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Black workers are hurt most as Congress doesn’t extend unemployment

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One mostly unintended—definitely on the Republican side—aspect of the $600 in added unemployment benefits is that it reduced racial disparities. But that means that one aspect of the $600 expiring is that those same racial disparities have come roaring back. Why? Because, for one thing “Black workers disproportionately live in states with the lowest benefit levels and the highest barriers to receiving them,” The New York Times reports. “Without the $60 federal payments, the most an unemployed worker in Florida or Alabama can receive is $275 a week.” Nearly 60% of Black workers live in the South, where state governments have spent decades ensuring workers would have the weakest protections and rights possible. So the additional $600 a week in unemployment benefits has dramatically equalized the situation between states with relatively few Black workers and relatively generous unemployment benefits and those with relatively many Black workers and appallingly weak unemployment insurance.

These disparities aren’t an accident. “Yesterday’s racist system becomes today’s incidental structural racism,” RAND Corporation economist Kathryn Edwards told The New York Times. The added federal benefit also reduced racial disparities by expanding the categories of workers covered by unemployment, since historically another way Black workers have been excluded from government assistance is by excluding the types of work Black workers do from being covered. And frankly, as Republicans resist renewing the additional $600 in unemployment that they allowed to expire, we have to consider the fact that it benefits Black people as one more reason Republicans oppose it.

This blog originally appeared at Daily Kos on August 8, 2020. Reprinted with permission.

About the Author: Laura Clawson has been a Daily Kos contributing editor since December 2006. Full-time staff since 2011, currently assistant managing editor.


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‘Crashing down’: How the child care crisis is magnifying racial disparities

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Ninety-three percent of child care workers are women, and 45 percent are Black, Asian or Latino, while half of child care businesses are minority-owned.

The collapse of the child care industry is hitting women of color the hardest, threatening to stoke racial and gender inequities and putting pressure on Congress to address the crisis in its new round of coronavirus aid.

Black and Latina women are suffering a double-barreled blow as coronavirus-induced shutdowns batter the industry, since they dominate the ranks of child care providers and have long struggled to gain access to the services for their own kids.

The sector, which saw 60 percent of its programs close at the height of the pandemic before rebounding slightly, is still down some 237,000 workers from last year — a number that’s likely to grow as states shut down again, economists say. Some projections show the industry could permanently lose half its programs. Two in 5 child care providers this month said they will shut for good without an infusion of federal funding.

The issue is shaping up to be a key faultline as Congress this week enters negotiations over the next round of coronavirus aid, which Senate Majority Leader Mitch McConnell has said he hopes to clear before August recess.

If “we allow them to go under, we are jeopardizing both the incomes and wealth of that workforce,” said Melissa Boteach, a vice president at National Women’s Law Center. And “the parents who are not going to be able to go back to work or who are going to have to give up their careers or jobs for less pay — because they can’t find the child care to cover the hours that they need — are disproportionately going to be women and women of color.”

Ninety-three percent of child care workers are women, and 45 percent are Black, Asian or Latino, according to Labor Department data. And half of child care businesses are minority-owned. At the same time, Black and Latina mothers are more likely to be the family breadwinners, more likely to hold low-paying jobs, more likely to be considered essential workers, and more likely to live in child care deserts.

Democrats have put forth two proposals that would appropriate more than $60 billion to the industry, which they say are just a starting point. The measures, H.R. 7027 and H.R. 7327, cleared the House Rules Committee Friday and are expected on the floor July 29, lawmakers said. Both include provisions that would give priority to providers serving low-income, “low-supply” and other high-need communities.

The Child Care Is Essential Act, led by Rep. Rosa DeLauro (D-Conn.) in the House, would appropriate $50 billion for the establishment of a grant program within the Department of Homeland Security’s Child Care and Development Block Grants that would aid providers that have either remained open or are temporarily closed due to Covid-19. Senate Democrats included identical language in their Coronavirus Child Care and Education Relief Act, S. 4112, which Minority Leader Chuck Schumer advocated for on a press call Tuesday.

The Child Care for Economy Recovery Act, introduced by Democrats in the House Ways and Means and Appropriations committees last month, would take a broader look at rescuing the industry — creating and expanding tax cuts, in addition to appropriating $10 billion for a new grant program for states to improve their child care infrastructure.

“When you look at the impact on providers and providers of color, and women of color who are parents looking for jobs, we really created a perfect storm,” said Rep. Katherine Clark (D-Mass.), vice chair of the Democratic caucus and a sponsor of both bills.

Separately, Schumer on Thursday released a plan to aid communities of color, which would include $135 billion for child care, health care and job training. And the presumptive Democratic presidential nominee, Joe Biden, rolled out a $750 billion proposal Tuesday that would bolster the industry, including by providing free preschool for all 3- and 4-year-olds, building new child care facilities, and creating tax credits for informal caregivers.

Republicans agree the industry needs help. A group of 41 GOP House members sent a letter to leadership Thursday calling for “additional, targeted support.” But they’re likely to pursue a different approach than Democrats, as well as a lower level of funding.

