Social Economics in Uncertain Times: — Personal Finances
Part Five — What happens when one faces layoffs or furloughs? How do we address the volatile stock market? This series analyzes the behavior changes that our Uncertain Times have brought to our lives.
“I don’t know what to do…I just got furloughed,” a friend texted me in April.
Everyone knows someone who had been laid off or furloughed during these uncertain times. But even those who were lucky to keep their jobs, finances changed with personal changes. Suddenly, insurance is top of mind — especially in a global health crisis. Also, many are driven to the stock market, hoping to turn a quick buck. How do we manage our finances in a changing job market? How can we ensure our insurance covers our healthcare needs? With the stock market down and up, what do we do with our stocks?
1) Layoffs versus Furloughs
During the early days of the lockdown, layoffs hit all industries. In NYC, musicians, singers, dancers, Broadway actors, fitness instructors, and anyone visibly interacting with others lost their jobs overnight. The term “furlough” started being used for companies to tell their employees that they were being laid off, but not really being laid off.
What exactly is a “furlough”? Because of the confusion between layoffs and furloughs, many people rightly applied for unemployment. Many received the weekly $600 stimulus checks through the CARES act, which supported a lot of Americans through July. However, an interesting loophole is that gig workers and self-employed people are still able to receive the CARES act benefit through the end of the year. So will this cause people in certain industries to avoid the job market until 2021? Will this loophole support the job market in other industries?
2) Insurance
In a global health crisis, health insurance is an essential factor. When many people are losing their jobs, households are losing health insurance coverage. In March 2020, Medicaid enrollment was up for the first time since 2017. By April 2020, Medicaid enrollment had increased by 1.3 million.
But COVID-19 tests were covered by the government. Even if one does not have health insurance, one can get a free COVID-19 test in NYC. Even if testing is available, the speed and inaccuracy of the tests raise other health and logical issues. What if someone who does not have insurance is sick with the flu or a cold and tests negative for COVID-19? Does the US healthcare. system cover this person? If someone has COVID-19, does the healthcare system cover their test, as well as ventilators, and other treatments? Because of healthcare coverage’s ambiguity, someone without insurance may not seek healthcare treatment because of fear of financial costs. While healthcare coverage has always been an issue in the U.S., the pandemic exacerbated the problem.
3) Robinhood — Stock Market Bulls?
Robinhood is an app that Gen Z popularized because of its low barrier to entry to buy or sell stocks. College students invested their savings (often their parent’s money) into Robinhood as a hobby. Entire meme accounts were popularized overnight making fun of, yet begrudgingly understanding the financial windfall of the “Robinhood bois”. Those who invested in pharmaceutical stocks saw phenomenal gains in the early pandemic days. But as with gambling, the stock market has two sides.
In June 2020, a student committed suicide because he saw a $730,000 loss in his trading account. The balance did not reflect a user’s portfolio or debt owed, but rather was likely due to complex options trades, which can settle over a few days. These numbers could cause financial and emotional distress for those who aren’t familiar with the nuances of complex trades, and at least in this case, ended in tragedy.
The timing of the market is dangerous. No one knows what will happen unless they have inside knowledge. Generally, good investors understand the swings of the market and watch returns over a 5- and 10-year period. Although in August 2020 the market had returned to February highs, the market had almost crashed in March 2020. Despite the strange economy, the stock market is currently still bulls all the way. So don’t sell you stocks (especially Tesla or Apple— watch that stock split!) just yet.
Liked my post? It’s a preview of my new book called Social Economics in Uncertain Times: How to Make Work and Life Decisions in the New Normal. Social Economics will be available on Amazon in September 2020. Pre-Order the e-Book now on Amazon! And follow me on Twitter @ameli_sans.
