Covid-19 forces the poor to choose between Scylla and Charybdis…assuming they have a choice
It is the middle of April 2020. Restaurants around the world stand empty.
In the U.S. we are entering the second month of Covid-19 restrictions on movement, business and social activities. As with most of the world, virtually the entire country is under some form of ‘stay at home’ order or lockdown.
Turbulence and uncertainty
The coronavirus pandemic has created huge uncertainties, including: how the easily the virus is transmitted, why some are infected and others aren’t, why some but not others succumb, when the combined health-economic crisis will be over, how bad the damage to the economy will be, and when will it recover.
The fear and uncertainty have been tracked by the stock market, which has exhibited violent swings. March 2020 was the most turbulent month of the stock market in the 124-year history of the Dow Jones Industrials, as measured by daily falls and rises.
While virtually everyone has been affected by the crisis, it would be an overstatement to say that “we’re all in this together.” Amid all the uncertainty, one thing is certain: the poor and vulnerable are going to suffer the most.
Those of us who still have jobs — especially jobs that don’t require us to leave the home — are the lucky ones. We can still count on an income (for now, anyway.) As businesses shutter, jobs have become a scarcer commodity and almost overnight, millions have suddenly lost their main source of livelihood. Since the middle of March, 10 percent of Americans have lost their jobs.
Unprecedented use of the term “unprecedented”
On the economic front, the present pandemic has begun eliciting comparisons not with the global financial crisis of 2008, but with the decade-long Great Depression that afflicted the nation starting in 1929. Policy makers and citizens alike are hoping for a quick recovery.
In the meantime, a shocking number of people face a grim reality as they have been pushed to the unemployment front line. In the three weeks ending on April 9, 16 million people claimed unemployment benefits. The unemployment rate has spiked to an estimated 13 percent, the highest since the Great Depression.
A Pew Research Center survey taken at the end of March found that nearly nine of out 10 Americans said their lives had changed a little and 44% said their lives had changed in a major way as a result of the coronavirus crisis.
According to the latest Financial Times-Peterson Foundation US Economic Monitor survey, also conducted at the end of March, 73% of Americans reported their income had been reduced.
These, and many other, massive changes did not gradually set in; they occurred in a matter of weeks.
The people most affected, of course, are those who have succumbed to the virus, and those in hospitals. Then there are the millions of doctors, nurses, EMT workers and thers in the healthcare sector, working on the front lines and putting their lives at risk. These new heroes are the most highly exposed to the dangers of the pandemic.
Unpleasant choices
However, on a structural level, the blow has landed hardest on low-income workers (as usual) and informal workers. Millions of people have lost their jobs in sectors that are collapsing, such as hospitality, retail, travel, manufacturing, house cleaning, childcare, or in sectors which are considered essential businesses and services, where continuing to work means more chances of exposure.
In some of these sectors — groceries, warehouses, delivery services — demand has even surged, and hundreds of thousands of jobs are being created. This is hardly a cause for jubilation, however, because simply leaving your home to go to a workplace puts you at greater risk. The low-paid employees at nursing homes, and in social care, cleaning, etc. naturally are also rewarded with a higher chance of infection.
Those who are low-paid do not have the relative luxury of white-collar workers to stay at home and work remotely. If they quit their jobs, they lose a paycheck. If they stick with it, they may be putting their lives and those of their loved ones at risk. A grim choice, to say the least.
For those in sectors that have just cratered, their source of livelihood has evaporated and it is uncertain for how long, or whether, those jobs will come back. Predictions are that many restaurants and other businesses will close permanently, which does not bode well for the economic recovery after restrictions are lifted and life goes back to normal, or a “new normal,” whatever that will look like.
While the government is spending trillions of dollars to cushion the blow, people working in informal jobs, including undocumented migrants, will not qualify for government assistance. Even the $1,200 in government relief going to the rest is not nearly enough to make up for lost employment.
And so, millions are cast out to sea in a leaky vessel, heading toward the twin catastrophe of Scylla and Charybdis. These are the people who will struggle to survive using the safety nets or their own meagre (and often non-existent) savings to carry them through. They also have fewer resources— such as savings and other assets — to fall back on during hard times.
The global shock
Low-paid, poor households are considered “vulnerable” during normal times. Vulnerable to what? Well, to the catastrophic situation we are in now. This “shock,” a term used by economists to refer to a sudden disruption with negative consequences, is probably already pushing many vulnerable into destitution.
Normally, shocks hit people at an individual level, or because a sector has been hit. Individual shocks might come in the form of an illness or injury, or death of a family breadwinner, which dry up an income stream. Sector level shocks affect an entire industry, such as the shutting down of the coal industry in England under Thatcher’s reforms, or of the textile industry in Nigeria when the country began allowing cheaper imports from China. Shocks also occasionally hit an entire nation, such as Hurricane Maria which devastated Domenica and Puerto Rico in in 2017. But this time, the shock is global, all-encompassing and, yes, unprecedented.