“I do want additional dollars going toward child care,” said Sen. Joni Ernst (R-Iowa), who unveiled a Senate GOP proposal last week. But “we simply, as a nation, can’t do another $3-plus trillion package.”

Top Republicans including Senate HELP Chair Lamar Alexander of Tennessee are behind Ernst’s plan, which would create a grant program that would give up to nine months of financial assistance to child care providers for coverage of coronavirus-related expenses. It would also offer technical aid to help a diversity of providers access the program.

Though the bill appropriates no new money to the industry, Ernst and Sen. Kelly Loeffler (R-Ga.) offered a resolution in May proposing that the next coronavirus relief package include $25 billion for the Child Care and Block Development Grant program. They’re still pushing for that funding, Ernst told POLITICO, and the grant program “could be a subset” of that.

Democrats slammed the proposal for not providing enough.

“To say ‘we’re going to pass something without a dime in it’ is really not an approach that is workable,” said Sen. Patty Murray (D-Wash.), the top ranking Democrat on the HELP Committee and sponsor of S. 4112, as well as the Senate companion to H.R. 7027. Even $25 billion “is not enough to address this crisis.”

It’s unclear what middle ground the parties will reach. But it looks like the package will include significantly higher levels of investment in child care than previous legislation. The CARES Act appropriated $3.5 billion to the Child Care and Block Development Grant program, while the HEROES Act — the House-passed Democratic proposal for the next round of aid — would appropriate $7 billion.

The Trump administration has remained mostly mute on the topic, focusing more on reopening schools.

“We obviously do want more child care providers,” Brooke Rollins, director of the White House’s Domestic Policy Council, said at a POLITICO eventThursday. “There’s no doubt that is an issue that will remain a priority for this White House.” But “we’ve also been very clear that we believe that schools need to reopen.”

Economists say that even pre-pandemic, the industry was stretched thin, operating on minuscule margins and accessible mainly to the wealthiest — and whitest — communities.

“Covid has poured salt in those wounds,” Elise Gould, an economist with the Economic Policy Center, said. “It’s not just out of reach, it’s unavailable.”

These pre-existing weaknesses, combined with the increasing number of schools that have announced they will not be opening come fall, signal the need for an immediate response.

“Child care providers have been pushed to the brink, and they’re going to start closing,” Katie Hamm, a vice president at the Democratic-leaning Center for American Progress, said. “We’re hitting a crescendo on this where if Congress doesn’t do something, it’s all going to come crashing down.”

This blog originally appeared at Politico on July 21, 2020. Reprinted with permission.

About the Author: Eleanor Mueller is a legislative reporter for POLITICO Pro, covering policy passing through Congress. She also authors Day Ahead, POLITICO Pro’s daily newsletter rounding up Capitol Hill goings-on.


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How the Trump Administration’s Small Business Protection Program Has Failed Communities of Color

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The Covid-19 pandemic has devastated businesses run by people of color. The Trump administration’s Small Business Administration isn’t helping.

In recent weeks, it’s become increasingly clear that the federal government has failed to protect minority-owned businesses from the pandemic’s economic fallout. According to data published by the National Bureau of Economic Research, the number of black-owned businesses decreased by 41% between February and April. For the businesses that have survived, their cash balances decreased by 26%, compared with a 12% decline overall. 

While Congress enacted two small business loan programs to be administered by the Small Business Administration (SBA), many entrepreneurs of color, who are facing disproportionate effects of the current economic crisis, did not receive emergency funding. Meanwhile, large and well-connected companies, some of which are owned by members of Congress, walked away with over $1 billion in loans from the SBA. 

Trump’s SBA not only failed to support businesses struggling the most in the midst of the pandemic, but it failed to fulfill its purpose as defined by Congress. When it first created the agency, Congress specifically outlined the SBA’s obligation to support entrepreneurs from socially disadvantaged groups, who faced (and continue to face) limited access to credit, lower credit scores, a lack of relationships with financial institutions and lower levels of personal wealth. 

In the Small Business Act of 1953, Congress wrote: “[T]he opportunity for full participation in our free enterprise system by socially and economically disadvantaged persons is essential if we are to obtain social and economic equality for such persons and improve the functioning of our national economy.” In Section 8(a) of the Small Business Act, Congress laid out the SBA’s particular responsibilities to aide “small business concerns owned and controlled by socially and economically disadvantaged individuals so that such concerns can compete on an equal basis in the American economy,” whether that meant a leg up in federal contracting, management assistance, or whatever else the SBA determined would aid entrepreneurs of color.

Structural disadvantage

Today, business owners of color continue to face the same structural challenges that put them at a financial disadvantage compared to white business owners when the SBA was created. A typical black entrepreneur receives a third of the startup capital the typical white entrepreneur receives. Business owners of color tend to have smaller businesses on average than white-owned small businesses. Moreover, 95% of businesses owned by Black Americans have no employees, compared with just 78% of white-owned businesses. 

