rates of unemployment still.
In Minnesota, we’ve seen the harm the pandemic is causing to those with the least resources to get through it: 9% of adults don’t have enough food; 15% of renters are behind on payments; and, 29% are having trouble affording basic household expenses. This represents hundreds of thousands of Minnesota neighbors suffering hardship.
Contrast this to what is happening in the higher-paying job market. Higher-wage jobs had largely recovered by summer. This ties in part back to the nature of the pandemic: Remote work was more of an option for these workers.
The pandemic also reminds us that although the stock market is often cited as a measure of the country’s economic health, it actually has little meaningful impact on most Americans’ daily lives. Rather, it merely demonstrates the vast wealth of some corporations and those with enough to engage in the stock market.
Nowhere do we see this better illustrated than in April 2020, when 20.5 million American jobs were lost, but the S&P 500 stock index put up its best month in 33 years.
The households that benefit most from gains in the stock market are largely those with the highest incomes: The richest 10% of American households own about 84% of the value of all stocks owned by American households. There is also a large gap in stock ownership by race.
For many folks, any connection to the stock market comes through a tax-deferred retirement account, while short-term market gains have little effect on their ability to pay the bills.
The situation we find ourselves in today calls on policymakers to continue to respond to the recession that so many are still experiencing, and take actions to control the virus to allow our economy to get back to humming along safely while promoting health and saving lives.
It also means merely going “back to normal” is unacceptable. We can’t leave in place this split reality laid bare by the pandemic. Instead, we must invest in a more equitable recovery, tackling the economic and racial disparities that were already with us.
That means making investments so that all of us, regardless of who we are or where we live, have what we need to thrive, from good schools and affordable housing, to broadband access and quality health care. It means protecting public services that Minnesotans count on.
It will take additional public resources to get where we need to go. Minnesota’s strong budget reserve and other current resources can fund some short-term solutions. Raising additional revenues through taxes — focused on those with the greatest resources — will be important, as well.