Who Pays the Price of the COVID-19 Economic Crisis | #StillCompromising, Ep.4
By Atia Thurman, Alexandra Morshed, & Karishma Furtado
Most of us remember the Great Recession of 2007–2009. While it was bad for many, it was catastrophic for Black families. Ten years later, just as they start to emerge from the dark shadow of that economic crisis, COVID-19 happens.
As Black St. Louisans bear a greater burden of infection, hospitalization and death from the COVID-19 pandemic, they will also suffer greater financial hardship. Like the host of underlying health conditions that put Black St. Louisans at greater risk of death due to the virus, the underlying economic conditions like higher unemployment, income gaps, little to no emergency savings, and lower homeownership rates put Black families’ long-term financial health in peril. Contrary to common narratives of individual weakness and poor decision-making, these conditions are, in turn, symptoms of society’s chronic disease: racism and several centuries’ worth of policies that have systematically excluded Black families from building wealth.
As we look down the barrel of another, greater recession, this episode in the #StillCompromising series explores the impact of COVID-19 on the financial well-being of Black St. Louisans.
“Black St. Louisans are more likely to be in the impossible position of choosing between their physical health and their economic health; between taking care of their children or elderly parents and earning an income; between working and losing insurance. These challenges are not new. The pandemic is simply casting a bright and harsh light on them.”
You may have noticed that this series took a pause for a few weeks. This was to make space for work and reflection on the new wave of civil unrest sweeping our region and the nation in response to the death of George Floyd, Ahmaud Arbery, and Breonna Taylor, among others. Their deaths are a punch-to-the-gut reminder of how much work remains to be done and the costs of allowing the status quo to persist. The mobilization and response we’re seeing in the wake of those deaths also show us that change can happen, but not without awareness, understanding, and pressure.
We are returning to this series newly reminded of the pandemic of racism that is at play within the pandemic of COVID-19, and how the two are very much inter-related. We explore some of those dynamics in Episode 4, below.
The Still Compromising Series: In March of 1820, the Missouri Compromise was signed and the state of Missouri was born out of an insistence on the continued systematic subjugation and devaluation of Black lives.
In March and April of 2020–200 years later — COVID-19 is revealing that we are still very much grappling with that original sin. The pandemic and its disproportionate effect on Black St. Louisans is pulling back the veil on our broken and inequitable systems. In this series we explore how COVID-19 has laid bare the ways we continue to compromise on our shared values and how we can use this crisis as an opportunity to catalyze Racial Equity. #StillCompromising
The COVID-19 tidal wave delivers an economic blow
In March, COVID-19 delivered an immediate economic punch to St. Louis households, which Black households felt with much greater force. Nationally, more than 40 million people have filed for unemployment since the start of the pandemic, with higher rates of COVID-19-related job losses and pay cuts in Black and Hispanic households. In St. Louis, the unemployment rate jumped from 3.4% to 11.6% by the end of April. Work in the service industry (e.g., restaurants, bars, hotels), which is more likely to be done by women and Black and Hispanic people, was first to go as it was neither “essential” nor amenable to working from home.
“Essential workers in the St. Louis region are 68% more likely to be Black, 32% more likely to fall below the poverty line, and 12% more likely to be uninsured than non-frontline workers.”
From previous recessions we also know that when making layoff lists, companies often base decisions on position (e.g., support or low-authority employees) and tenure which puts women and people of color at greater risk for losing their jobs. This is a familiar pattern in employment vulnerability for our region. For the past decade, Black unemployment has persistently hovered at nearly three times that of White unemployment in the St. Louis metropolitan area. The American employer-based health insurance system and a weak Medicaid infrastructure—especially in Missouri—means that for many, losing work has also meant losing health insurance in the midst of a global health crisis.
Low-income essential workers, on the other hand, face the choice between earning an income and contracting the disease. In Episode 3, we established that essential workers in the St. Louis region are 68% more likely to be Black, 32% more likely to fall below the poverty line, and 12% more likely to be uninsured than non-frontline workers. If we look at the nearly half of frontline workers that work outside of healthcare, we see a group that is even more unprotected despite the risky nature of their work: they are twice as likely to be Black, 50% more likely to fall below the poverty line, and 40% more likely to be uninsured. For these workers, surviving COVID-19 at best translates to potential loss of income when sick leave is denied or runs out, and at worst presents a financial hit that on its own leads to severe poverty if they are uninsured or underinsured.
