The economic prospects of rich and poor Americans had long been diverging. The pandemic finally completed the break.
- Prior to the coronavirus
pandemic, it looked like the American economywas booming.
- But ever-growing
inequalitywas lurking underneath, and the pandemic threw that into starker relief.
- The average American's income rose after the $3 trillion CARES Act, but after those benefits expired in July, the seemingly never-ending pandemic plunged millions into
- As a K-shaped recovery took form, benefitting those already comfortable and further impoverishing those worse off, Americans at the bottom fell further behind.
- It could take a decade until lower-income Americans recover from the pandemic
recessionalone, notwithstanding the preexisting inequality gap.
Lori Jay spent the past four years working as a rideshare driver in Maui. The 66-year-old was part of the gig economy, relying on a steady stream of tourists for her income.
"We used to joke kiddingly to each other, everybody here, 'What happens when the ships stop coming?'" Jay told Insider.Back then, tourists were spending money on vacations, the job market was competitive, and unemployment was at record lows.
But wages remained stagnant for everyone else. It was more expensive to join the middle class, and debt and inequality were only increasing.Then came March, and those ships stopped coming.
"Everybody I know stopped working," Jay said.The uneven dynamics of the economy were then exacerbated, resulting in widening inequality at a time when the poor aren't only financially vulnerable but when physically performing a job brings an associated risk of infection from a deadly pandemic. Throughout the pandemic, high earners in the upper middle class and above - those at the top of America's K-shaped recovery - haven't just been financially comfortable, they've thrived.
And the people at the bottom of the K? They were already feeling the impact of growing income inequality at the start of 2020, and have just fallen further and further behind.
Federal assistance worked in the spring, but its absence widened the gap after the summer
The immediate fallout of the pandemic was swift: from March 15 to April 18, over 26 million Americans filed for unemployment benefits. The CARES Act in March offered some relief, with its $1,200
Still, that federal aid likely saved 12 million Americans from falling into poverty. In April, personal income for Americans spiked and the median checking account balance rose by 65%. Also, poverty rates fell in March and April.
But millions of Americans were suddenly - and indefinitely - unemployed, especially lower-wage workers."Around April, people started realizing that they got to start to try to do something," Jay said. She said that people started trying to organize growing gardens and food.
Clark was facing down eviction again in December. Business was so bad at the the three different jobs she's held since March that she kept getting laid off.
While the situation grew dire for one class of workers, the others were looking pretty good.Higher-income Americans weren't just saving more - they were spending less (and consistently spending less than lower-income Americans). They could refinance their mortgages at great prices (32% of lower-income Americans had difficulty making mortgage payments in September). And they were still working from home, even as companies turning record profits offered little (or no) hazard pay to its frontline workers.
Read more: America's miserable K-shaped Christmas
Better-off Americans aren't just sitting around and profiting - they're trying to give back
Some millionaires have explicitly asked for a wealth tax to help address the pandemic. Billionaire MacKenzie Scott has given away $4 billion over the last 4 months.Morris Pearl is the chair of Patriotic Millionaires. They're a group of millionaires who have advocated for higher taxes on themselves, and for average Americans to be able to hold the same power as millionaires.
He said that, throughout 2020, the public discourse has been "moving greatly in our favor." He's felt encouraged by President-elect Joe Biden wanting to tackle "people just falling further and further behind."John Leer, an economist at Morning Consult, which tracks consumer confidence, spoke to Insider prior to the new stimulus package's passage. He said the new bill is "a step in the right direction," but pointed out that it'll still "disproportionately benefit" higher-income consumers by helping their companies keep them employed and indirectly boosting housing prices, an asset that will only amplify the "wealth effect" among higher-income Americans. Meanwhile, lower-income workers are less likely to receive the $300 in additional weekly benefits.
The legislation contains the original benefits of the CARES Act, but halved - $600 stimulus checks and $300 in additional weekly unemployment benefits (and for 10 weeks, not 16).Leer said he anticipates it taking at least a decade for those hardest hit by the pandemic to recover from the recession (and that's without taking into account the preexisting income inequality). But it can be difficult to truly comprehend the scope and magnitude of employment and inequality in America right now; we may not even be able to psychologically wrap our heads around the numbers.
Instead, take it from Clark, who prior to the stimulus' passage said she'd put any money she receives towards paying off her apartment.
"There's a lot of people that don't - they're not living this life. Their whole life hasn't changed any, and a lot of it has for the rest of us," she told Insider. "We just want the world to go back to normal. That's all we all want, I think."
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