The Economic Fallout of the Coronavirus for People of Color
The United States is in the midst of a major economic disaster. In recent weeks, public officials have closed schools, shuttered businesses, and restricted mobility in order to limit the spread of the coronavirus, which as of April 14 has killed more than 23,500 Americans and infected hundreds of thousands more. These public health measures are essential, but they come at a cost: Millions of Americans have now lost their jobs, and countless businesses are predicting diminished revenues and experiencing profound financial uncertainty.
Nowhere are the effects of this current emergency more acute than in communities of color, which have long endured occupational segregation, economic exploitation, and employment discrimination. These factors put people of color at greater risk of unemployment and limit their ability to weather economic downturns. The coronavirus does not discriminate based on race, but without immediate action, its economic fallout will disproportionately affect communities of color.
Because social distancing is necessary to protect overall public health, federal and state governments must make it financially possible for people to stay home by expanding economic assistance programs, easing debt burdens, and protecting against predatory lending and employment discrimination. And as policymakers continue to pass policies and institute new practices, it’s important that they avoid repeating the mistakes of their predecessors. Some of the boldest universal policies of the 20th century contained explicitly or implicitly discriminatory provisions that prevented people of color from obtaining the full benefits to which they were entitled. Today, new calls for a massive recovery and an urban revitalization plan evoke both hope and apprehension in communities of color. It is critical that lawmakers ensure a robust and equitable recovery by taking targeted and concrete steps to minimize inequality, remove entrenched structural racism, and promote economic fairness for all.
Economic downturns and people of color: Lessons from the Great Recession
From December 2007 to June 2009, the United States experienced one of the longest and most severe economic downturns in living memory. Millions of Americans lost their jobs and homes, and household wealth plunged. Few communities were spared the effects of the Great Recession, but communities of color experienced the worst effects—and some never fully recovered.
Overall U.S. unemployment peaked at 10 percent during the Great Recession. But it soared even higher in communities of color: 16.8 percent for Black workers, 15.1 percent for American Indian and Alaska Native workers, and 13 percent for Hispanic workers—levels not seen nationally since the Great Depression. Hispanic, Black, and Native American unemployment rates did not reach their pre-recession lows until 2017. Hispanic and Black families also endured the highest rates of foreclosure and lost the most wealth during this period. From 2007 to 2016, Black and Hispanic households lost 48 percent and 36 percent of their wealth, respectively. By contrast, white households lost 24 percent of their wealth during this period. Today, the ratio of median Black and Hispanic household wealth to median white household wealth is just 9.5 percent and 14.6 percent, respectively. Unlike unemployment rates, homeownership and wealth never fully rebounded in these communities.
Experts believe that occupational segregation, financial exploitation, and exclusion from federal programs increased the length and severity of the Great Recession in communities of color. Many of the factors that contributed to racial disparities in unemployment, homeownership, and wealth remain present today.
Occupational segregation could worsen the unemployment gap during the pandemic
Long before the current health crisis, public policies restricted tens of millions of workers of color to jobs with few benefits, lower wages, and limited protections. (see Figure 1) Today, workers of color are overrepresented in the lowest-paid agricultural, domestic, and service vocations and have the least job security. Many of these workers, including restaurant and retail workers, have already been laid off due to public health guidance. Furthermore, even as unemployment rates reached historic lows nationally, Black workers and American Indian and Alaska Native workers remained twice as likely to be unemployed as their white counterparts. Workers of color, especially women of color, also receive lower wages and have less access to paid sick leave and paid leave for child care than white workers. For communities of color, the labor market is unsteady when the economy is strong and extremely hazardous when it is not.
In recent weeks, state and local lawmakers compelled many employers to close their doors to help limit the spread of the coronavirus, which causes the disease COVID-19. These measures are critical for public health, but they have also produced a surge in unemployment, especially in communities of color. Structural racism could worsen these trends in the coming weeks. Businesses in Black-majority neighborhoods, for instance, were already losing billions of dollars in revenue per year compared with similar businesses in non-Black-majority neighborhoods. A serious and sustained decrease in revenue may jeopardize the solvency of these firms and the jobs held by their employees. Many people of color, especially those without college degrees, are unable to work remotely and receive regular pay during this potentially lengthy period of social distancing. (see Figure 2) Furthermore, the Trump administration issued guidance that will prevent more than 75 percent of American workers from gaining access to paid family leave under a relief package passed by Congress just weeks ago, meaning workers will have difficulty caring for themselves or sick family members.
Back-of-the-envelope calculations from the Federal Reserve Bank of St. Louis suggest the COVID-19 pandemic could eventually produce unemployment levels of up to 32 percent nationally. Regardless of the level at which unemployment peaks nationally, it will be even higher for people of color because they are largely restricted to the most at-risk occupations.
