Inequality in the Aftermath — How a Disease Compounds Generational Divides

There’s been growing research for some years that the American Dream, which at its core is a journey of upward mobility, is fading away. COVID-19 accelerates that dissipation even more. Thus far, the disease has triggered a recession in the US (which the National Bureau of Economic Research officially recognized this week), will cause 100,000 restaurants to permanently close, and prevent real GDP from surpassing its 2019 level until late-2021 or beyond.

Without comprehensive reforms and strategy shifts, the aftermath of this pandemic looks like a world where generational divides are wider, and inequality between classes, races, and genders even more difficult to close.

Millennials and Gen Z

In December 2019, the GAO published a report analyzing the economic status of Millennials compared to that of previous generations, which highlighted:

• The percent of individuals making more money than their parents, when they were the same age, has declined over the past 40 years;
• The chances of moving up the income ladder have been flat over the same period;
• This is despite higher average education (primarily college degrees).

This picture on economic mobility over three generations is stunning, and was amplified during the 2007–09 recession, where Millennials experienced severe disruption to job prospects and trajectories:

Federal Reserve Bank of St. Louis Review

Millennials now face their second recession in two decades, with many entering their prime working (and wage-earning) years.

All of this foreshadows great difficulty for Gen Z as well. Thus far, individuals in Gen Z have been three times more likely to lose their jobs or be placed on temporary leave compared to other age groups. Job seekers will have longer gaps before and between employment, and have to accept lower starting salaries, earning less for at least 10–15 years than those graduating during periods of prosperity. There will also be a greater frequency of choosing jobs that don’t align with degrees and personal interests.

For both generations, we should wonder how hard-working, talented, and lucky must one be in order to not slip through these macroeconomic cracks and have some faint likelihood of achieving the American Dream.

Low-income Classes and People of Color

As the nation is confronted with the recognition that our racial biases and practices have improved far too little since the Civil Rights Act of 1964, COVID-19 is widening the chasms of inequality for generations to come. There are two primary reasons why:

1. People of color are struck disproportionately hard. In March, the share of employed Caucasian workers fell by 1.1%, while African-Americans by 1.6%, Asian-Americans by 1.7%, and Hispanics by 2.1%. In New York, a state that’s been releasing detailed demographic breakdowns of unemployment claims, filings from Asian-Americans were up 10,210% in April as compared to April 2019, with Hispanics at 3,222%, Caucasians at 2,904%, and African-Americans at 1,927%. These workers are concentrated in sectors — food, personal care, retail, and healthcare — that rely on in-person experiences. But it’s also because credit and other funding for minority operators is more limited and riddled with biases, e.g. businesses owned by African-Americans are asked to provide more information about personal financials, even when controlling for credit score and business type. These two factors explain why the unemployment rate for minorities has been higher, but also why recovery will take longer for these groups. As an early signal of that, unemployment fell from 14.2% in April to 12.4% in May for Caucasians, but it rose from 16.7% to 16.8% for African-Americans, reflecting the observation that people of color are often the “first to be fired, last to be hired.” And while current data doesn’t clarify the recovery prospects for Asian-Americans, the racism of being associated with exposing others to COVID-19 (or “the Chinese virus” or “the kung flu” as the President has called it) has brought a spike in hate crimes and spells long-term difficulties for social mobility.
2. Low-income and minority students are receiving a significantly lower quality of learning. The pandemic and its widespread, abrupt changes to the locations in and methods through which children learn potentially increases student achievement gaps by 15–20% and drop-out rates by 6–16%. Though every race is left worse through this model of education, the effects also heighten racial pay gaps, where African-American and Hispanic students are expected to forego twice as much in yearly income as their Caucasian counterparts.

Continued resource scarcity for small businesses, students, and schools means pronounced barriers to social mobility for individuals who are of low-income and/or belonging to a racial minority group, precluding equal access to the American Dream.

Women

Women are being disproportionately affected by the this pandemic as well and stand to lose years of progress made in economic independence and equality. In particular:

1. From 1981, every recession in the US has seen men unemployed at higher rates than women. Thus far, this recession is the first exception. Five times more women have lost their jobs in just one month of this recession compared to the entirety of the 2007–09 recession. In aggregate, ~60% of the jobs lost in March and 55% of the jobs lost in April were held by women.
2. Despite our social advances, child care stills falls disproportionately on mothers, and so the closure of schools and care centers has multiplied the responsibilities other than and distractions from work for women. Single mothers, of which there are roughly 15 million in the US, stood at about a 16% unemployment rate by May. Given that the percentage of single mothers who are minorities is also particularly high (e.g. ~56% of all African-American families with children are headed by a single mother), the generational effects of this unemployment extend inequality in more than one way.

In December 2019, the World Economic Forum estimated that a woman would have to be born in the year 2255 to enter a labor market where her work is paid equally to that of a male counterpart. This pandemic potentially postpones that already distant reality by several generations.

In the aftermath of this disease, the prospects of social mobility, economic opportunity, and a feeling of generational progress stand to suffer in more ways than we can currently understand. We need many and massive ideas to shift our course back to one where someone growing up or immigrating to this nation can hear about the American Dream and still believe it to be true.