Thanks to the racial wealth gap, the poor will suffer more
The outbreak of COVID-19 is especially worrisome for Black, Latin, and other vulnerable communities. These communities are disproportionately uninsured or underinsured and have fewer financial resources and employment benefits with which to weather this major public health emergency.
Nothing demonstrates this vulnerability more vividly than the dramatic and persistent intergenerational racial wealth gap. The COVID-19 pandemic is another stark reminder that the next administration must address wealth inequality and make asset security a top priority.
The influence of wealth
When unexpected emergencies occur, an individual’s or a family’s wealth can provide them with protection. Wealth, especially liquid wealth—resources that can be readily converted into cash—allows individuals and families to respond to life events and unexpected expenses, such as loss of income that may result from a pandemic.
Unfortunately, and unjustly, wealth has been unequally distributed in America. The typical White family has 10 times the wealth of the typical Black family and seven times the wealth of the typical Latin family. This stark and persistent racial wealth gap leaves Black, Latin, and low-asset people vulnerable. They are less likely able to afford several days—let alone weeks—without income.
Wealth is one’s assets minus their debts. Black and Latin communities are less likely to own assets. For example, almost 30% of Black college-educated households, and 20% of Latin college-educated households, would not be able to afford to pay all their bills after a $400 emergency expense.
These figures increase to nearly 60% and 50%, respectively, for non-college-educated Black and Latin households. With little to no liquid wealth and vulnerable job prospects, Black and Latin families are more likely to face greater housing insecurity, including exposure to eviction and foreclosure, which in turn will exacerbate the racial homeownership gap.
America is on the brink of entering a recession that will have particularly negative effects for Black and Latin communities, who are typically the first to feel the effects of economic downturns. They are also last to recover from economic swings.
For example, when reviewing the median wealth of Black and White families following the Great Recession, Black families’ wealth in 2016 was about half of the median Black wealth recorded right before the Great Recession. In comparison, the median White wealth in 2016 had grown by almost 15% since the Great Recession.
This highlights the larger impact that a recession can have on the racial wealth gap. In short, a recession only exacerbates the already existing vicious cycles of low wealth for Black and Latin families.
Furthermore, both Black and Latin employees are paid lower wages than their similarly situated White counterparts. For example, Black, Asian and Latin workers are overrepresented in the restaurant and hotel industry, two industries facing shutdowns in response to the coronavirus.
Furthermore, Black workers often hold occupations that are less stable, such as jobs in retail and home health and jobs as nursing home aides. In addition to being more likely to hold low-paying jobs, Black and Latin workers are more likely to hold jobs less likely to offer comprehensive benefits.
Just 16 percent of Latin workers and 20 percent of Black workers have the ability to work from home, compared with 30 percent of White workers. Black and Latin workers also have less access to paid sick leave and paid leave for child care.
When considering the intersection of race and gender, this inequality is particularly daunting for Black and Latin women, who often have a greater share of caregiving responsibilities. They are also more likely to hold low-paying service jobs than their White counterparts. In addition, these jobs numbers do not include all the Black and Latin men who are incarcerated and thus rendered “invisible” in labor market statistics.
Ensure access to affordable or no-cost medical care
Persistent financial barriers to healthcare coverage may prevent Black and Latin people from accessing needed medical care—including the treatments they need if they are exposed to the COVID-19 virus.
Any states that have failed to expand Medicaid should do so immediately. Anyone needing care should not face the financial stress or stigma that may deter them from seeking coverage and thereby put themselves and others at risk.
Ensure paid sick leave and paid family and medical leave are available to all workers
While Congress took a first step toward providing targeted protections for workers, it’s important to extend protections to ensure that workers across the country have access to paid sick days and paid family and medical leave to address their health and caregiving needs.
Send cash directly to households
As families and communities work to manage their expenses in this volatile time, it’s important that the government consider different options to provide relief to workers experiencing this economic shock.
Increase access to capital for minority businesses
Many businesses owned by Black and Latin Americans have limited capital to survive over the short and long term. Therefore, it’s imperative that policymakers ensure that these businesses get access to capital.
Take comprehensive action on student loan debt
There are more than 40 million federal student loan borrowers who may struggle to make their payments during the outbreak. Black borrowers take on more debt and are less likely to get the same return on investment as their White counterparts. They are also more likely to default. Policymakers must ensure a robust package that at least stops the accumulation of additional interest and provides a moratorium on all student loan payments and collections activity.
Temporarily waive all late payments for credit card and auto loan payments
Black and Latin households are less economically secure than White households. Black borrowers tend to have more costly debt and pay more for installment loans such as credit cards and auto loans. This is partially due to credit steering and credit market discrimination.
Place a moratorium on housing evictions and home foreclosures
State and local governments should strongly consider efforts across the country to place moratoriums on housing evictions and home foreclosures.
Following the crisis, it’s important to take on structural changes to U.S. economic policies to ensure that the necessary health and economic infrastructure is in place the next time the country faces a pandemic or looming disaster stemming from climate insecurity. Closing the unjust racial wealth gap should be a top priority to ensure more equitable, just and resilient communities.
Danyelle Solomon is the vice president of race and ethnicity policy at the Center for American Progress. Darrick Hamilton is the executive director of the Kirwan Institute for the Study of Race and Ethnicity and professor of public affairs, economics, sociology, and African and African American studies at Ohio State University.