People of color have fewer assets and less liquidity to respond to an emergency
Decades of structural racism in economic, educational, and housing policies have produced a stark racial wealth gap in the United States. Prior to this pandemic, the typical Black and Latinx households had net worths of just $17,100 and $20,765, compared with the $171,000 held by the typical white household. Black and Hispanic households also have far less liquidity than their white counterparts. More than 1 in 10 Asian American households and 1 in 4 American Indian and Alaska Native households live in poverty. Without wealth and liquidity, households may be unable to cover unexpected expenses and withstand long-term negative income shocks. Perhaps as a result, many families of color report that they would not be able “to pay their current month’s bills” in the event of a $400 emergency expense. Without support, many families of color struggle to maintain their financial footing during economic downturns.
The current public health crisis has generated a wave of unexpected expenses and negative income shocks. Evidence suggests that structural racism may actually increase exposure and susceptibility to COVID-19 in communities of color. Decades of public policy have restricted people of color to areas with higher levels of pollution and limited access to affordable healthy food, as well as established structural barriers to the health system. These factors have compounded to create stark health disparities in serious chronic health conditions such as asthma and diabetes. Many people of color may have to undergo unanticipated treatment that could cost thousands of dollars. They are also more likely to lack health insurance than their white counterparts and face other structural barriers to treatment, further compounding the economic impact they face. As noted above, people of color are already bearing the brunt of the surge in unemployment. According to the Pew Research Center, 29 percent of Latino households have already experienced a layoff and 40 percent have had to take a pay cut. These factors could undermine the financial well-being of countless households, many of which already struggle to cover student loan payments, child care, and other expenses and are targeted by predatory lenders.
Housing instability in the wake of the coronavirus
Many of the federal homeownership and housing affordability policies of the 20th century disproportionately benefited white households while excluding households of color. Today, 73 percent of white families own their own home, compared with just 41 percent of Black families, 49 percent of Latinx families, 58 percent of Native American families, and 63 percent of Asian American families, according to a CAP analysis of U.S. Census Bureau data.* Even when people of color are able to purchase their own homes, they often have to pay higher mortgage rates than their white neighbors. Renters of color are also at much higher risk of eviction. The COVID-19 pandemic will likely only exacerbate these disparities, as people of color are less likely to maintain steady incomes and to be able to depend on existing wealth to get through the current economic emergency.
Discrimination will slow the economic recovery in communities of color
Despite the legislative achievements made during and after the civil rights movement, people of color continue to endure rampant racial discrimination. According to recent research, 27 percent of Asian Americans, 31 percent of Native Americans, 33 percent of Latinos, and 56 percent of African Americans have experienced discrimination when applying for jobs. People of color also withstand high levels of discrimination when seeking promotions or equal pay and when trying to rent or buy housing. Women of color face the compounding effects of gender and racial discrimination when attempting to secure employment and housing.
The United States will eventually emerge from the COVID-19 pandemic and begin to rebuild its economy. However, evidence demonstrates that while workers of color are often the first to be fired during economic downturns, they are often the last to be rehired during recoveries. This recovery may be especially uneven due to the flood of xenophobia and anti-Asian hate incidents that have characterized the current crisis. Racial discrimination will prolong the economic fallout in communities of color unless lawmakers act now to prevent it.
As policymakers continue to put forward ideas to help Americans recover from this pandemic, they must provide targeted interventions for people of color, who are disproportionately affected by this virus.
Recommendations for immediate coronavirus relief
In fewer than three months, the pandemic has exacted a terrible toll on the U.S. economy. Millions of Americans have lost their jobs, and countless businesses are struggling to sustain themselves. Thankfully, federal, state, and local lawmakers have demonstrated their eagerness to mitigate the economic effects of the pandemic. But policymakers should pursue the following measures to ensure that people of color are protected.
Expand access to unemployment insurance benefits
Last month, federal lawmakers expanded unemployment insurance (UI) benefits ahead of the expected national increase in joblessness. In recent years, however, many states with high percentages of Black and Latinx residents have made it difficult to apply for and receive benefits. For example, less than 15 percent of unemployed people in Louisiana, Mississippi, and Georgia—the three states with the highest percentage of Black residents—were able to collect UI benefits in 2018. States should dismantle structural barriers to UI benefits to ensure all Americans can obtain the support they need to withstand the current economic crisis.
Ensure low-income individuals have access to no-cost testing and treatment related to COVID-19
Recent relief packages have extended no-cost testing for COVID-19 but have yet to address the potential costs of treatment, especially for those who do not currently have health insurance. In 2018, more than 1 in 6 Black, Hispanic, Asian American, and American Indian and Alaska Native people were unable to see a doctor because of cost. Despite the intent of the Families First Coronavirus Response Act, shortly after its passage the federal government exempted a number of employers—which account for an estimated 75 percent of workers—from federal paid leave. Furthermore, there are a number of states—including Florida, Georgia, and Wisconsin—that have failed to expand Medicaid. Medicaid expansion would cover most or almost most of the treatment costs an individual may incur. More must be done to ensure that all Americans have access to safe, affordable treatment.
