The pandemic has widened the wealth gap
Our country and the world are grappling with the worst pandemic in 100 years and it has left so many sick, unemployed and devastated with loss. As we come out of this tragedy, we need to take stock of how people behaved during these times. All losses are not the same. Some have lost loved ones and this loss is tragic for everyone. But when we look at the financial loss, we found that it was very different for different people.
Can there be a ânew normalâ when you may have lost a job; or are afraid of losing your home; or your children have returned home because they lost their jobs? How do you budget for this period of your life? What lessons have people learned?
The pandemic has not treated all people the same. More blacks and Latinos have been hit harder because of pre-existing conditions and greater economic challenges. As the country begins to recover, many are still being left behind. According to CNBC, “the employment data is worse for minority groups, especially women of color, than for white workers … and the recovery has been slower for minority groups as well.”
The report went on to say that âfor white workers, the unemployment rate fell to 5.6% in February, below the national rate. But for black and Hispanic workers, reported unemployment rates were 9.9% and 8.5% respectively, staying above U.S. numbers as they have been throughout the COVID-19 pandemic.
What is wealth?
The wealth gap was exacerbated during the pandemic. According to The New York Times, âWealth – total assets – is the most significant measure of financial strength. Yet for every dollar in a typical white household, a black person gets 12 cents, a gap that has widened over the past half century. Latinos get 21 cents for every dollar of white wealth. “
As the in-person and physical part of our economy was devastated, people in white-collar jobs could switch to Zoom and were not significantly affected economically. In fact, they made great gains as the stock market soared. As a survey of consumer finances conducted by the Federal Reserve and reported by The New York Times, indicated; âIn 2019, the 1% of American wealth controlled about 38% of the value of financial accounts holding securities. Broaden your scope to include the richest 10%, and you’ve found 84% of the value of all Wall Street portfolios. “
Impact of the pandemic
A recent Harvard study, Opportunity overview, showed that as COVID spread, âhigh-income households sharply cut spending, primarily on services that require (d) in-person interactions. And, âthese companies having lost income, they laid off their employees, especially low-income workers. Almost 50% of low-wage workers working in the most profitable postal codes have lost their jobsâ¦ â
It’s not just low-income workers who are struggling. The middle class had felt the economic pressure before the pandemic. The Hardship Report Project reported in 2018 that âmiddle class living now costs 30% more than it was 20 years ago; in fact, in some cases the cost of daily living over the past 20 years has doubled. The pandemic has hurt these people even more. But others fared better.
TheBalance.com conducted a survey of people affected by the pandemic and found disparate results based on respondents. âThirty percent of Americans say the pandemic has made their financial situation worse, while 30% say it has improved their financial situation, signaling a K-shaped recovery that is pulling different individuals or groups out of recession at rates , different times or magnitudes. . ”
In fact, as the economy began to shut down, the rich and those still earning income cut back on spending and started saving their money. The personal savings rate in the United States (the percentage each month after taxes and expenses) has skyrocketed. It topped 32% in April while consumer spending fell more than 12%. It is not unusual to see savings increase when economic activity declines, and the reverse will happen when we open up. But if you’ve been fired, you hold on to your fingernails to cover your bills and you don’t save.
Before the pandemic, the Federal Reserve’s 2018 US Household Economic Well-Being Report found that 61% of people had to borrow to cover an emergency of $ 400. The pandemic has been a wake-up call to some people.
I spoke with Lauren Silbert, vice president and general manager of TheBalance.com about their investigation. Silbert told me that the investigation showed that the pandemic had caused many people to look into their finances. In fact, she said: âMore than half of Americans said the pandemic has made them more aware of how they spend their money, and 41% are more careful with their money now. A third of people who now keep a budget said they started doing so during the pandemic. “
“Exaggerating the wealth gap even further, the lowest paid workers lost nearly 8 million jobs during the pandemic, in stark contrast to the highest earners in the country, who actually got jobs during COVID . So many low-income workers have lost their jobs in the past year that it inflated the wage statistics – there were fewer low-paying jobs to factor in than the average, âsaid Mr. Silbert.
The path to follow
Even if you have suffered financially from the pandemic, there are things you can consider doing:
- Pay what you can. Sit down with your partner and do the hard math. Look at what you owe and what your current income is. Create an âemergency budgetâ that you hope is temporary. Pay the biggest bills to save your home; put food on the table and get the medical attention you need.
- Take what you can get. Obviously as the economy opens up and if you can’t get your old job back, take whatever job you can get. It might be a step down, but it will earn you income. You can also look for part-time or concert work to help pay some bills. You can still keep looking for a better job, and you may even be able to advance in the current job. Some jobs are better than nothing.
- Negotiateâ¦ Negotiateâ¦ Negotiate. Call credit card companies, student loan providers, auto lenders, utility providers, and banks that you owe money to. First of all, you need to understand the terms of their abstention and note that it is not forgiveness. Explain your financial situation and see if they will reduce the rates and the amount of loans. Is it worth it. Remember, they would rather negotiate the terms than cancel the loan.
- Mom and dad hotel. If you can terminate your rental agreement, consider going home to save some money. If you do this, you are not alone. Zillow reported that nearly 3 million adults have returned home during the pandemic. This is the highest number ever recorded.
Things will get better; you must have faith and do what you can now to weather the storm. Henry Ford’s words seem appropriate; “When everything seems to be going against you, remember that the plane takes off against the wind, not with it.”
President and CEO, Children’s Financial Network Inc.
Neale Godfrey is a New York Times # 1 bestselling author of 27 books, which empower families (and their children and grandchildren) to take charge of their financial lives. Godfrey began her journey with The Chase Manhattan Bank, joining one of the first female leaders, then became president of The First Women’s Bank and founder of The First Children’s Bank. Neale was the pioneer of the âKids and Moneyâ theme, which took off after her 13 appearances on âThe Oprah Winfrey Showâ. www.nealegodfrey.com