For individual workers, compounding the risks that come with working outside the home are the risks of simply getting to work. Many low-paid workers rely on public or shared transportation. Obviously it is more difficult to practice social distancing in confined spaces, such as subways or buses.
Circumstances are tough enough for the vulnerable who are still healthy. But for those who become ill, the situation gets much worse. Getting sick while just getting by imposes a cost not only to people’s immediate physical health, but is a tax on livelihoods and the wellbeing of dependents.
In the U.S., as in many developing countries, there are three specific areas where the poor slip through holes in social safety nets: paid sick leave, health insurance, and unemployment benefits. Combined, these big holes in the net can, perversely, incentivize people to risk their own wellbeing —and now, in the age of Covid-19, their own lives and those of others.
Lack of paid sick leave
The lack of paid sick leave doesn’t just harm individuals, it threatens the public welfare. According to the Center for Law and Social Policy (CLASP), which highlighted this issue in November 2019 (well before the pandemic hit these shores), over 32 million workers in the U.S. have no paid sick days off, with low wage workers being the least likely to have sick leave. The combination of no of sick leave and low income incentivizes behaviors that run against measures needed to mitigate the risks thrown up by the pandemic. Covid-19 can thus “cost them their livelihoods, as well as their health”.
Without paid sick leave, workers cannot afford to take unpaid time off when they are sick. That means they will continue to work, while exposing others to their illness, with potentially deadly implications. In other words, individual choices, resulting from public policies, end up harming the public good, even as it widens inequality.
Lack of health insurance
In the U.S., many of those same workers who do not have paid sick leave also lack health insurance.
According to the Centers for Disease Control, the number of uninsured Americans fell significantly —from 46.5 million to 27 million — between the time the Affordable Healthcare Act was passed in 2010, and 2016, Obama’s last year in office. Since then, the number of uninsured Americans has been creeping up again. From 2017 to 2018 it increased by 500,000, according to Tolbert et al (2019).
Unexpected healthcare costs threaten to burden already limited household finances. They disincentivize seeking treatment or preventive care. Though some governments provide free or reduced-cost services to its poorest, the coronavirus may now present an additional expense for those ineligible, or who cannot access it.
Lack of unemployment benefits
For the many who work in the informal sector, or as gig workers — think Uber and Lyft drivers — there are no unemployment benefits.
Although governments in some countries are making an effort to support those who have lost their jobs as a result of the pandemic, if you don’t have a contract, you can’t be laid off, and you can’t claim benefits. You just watch your income shrink or disappear.
Safety nets under strain
Meanwhile, NBC News reports that nonprofit community centers, who primarily serve as safety nets for un- and underinsured American citizens and immigrants, are running out of funding as the coronavirus ramps up. Not surprisingly, the poorest are suffering the most, as this USA Today article points out. A drop in donations, volunteers, supplies, and certainty of funding, combined with overall lack of preparedness, is forcing these clinics to reduce their services.
Compounding poverty
Similar to the way in which investors reap compound interest, money begets more money in an upward spiral of wealth accumulation, so does poverty beget more poverty in a downward spiral asset depletion.
Thus, other poverty factors and demographics can compound the economic and health impact of the coronavirus on the poor. For example, the poor tend to live in smaller homes, more cramped environments (think of urban slums and shantytowns) and in larger families. This makes social distancing more difficult, and isolating the sick next to impossible.
Even if more vulnerable and elderly family members are staying home and practicing social distancing, someone who works, not by choice but by necessity — may bring the virus home with them.
Being poor is bad enough, but the coronavirus, and especially the government measures taken to combat and contain it – shutting down businesses, ordering people stay at home — hurt the poor much more than anyone else.
I’ve focused on the situation in the US above. With its weak support for the poor, the US, despite being a rich country, has quite a bit in common with developing countries. A big difference is that the US is home to the world’s global currency. It can print as many dollars as it needs to bail itself out (although a move not entirely devoid of fiscal consequences).
A far-off consolation?
Plagues and pandemics sometimes reorder societies. It may be a meager consolation, but sometimes the reordering benefits the lower classes, leveling the playing field. After the Black Death swept through Europe in the 14th century, killing between 30 and 60 percent of its population, demand for labor jumped, serfs were freed from their masters, and wages increased.
For those who have been alarmed by the relentless rise in inequality in rich countries, the pandemic may be a blessing in disguise, although for many of the poor living through this crisis now it will be too little too late.
* Image by analogicus from Pixabay