Send additional cash and other financial assistance directly to households
The federal stimulus package known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides much-needed cash assistance to American families. But it is insufficient to cover the unexpected medical costs and negative income shocks that will disproportionately hurt people of color in the coming weeks. Approximately 17 percent of Black households and 14 percent of Latinx households are unbanked, which means they will have to wait weeks or even months to receive a paper check from the federal government. For the duration of the crisis, lawmakers should provide additional rounds of assistance through a progressive formula that promotes equity.
Provide targeted assistance to minority-owned businesses
Federal, state, and local lawmakers are already taking steps to protect small businesses. The CARES Act includes forgivable loans, tax credits and deferrals, and other measures to encourage small businesses to retain employees. Cities including Sacramento and New York have offered zero-interest loans and direct cash grants. But few jurisdictions have enacted legislation providing targeted assistance to minority-owned businesses. Lawmakers should substantially expand the resources and authority of the Minority Business Development Agency and allocate financial assistance specifically for minority-owned businesses.
Prohibit evictions and foreclosures
With little to no liquid wealth and vulnerable job prospects, people of color are more likely to face housing insecurity during the current economic downturn, including exposure to eviction and foreclosure. The prohibition of foreclosures on all federally backed mortgages for 60 days through the CARES Act will not be enough for homeowners. Many Black homeowners are already in a precarious economic situation, and this pandemic will only exacerbate their financial difficulties. The prohibition should be extended through the end of the year. Also, all evictions should be stayed until the end of the year.
Ease the burden of student loan debt
Tens of millions of Americans, especially people of color, are struggling to pay down their student loans. While previous stimulus bills addressed the emergency needs of defaulted borrowers and suspended payments on federally held student loans, they neglected payments on Perkins and Federal Family Education Loans. Future packages should include these borrowers and ensure that all borrowers receiving temporary relief are not subject to capitalization in interest when this period elapses. In addition, $10,000 in federal student loan debt should be canceled.
Strengthen the Consumer Financial Protection Bureau
With fewer assets and less liquidity, people of color are likely to struggle to withstand the economic fallout of the COVID-19 pandemic. This anxiety puts them at greater risk of financial exploitation by predatory lenders. Federal lawmakers should expand the resources and authority of the Consumer Financial Protection Bureau to combat deceptive financial tactics and other forms of pandemic profiteering.
Suspend negative credit reporting
The CARES Act neglected to include any substantial protections for consumer credit scores. Countless American families are currently experiencing severe financial shocks through no fault of their own. At least 16 million workers filed for unemployment in just the past three weeks. Americans should not be penalized for depending more heavily on consumer credit in these uncertain times. This is especially important for people of color, who have less wealth, depend more heavily on credit during emergencies, and are more likely to experience unemployment during economic downturns. Future relief packages should temporarily restrict the effect that high balance-to-limit ratios, new credit, and delinquencies have on credit scores.
Enact and fully enforce employment discrimination statutes
The U.S. Equal Employment Opportunity Commission is charged with enforcing federal laws that make it illegal to discriminate against job applicants and employees, but it lacks the funding and staff necessary to hold bad actors accountable. States have also neglected to enact and fully enforce their own civil rights statutes to protect workers of color, especially women of color, from hiring and wage discrimination. Lawmakers should provide civil rights attorneys with the resources they need to ensure a robust, equitable economic recovery.
Ensuring a robust and equitable recovery
Previous recoveries, especially those of the 20th century, created bold new policies and programs but exacerbated racial inequality. Federal mortgage insurance, the national minimum wage, overtime requirements, and collective bargaining rights are all examples of measures that are meant to assist struggling families and expand access to economic mobility, but people of color have been explicitly or implicitly excluded from those benefits. This should not happen again.
Structural racism in federal, state, and local policymaking produced and has sustained stark inequities in economic well-being in the United States. People of color—who have long endured financial exploitation, occupational segregation, and employment discrimination—remain among the most vulnerable Americans during times of economic hardship. As policymakers start devising plans to help American communities’ recovery, it is essential that they center people of color, who are not only the growing majority of Americans but also the backbone of American society. Not only will these actions strengthen the country’s overall economy immediately, but they will also prevent the unequal burden communities of color face during future economic crises.
Connor Maxwell is a senior policy analyst for Race and Ethnicity Policy at the Center for American Progress. Danyelle Solomon is the vice president of Race and Ethnicity Policy at the Center.
* Authors’ notes: The authors used the U.S. Census Bureau’s American Community Survey (ACS) from IPUMS USA to generate estimates of homeownership rates by race and ethnicity. This analysis utilized data from the 2013–2017 ACS five-year estimates. The authors weighted the percentages to reflect population characteristics.
CAP uses “Black” and “African American” interchangeably throughout many of our products. We chose to capitalize “Black” in order to reflect that we are discussing a group of people and to be consistent with the capitalization of “African American.”
To find the latest CAP resources on the coronavirus, visit our coronavirus resource page.
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