Most Americans got rich during the pandemic, despite a deadly disease that upended the economy.
But economic inequality, after narrowing in 2020, appeared to widen again in 2021 as the federal government’s massive financial rescue programs began to wind down.
What happens next to the size of the economic pie and how it is sliced are open questions, even more than in pre-pandemic times, in a context of greater uncertainty than the normal.
Soaring inflation is eroding Americans’ purchasing power and raising the threat of a recession that would hurt everyone’s economic fortunes. An increase in the number of self-employed people also means a wider range of possible outcomes, good or bad, for many people who embark on the risky path of starting their own business.
But so far so far for many Americans, at least in terms of their financial well-being, even as the country’s death toll from the coronavirus approaches one million.
Rhomeo Mitchell of Lawrenceville, Georgia said that at the start of 2020 he was struggling to manage the modest paychecks he received as a video technician, living in motels. Then the pandemic hit and the store fired him.
But as the emergency deepened, Congress passed a massive support package for the unemployed, adding weekly payments of $600 for several months. The money stabilized Mitchell’s situation and he used $1,000 of it to buy a 1999 Jeep Cherokee.
Now he works for a pest control company checking pallets to make sure shipments contain the necessary materials. He declined to say exactly how much he earns, but it more than covers the $525-a-month cost of his place in a rooming house.
“I have my freedom, I wake up every day,” Mitchell, 35, said. “I weathered the storm.”
According to the JP Morgan Chase Institute, median current account balances have increased overall during the pandemic. This was especially true for low-income families, whose balances were 65% higher at the end of last year than in 2019.
Between February and October 2020, the bottom half of US households saw their disposable income increase by 10%, almost twice as much as the top tenth of households, according to RealTime Inequality, a measurement tool created by Stanford economists. Most strikingly, the wealth of the bottom half grew 301% over the year, about 14 times faster than the wealth of those in the top tenth.
That was fueled at least in part by unprecedented federal government assistance, much of it going to millions of lower- and middle-class Americans laid off and unemployed in the early weeks of the pandemic. After the initial weekly supplements of $600 ended, weekly supplements of $300 went into effect for several months.
Most families, with the exception of the highest earners, also received “stimulus” checks. Meanwhile, many tenants were protected from eviction whether they paid their landlords or not. And in 2021, many families received increased child payments instead of tax credits.
Workers in the years following World War II made solid gains, and the economic inequality gap in the United States narrowed. But between 1979 and 2020, wages and wealth at the top began to soar, and inequality grew steadily.
Then the pandemic arrived. As the economy briefly dipped and then quickly rebounded, employers struggled to fill vacancies, often paying new hires more than before COVID-19.
If there’s one key sign that the pandemic economy has benefited low-wage workers, it’s the unemployment rate, said University of Chicago economist Bruce Meyer. Before the pandemic, the unemployment rate in Georgia was 3.6%. It is now 3.1%.
“Income, spending, poverty, savings – they all tell pretty much the same story,” Meyer said. “Revenues have increased.”
When unemployment is low and wages rise, the influence of workers also increases, who may quit for a better job.
Paloma Cravey was a human resources manager at a huge logistics company, but last year she moved to a smaller technology-focused company. The 31-year-old Roswell, Georgia resident is now a human resources manager with better benefits and a shorter commute.
“I almost doubled my base salary,” she said. “I had a great experience and great connections in the other job, but I thought if I was going to make a change now was the time to do it.”
That still doesn’t mean everyone has gotten better off financially during the pandemic. Industries such as logistics and technology have boomed, while many restaurant and hotel jobs have not returned.
This unrest has hurt people like Paula Grisham of Decatur, Georgia, who had several part-time jobs in early 2020 before she was fired from teaching Sunday School and losing her job as a tutor for children. schoolchildren.
She and her husband also did home renovations and that business did well during the pandemic, but it wasn’t enough to buy a house. She plans to buy a food truck and rebuild her income.
