Whether history considers the current downturn a recession or a depression, it is clear that it will reinforce the growing inequality in our country.
Low-income workers are more likely to have lost their jobs in the pandemic and less likely to have savings to see them through. While the CARES Act increases and extends the reach of unemployment benefits, millions of workers have been unable to file for benefits, have been denied benefits, or are still waiting to receive them. And the additional benefits are scheduled to expire at the end of July—even though the Congressional Budget Office projects that unemployment will remain above 10% through 2021.
Since higher-earning Americans are more likely to own stocks, the widening gulf between a rebounding stock market and faltering business performance will only increase the wealth gap.
Running a small business—a traditional path to prosperity—has also become more perilous. Prior to the pandemic, five of 10 small businesses had a cash buffer of less than a month. Many have been unable to access Paycheck Protection Program loans; those who have received loans often aren't sure how they are allowed to spend the money and whether it will see them through—foreshadowing a wave of bankruptcies in the near future.
Navigating this economic crisis without substantially increasing inequality would require an unwavering commitment to support displaced workers and small business owners. Once the crisis has passed, the structure of the economy, and the types of jobs available, will be different. Just as important, then—when health and economic conditions allow—would be additional investment in retraining workers who cannot return to their old jobs, and helping business owners restructure and restart their businesses.
Shanthi Nataraj is director of the Labor and Workforce Development Program at the nonprofit, nonpartisan RAND Corporation.
This commentary originally appeared on Los Angeles Times on May 31, 2020. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.