Coronavirus pandemic

US workers face unequal future when the coronavirus recedes

Low-wage workers expected to experience more inequality as jobs dry up and salaries fall

WASHINGTON • As the coronavirus worked its way across the United States, it cleaved the country's workforce in two: those who have the ability to work from home, and those who do not.

From baristas and hotel workers to tourism operators, people whose job requires them to show up in person are among the hardest hit in the layoffs, and also those on the low end of the US pay scale.

Unemployment is now at a level not seen in since the Great Depression nearly a century ago, and moving higher, while the coronavirus is expected to threaten the country for months to come, factors analysts fear will only serve to deepen inequality for workers in the world's largest economy.

This comes as the US recorded 960 coronavirus deaths last Saturday, bringing its total to 103,758 since the pandemic began, according to a tally kept by Johns Hopkins University. The country has logged 1.7 million cases of the virus, far more than any other nation.

"People who are well-off and highly skilled and work from home are going to demand that their employers make accommodations for them," said Associate Professor Jesse Rothstein at the University of California, Berkeley.

But "lower-skilled workers... are taking on more risk without more pay", said the former chief economist at the Labour Department .

Federal Reserve chief Jerome Powell has described the pandemic as "a great increaser of inequality", but experts say that is not inevitable, particularly if Congress passes new stimulus measures to support battered businesses and consumers.

"Every single cleavage we had before is widening," said Ms Claudia Sahm, a former principal economist with the Federal Reserve who is now with the Washington Centre for Economic Growth, adding: "We have an opportunity to do something better than what we were doing before, but it will not just happen. It has to be a policy effort."

When the coronavirus arrived, the US economy had a tight labour market, with the jobless rate near a historic low of 3.5 per cent in February, while long-stagnant wages were just starting to rise.

Yet the job market was not as healthy as it appeared.

The private-sector Job Quality Index (JQI) - which uses government employment data to gauge the balance between non-supervisory jobs with decent pay and those without - has been charting downwards for years. In February, the JQI was back near its record low reached in March 2012 as many of the jobs being created paid below the mean weekly wage, according to the index compiled by a consortium of academics and researchers.

And a study late last year from the Brookings Institution found that 44 per cent of US workers qualify as "low wage", with median annual earnings of just US$18,000 (S$25,500) a year.

When the pandemic hit and sent the unemployment rate to 14.7 in April and the economy into an almost-certain recession, low-paid workers in industries such as leisure, hospitality and food services were laid off in such large numbers their absence skewed average wages upwards.

While government data shows most consider their layoffs to be temporary, Associate Professor Michael Weber at the University of Chicago Booth School of Business warned that if businesses close or scale back staffing, job seekers will be forced to compete against each other, driving wages lower, as is typical in recession job markets.

Although grocery store chain Kroger, e-commerce giant Amazon and several fast-food companies have announced massive hirings since the pandemic hit, they do not offer any safe haven.

"Those are the very jobs that are under criticism over the last few years, given that they pay unreasonably low wages," Prof Weber said. And those type of jobs "come hand-in-hand with more precarious income situation".

Cornell University's Professor Robert Hockett, a principal law researcher on the JQI, said job seekers could demand risk premiums at workplaces where they face exposure to the coronavirus, or take equity stakes in struggling companies to help keep them afloat.

But jobless people could end up being forced to accept whatever posts they can find, particularly if Congress fails to extend the small business loans and unemployment benefits temporarily expanded in the US$2.2 trillion Cares Act approved in March.


Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on June 01, 2020, with the headline US workers face unequal future when the coronavirus recedes. Subscribe