With many states under lockdown, the coronavirus pandemic is taking a toll on the United States economy. But not everybody will feel the same impact, as low-income workers don’t have the financial cushion to absorb the blow.
Up to 53 million people in the U.S. — 44% of the country’s workers — earn low wages, with median hourly earnings of $10.22. They already have precarious economic circumstances but with the COVID-19 they are at a greater risk than ever.
According to an analysis by McKinsey Global Institute, the battle to contain COVID-19 could leave 42 million to 57 million net jobs vulnerable to reductions in hours or pay, temporary furloughs, or permanent layoffs.
“People who were living paycheck to paycheck do not have the financial cushion to absorb a shock of this magnitude. They need immediate assistance to pay the rent, keep the lights on, and put food on the table,” the report reads.
The researchers analyzed the vulnerability of more than 800 occupations based on whether or not they are typically deemed “essential” and whether they require close proximity to others. Then it analyzed the sector-level effects of changes in demand related to physical distancing.
Just two service industries — accommodation and food services, plus retail — account for 42% of vulnerable jobs, the report showed. Although many restaurants are using takeout and delivery, they may need fewer people to do so, and some will struggle to pay rent in the coming months.
Stores deemed “nonessential” have been closed in much of the country. Travel has also ground to a halt, canceling many flights and emptying out hotels and tourist attractions. By contrast, losses could be much more contained in primary sectors such as utilities, agriculture, and mining.
Among the estimated 13.4 million jobs that could be affected in the restaurant industry, 3.6 million involve food preparation and serving (a category that includes fast food). Another 2.6 million restaurant servers and 1.3 million restaurant cooks are vulnerable. Almost 11 million jobs in customer service and sales could be affected.
“Even before the pandemic, some 40 percent of Americans reported that they could not cover an unexpected $400 expense without borrowing or selling assets. Finances were already precarious for many of the people who are now without work,” the report reads.
A separate Brookings Institution report found that the workers most vulnerable to job loss are those with a high school diploma or less. “Even in a strong economy with low unemployment, these workers were already at the lowest run of the ladder” in terms of financial security, said Brookings Metropolitan Policy Program Fellow Martha Ross.
The largest metro areas have the highest absolute numbers of low-wage workers. For example, there are 2.7 million in the Los Angeles region (53% of the workforce), which includes 500,000 retail workers, cooks, and food servers.
Smaller regions may have smaller numbers of low-wage workers, but those numbers are still substantial within the context of the local economy. Among regions with populations between 500,000 and 1 million, for example, low-wage workers make up between 35% and 56% of the total workforce.
“As policymakers weigh different stimulus measures, they should keep these millions of low-wage workers front and center as a priority. In the short term, immediate cash assistance seems likely, and it’s the right call,” the report reads.
Nevertheless, that’s not sufficient, according to Brookings and McKinsey. Many of these workers were barely making ends meet even before COVID-19. Industries such as restaurants, cruise lines, and hotels are now seeking massive federal relief and negotiations should include worker pay, benefits, and training, they argued.