The disproportionately felt economic stresses of COVID-19 are compounded by mass closures of schools, which have revealed the extent to which our education system was serving, among other things, as a primary source of food and child care. This is especially true for Black children, who are more likely to live in food insecure households and less likely to have access to high quality child care.
In so many ways, the story of the disparate economic impact of COVID-19 comes down to choices: who has them and what the options are. Black St. Louisans are more likely to be in the impossible position of choosing between their physical health and their economic health; between taking care of their children or elderly parents and earning an income; between working and losing insurance. These challenges are not new. The pandemic is simply casting a bright and harsh light on them.
Black St. Louisans Are More Vulnerable to the Economic Shock of COVID-19
The making of a racialized economic catastrophe
As we face the immediate and long-term economic fallout of COVID-19, Black families are more vulnerable to the financial destruction the economic downturn will bring forth. This has much to do with the existing and widening racial wealth gap and the structural racism that created it.
“Assets don’t just help families during a financial crisis, they are the building blocks of wealth. Historical barriers to asset building have led to a significant wealth deficit by Black families, whose median and mean net worth in 2016 was less than 15 percent than that of White families.“
The term wealth can sometimes mask what we’re talking about — leading to visions of bank vaults that are better stocked for some than for others. More appropriately, we are referring to the lack of household assets that buffer against economic shocks, such as savings accounts, home equity, retirement savings, and business equity. Nationally, 58% of Black and Latino households are liquid asset poor — they do not have enough cash or savings to subsist at the federal poverty level for three months in the absence of income. More pressingly, one in five Black households have zero or negative net worth.
Assets don’t just help families during a financial crisis, they are the building blocks of wealth. Historical barriers to asset building have led to a significant wealth deficit by Black families, whose median and mean net worth in 2016 was less than 15 percent than that of White families. By other estimations, the divide in wealth is up to 40 times greater. Either way, the gap is growing and Black wealth is on the decline. At this pace, some experts predict that Black households will not achieve financial parity with White households for another two hundred plus years, and that doesn’t account for a set back the magnitude of COVID-19.
This vulnerability to financial hardship makes Black households more likely to get trapped in costly debt — due to higher subprime loans (e.g., payday loans) that target them, greater prevalence of criminal justice debt from higher municipal fines and fees, and higher rates of debt collection lawsuits in Black communities. In an analysis of the St. Louis area, Black neighborhoods experienced a rate of debt collection lawsuits that was five times higher than that in mostly White neighborhoods — adding court expenses, judgement payments and accompanying interest to the existing debt.
Wealth is a key determinant of economic mobility and opportunity, but it has been out of reach for most Black families in St. Louis. The St. Louis history is filled with schemes to categorically deny Black families access to wealth. Racial covenants, redlining, restrictive zoning codes, White flight, zoning, urban renewal, and the destruction of Black neighborhoods are among the most well documented. More recently, the overuse or misuse of Tax Increment Financing in healthy markets that are unduly designated as “blighted” siphons away resources from dis-invested neighborhoods, which are populated by majority-Black households, and benefits private, wealthy developers.
The aggregate effect of these practices has helped fuel the racial divide and further compound racialized economic isolation. Today, we know that eliminating disparities in income and homeownership, improving the investment return on homeownership and education, progressive taxation, and educational equity are the main avenues for beginning to address the historical forces that created and perpetuated the racial wealth gap.
“In 2016, it was estimated that it would take 220 years for Black families in the U.S. to catch up to White families’ 2013 wealth.”
