STREET SMART ECONOMICS | The pandemic widened the gap between rich and poor, but the Legislature could provide remedies
Terrible news of death and economic destruction due to the pandemic dominates the headlines, hitting hardest at the health and economic security of the most vulnerable and lower income members of the community. History and experience elsewhere show clearly that the economy can’t recover until the pandemic ends. Weak and ineffective federal efforts to contain the coronavirus and provide economic relief created an economic disaster on top of a public health catastrophe. Both the public health and the economic crises are worst for people with little money, while few of the wealthy are suffering.
America’s 651 billionaires have not only largely escaped the pandemic’s health and economic blows, they have thrived. Together, their wealth is up by over $1 trillion since mid-March. Big corporations are posting record profits, including the huge grocery chains that months ago quit paying their employees hazard pay for the risk of exposure they take every day at work.
What is required is strong federal action to both fight the pandemic and to provide economic relief to strapped households and small businesses. But even without the resources that the federal government has, the state could expand its limited capacity to provide relief by ending new tax breaks for the wealthy created by the Trump tax cuts of 2017, raising incomes taxes on millionaires and other strategies advocated by the Oregon Center for Public Policy and its partners.
The harsh and unnecessary toll of the pandemic concentrated on the least well off Other countries have done a far better job of containing the coronavirus. Culturally very much like the U.S., Australia and New Zealand have suffered 1 and 0 deaths respectively in the last month, while the U.S. reported 54,677.
More than 300,000 people in the U.S. have died, the equivalent of a hundred 9/11 attacks. The elderly are particularly susceptible to the virus. Other groups can’t avoid exposure, whether on the streets, on the job, in public transportation, in crowded housing, in nursing homes or in prisons. That combination means that communities of color and people with low incomes are in the greatest danger.
Economic shutdowns and slowdowns worst for lower-wage sectors Deep economic recession was inevitable, as people abandoned in-person activities even before lockdowns were imposed in some states to limit virus exposure. Stores, gyms, restaurants, bars, hotels, airlines, libraries and entertainment venues are shuttered. Festivals and concerts are cancelled; campgrounds were shut through the summer. Child care centers operate at low capacity for the children of essential workers. People are putting off family celebrations, dental care, non-emergency health care and haircuts.
The first line in the graph above shows how quick and deep Oregon’s job loss has been in this recession, as compared with other, economically driven downturns that took much longer to hit bottom and then to climb back.
Economic recovery depends on stopping the pandemic and providing effective relief to families and businesses, to pay the bills until they can get back to work. Weak, disjointed and ineffective federal efforts to fight the virus while delivering patchy, inadequate relief have left millions of people and big sectors of the economy crippled for months.
Thirteen million adults living with children in November reported, “The children weren’t eating enough because we couldn’t afford enough food.” One in four renters with children say they are not caught up on rent, risking eviction when protections expire at the end of December.
Lower paid service workers, disproportionately women, people of color, younger workers and immigrants, have had it worst. Employment shrank particularly in jobs where women and people of color were over-represented, on top of which many more women than men have had to cut their hours or leave the labor force entirely to care for children no longer in school or child care. Federal relief for individuals has been slow, limited and short-lived, while small business loans were grabbed by the very biggest companies eligible.
Meanwhile, billionaires gained big during the pandemic The pandemic recession hasn’t hurt America’s 651 billionaires. Together, their wealth soared to more than 4 trillion dollars, up by over a trillion since mid-March, largely due to a surging stock market. That amount would have taken each of them 113,000 years to earn working full-time at the federal minimum wage of $7.25.
Oregon’s Phil Knight has a net worth that puts him 15th on the list of U.S. billionaires, well above the average of the 651 billionaires it took to accrue over a trillion dollars in less than nine months. Even at the Portland area’s more humane minimum wage of $13.25, Knight would have had to work full-time for 853,000 years to gain the $23 billion he added to his portfolio since the mid-March lockdown.
Big retailers earn high profits, notably including local grocers not paying hazard pay With restaurants off-limits, grocers’ profits are through the roof, but they quickly quit paying hazard pay to workers exposed daily to customers who may be refusing to wear masks. According to the Brookings Institution in November:
“Top retail companies’ profits have soared during the pandemic, (but) pay for their frontline workers — in most cases — has not. In total, the top retail companies in our analysis earned on average an extra $16.9 billion in profit this year compared to last — a stunning 39% increase — while stock prices are up an average of 33%. And with few exceptions, frontline retail workers have seen little of this windfall. The 13 companies we studied raised pay for their frontline workers by an average of just $1.11 per hour since the pandemic began — a 10% increase on top of wages that are often too low to meet a family’s basic needs. On average, it has been 133 days since the retail workers in our analysis last received any hazard pay.”
Retailers in the study included WalMart, Fred Meyer, Safeway and Amazon, which owns Whole Foods. One reason their stock prices rose is that these giant corporations used windfall profits to buy back their own stock, raising stock prices, which leads to higher executive salaries, which are also often tied to stock prices. On the other hand, “hero pay” for cashiers and other low-wage, essential workers quickly disappeared, though the risk to their health and that of their families is worse than ever.
Oregon can and should push back on economic distress and inequality worsened by the pandemic While states in general are limited in their ability to expand their efforts during recessions, the Oregon Center for Public Policy has identified a number of strategies to increase tax rates at the top: Avoid incorporating new, wasteful federal tax breaks into the Oregon tax code and put the money into inclusive pandemic and wildfire relief efforts while maintaining critical public services.
We can raise state income taxes on millionaires — and billionaires — who right now pay rates not much higher than families with taxable incomes well under $20,000 a year. As a state, we can stop companies from hiding their Oregon-based profits in overseas tax havens.
Oregonians can’t wait for the federal government to get it together. Constituents may need to let their representatives know that we expect the Oregon State Legislature to step up.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a Professor of Economics Emerita, Portland State University. Street Roots is an award-winning, weekly publication focusing on economic, environmental and social justice issues. The newspaper is sold in Portland, Oregon, by people experiencing homelessness and/or extreme poverty as means of earning an income with dignity. Street Roots newspaper operates independently of Street Roots advocacy and is a part of the Street Roots organization. Learn more about Street Roots . Support your community newspaper by making a one-time or recurring gift today .
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