“Financially, I’ve become a lot less secure,” said Grisham, who is in her 40s. “I have nothing more to do with what I used to do.”
Big data often obscures how inequality hurts some groups more than others, said policy analyst Ray Khalfani of the left-leaning Georgia Budget and Policy Institute.
In Georgia, black workers make up about 31% of the workforce. But even as the economic recovery was in full swing last fall, black Georgians still made up 65% of the unemployed, he said. And while the state’s unemployment rate fell to historic lows, the unemployment rate for black women was nearly double the overall rate and more than double the rate for white women.
When it comes to economic equality, there are signs that it has begun to return to its decades-old norm of widening rather than shrinking.
Economic inequality is often measured by a combination of wealth and income. The income of wealthy people often includes income from investments in things like stocks, bonds, and real estate. For the poorest Americans, income generally comes entirely from wages, but has been boosted during the pandemic by government assistance until recently.
At the start of 2020, the bottom half of Americans had 20.1% of the nation’s after-tax income. In the spring of 2021, the bottom half had 23.9%, which represents an average addition of $6,600 per employee, according to RealTime Inequality.
Last summer and fall, however, many government programs were cut, while the stock market and house prices soared. And while the economy frantically added millions more blue-collar jobs, many white-collar professionals — especially those working from home — never lost a paycheck.
By the end of last year, the bottom half’s share of after-tax income had fallen to 20.9%. The share of the top tenth, meanwhile, rose to 37.2%, from 32.3% in the spring.
Purchases of luxury items are a sign that more affluent consumers are starting to move away again.
Before the pandemic, less than 12% of vehicle sales were luxury brands, and that has risen to 16% or 17%, according to Charlie Chesbrough, senior economist for Cox Automotive, which analyzes the automotive market and has the same parent company. than The Atlanta Journal-Constitution.
In times of economic prosperity, executives receive stock and bonuses, landlords receive rent, and investors reap dividends and capital gains.
The S&P 500, a large measure of stocks, fell in the early months of the pandemic but ended 2020 up 14.5% on the year. The index has fallen again in recent months, but is still around 37% above its pre-pandemic level.
“People who hold the majority of their wealth in stocks have done particularly well,” said Todd Jones, chief investment officer of Gratus Capital, an Atlanta-based wealth management firm.
House prices and monthly rents have also increased by double-digit percentages since the early months of the pandemic. It made homeowners and landlords richer while straining the finances of Americans who don’t own homes.
Inequality sometimes narrows during recessions but then widens when the economy expands, though the finances of the poorest Americans also improve during recoveries, said Scott Winship, director of poverty studies at the ‘American Enterprise Institute, from right.
“People tend to look at inequality and say it’s a story of the rich getting richer and the poor getting poorer. But it’s not necessarily true that inequality is harmful,” he said.
At the end of last year, the tenth highest on the financial scale held 71.7% of the country’s wealth, up slightly from 2019 when it held 71.5%, according to RealTime Inequality. Still, the bottom half, on average, emerged in better financial shape, with their average wealth more than doubling to $7,900.
What happens next could go in many directions.
Inflation, already a problem, could undermine low-income households who spend every paycheck on basic necessities. The Russian-Ukrainian war could lead to further increases in energy and food prices.
Another uncertainty is the record number of Americans being pushed by the pandemic to start their own businesses. Historically, many new businesses fail within a few years, but many fortunes also emerge from long-standing startups.
A financial planning graduate, Mishana Carson went to New York to work for a big company, but didn’t like the job or the way she was treated. When she was laid off last year, the 25-year-old returned to Decatur to serve as a waitress, tend the bar and chart a new path.
Now she works part-time for an insurance company while trying to start her own business as a financial planning consultant.
“I’m definitely at a point of insecurity, so I’ve decided to sacrifice income security for my sanity,” she said. “And now I’m an entrepreneur.”
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