Yet, in St. Louis, the Black median household income has remained at nearly half of the White household income since 2005. Worse, the homeownership gap between Black and White St. Louis households has widened over the past 15 years. Despite the fact that homeownership accounts for nearly 40% of Black wealth, wealth accumulation through home equity remains an elusive goal for many. This is due in part because Black St. Louisans are more likely to live in under-resourced neighborhoods with property values far below those populated by White families. Another contributing factor is that the cost of homeownership is greater for Black households, who pay more in interest, leverage more of their income, and gain less in equity. Homeownership simply doesn’t yield the same benefits for Black households.
Persistent Income and Growing Homeownership Gaps
Another way in which conventional wisdom falters for Black St. Louisans lies in the return on investment of education. In fact, the wealth gap between Black and White households increases with education. While Black individuals invest in more years of schooling and education credentials than Whites from families with comparable resources, this has not been a meaningful vehicle for economic mobility and often leaves Black students saddled with substantially more debt by age 25 compared to their White counterparts. Furthermore, education does not offer the buffer from financial loss for all. During the last economic downturn, Black families headed by someone with a college degree fared far worse than White college-educated families.
The Great Recession and the uneven recovery
The recovery from the Great Recession of 2007–2009 has been partial and uneven by race and income. A Pew Research study shows that, since the recession, the racial wealth gap has only widened, largely driven by wealth gains among super-rich White households alongside crucial losses of wealth in the Black middle class. These losses were so large because of three factors: First, entering the recession, Black households had much more of their wealth tied up in home equity (71%) compared to White households (51%). Second, they were targeted for predatory and deceptive lending practices at a higher rate. Finally, the recovery of home values in Black neighborhoods has been nowhere near that of White neighborhoods. In the City of St. Louis, Black middle-class neighborhoods in North City and some parts of South City have seen a decline in home values between 2000 and 2016, effectively hollowing out the St. Louis Black middle class.
Among lower-income households, the recession cut the 2007 ten-fold disparity in wealth between White and Black households in half, but not by lifting Black wealth. The shrinking wealth gap was driven, instead, by unrecovered losses in homeownership among lower-income White households.
Facing the future with new policy solutions
Despite generations of Black families struggling to build wealth through education, employment, and homeownership, the Great Recession resoundingly demonstrated the fallacy of our national ethos and showed that not all Americans can experience social mobility and prosperity through these means. The legacies of institutional racism, still active in many of our systems of wealth building, impede recovery for Black households. This is a lesson that went largely unlearned in the response to the Great Recession.
However, the convergence of COVID-19, another recession, and a new civil rights movement has created an opportunity like no other, one we cannot afford to miss.
- We must demand bold policies that strengthen the social infrastructure and remedy decades of wealth inequity — such as raising the minimum wage, expanding Medicaid, enacting paid family or sick leave, fully funding affordable housing, and reforming tax policies that compound wealth for the wealthiest citizens, all of which would redress the racial wealth gap and fortify middle and low-income families.
- Building on the momentum of local movements, our region must back an equitable early childhood education system and continue to support the expansion of Child Development Accounts.
- And given the potential for home ownership to grow wealth, we should look to local policy recommendations that reshape the housing landscape to be more diverse, inclusive, and prosperous.
We could go blindly into another recession and suffer the setbacks, or we can apply a racial equity lens to the financial recovery and put our region on the path toward racial equity — a future St. Louis where race no longer predicts life outcomes and everyone thrives.
Read #StillCompromising Episode 2 and sign up for our newsletter to be the first to hear about future releases.
Karishma Furtado, PhD, MPH, is the Data and Research Catalyst for Forward Through Ferguson.
Alexandra Morshed, PhD, MS, is a Postdoctoral Research Associate at the Prevention Research Center in St. Louis at the Brown School at Washington University in St. Louis.
Read #StillCompromising Episode 3 “Who’s an Essential Worker” and sign up for our newsletter to be the first to hear about future releases.
Atia Thurman, MSW is the Associate Director of the Clark-Fox Policy Institute and Manager of Brown School of Social Work Initiatives.
Alexandra Morshed, PhD, MS, is a Postdoctoral Research Associate at the Prevention Research Center in St. Louis at the Brown School at Washington University in St. Louis.
Karishma Furtado, PhD, MPH, is the Data and Research Catalyst for Forward Through Ferguson.