These facts illustrate just how vital the SBA’s programs remain for minority-owned businesses. Yet, by all accounts, business owners of color have faced disproportionate financial suffering during this pandemic, despite the two small business loan programs administered by an agency with a specific mandate to assist them. 

Consider the larger of the two SBA loan programs: The Paycheck Protection Program (PPP). PPP uses private financial institutions to issue federal loans to small businesses that can later be forgiven, so long as the business spends 60% of the funds on payroll expenses. Since the program’s rollout, SBA failed to issue clear guidance to lenders, or conduct adequate oversight. As a result, banks prioritized larger, better-connected businesses. Plus, simply by the nature of the program’s first-come-first-served design, those bigger and better-connected businesses swallowed up most of PPP’s initial funds, leaving many minority-owned businesses to wait until the second round of funding was approved. By then, many businesses had already closed their doors for good.

For those business owners of color who actually got their hands on PPP money, the loans turned out to be less useful than imagined. Minority-owned small businesses are less likely to have employees but were still only permitted to use 40% of their PPP loans on non-payroll expenses. 

That’s where the SBA’s smaller program—the Economic Injury Disaster Loan Program (EIDL)—could have come in handy. EIDLs provide small businesses with more flexible capital that can be used for a variety of business expenses, not just payroll. Additionally, businesses that apply for EIDL are eligible to receive a $10,000 advance on the loan that does not need to be paid back. Unfortunately, the SBA arbitrarily limited the amount of money businesses could receive from the $10,000 grants, and long wait times have left many business owners without any funds months after Congress created the program. And if business owners of color didn’t apply months ago, they won’t qualify for EIDL now: Treasury Secretary Steven Mnuchin limited the program to allow only agricultural businesses in April.

The disparities in access to SBA loans for business owners of color are stark. In a recent report, UnidosUS and Color of Change found that only 1 in 10 Black or Latinx-owned small businesses received the PPP assistance they requested. Another reportfrom Goldman Sachs found that only 79% of Black business owners applied for a PPP loan, compared with 91% of small businesses overall—and that 26% of black business owners have less than one month of cash reserves compared with 17% overall. These disparities might have been reduced but for the SBA’s failure to instruct lenders to prioritize underserved businesses, including minority and women-owned businesses. 

Unfortunately, the SBA’s inaction in this crisis follows a decades-long tradition of failing to support its mandate to help business owners of color. The agency has not adequately provided small business owners of color with the support the Small Business Act calls for in nearly 70 years since the legislation’s passing.

8(a) program

Through the SBA’s 8(a) business development program, minority-owned businesses can compete for set-aside government contracts and receive management and technical training. Yet since its inception, opportunistic white entrepreneurs have defrauded and abused the program, while the SBA has failed to ensure money got in the right hands.

In 1977, the Washington Post reported that white-owned businesses were fraudulently applying to the program, procuring lucrative government contracts meant for minority-owned businesses. Meanwhile, actual business owners of color in the program reported that they lacked technical support and guidance from the SBA. One black small business owner reported that the SBA offered to let him split a contract with a company owned by the white brother-in-law of an SBA employee. Two Nixon officials received 8(a) contracts. One federal official received an 8(a) contract for his business that had no assets or employees and then subcontracted all the work to white-owned businesses.

In 1979, in response to the abuse, the SBA Office of Inspector General (OIG) released a report that found that one in five 8(a) participants were defrauding the program. The Government Accountability Office (GAO) found the 8(a) program’s eligibility criteria were not applied uniformly, and the SBA failed to properly report data on participants.

Congress attempted to improve the 8(a) program in 1978, 1980, and 1988, but it continued to be mismanaged and plagued by fraud. According to GAO, most of the program’s dollars went to a small number of firms, and the program’s management training did not provide minority-owned businesses with the tools to become self-sufficient businesses, evident from their lack of non-8(a) clients after graduating from the program. The GAO also reported that the 8(a) program lacked resources and failed to properly record data on the participating firms – in other words, they conveniently were unable to track the improvement (or lack thereof) of participants. 

Even after continued reports of mismanagement and fraud, the SBA failed to effectively implement GAO’s recommendations. In 1996, the GAO reported that, while the SBA had made some progress, 8(a) was still not optimally supporting minority-owned businesses. The report criticized the program for only graduating three businesses. Again in 2000 and 2008, the GAO reported that the program was understaffed and under-resourced and had failed to implement recommendations to improve the program and reduce fraud. This lack of resources meant the SBA could not effectively support minority-owned firms participating in the program or ensure participants met eligibility requirements.

In 2009, after years of inaction, ProPublica revealed that the Department of Defense had awarded nearly $30 million in 8(a) contracts to companies under criminal investigation for falsely claiming to be small minority-owned businesses. In 2010, GAO discovered that 14 ineligible firms received $325 million in 8(a) contracts meant for minority-owned businesses, and in some cases, the SBA was aware of the firm’s ineligibility at the time it gave out the money. As recently as 2018, the SBA inspector general reported the agency failed to remove ineligible companies from the program. Ultimately, it is unclear just how much money has been pilfered from the intended minority business owners due to the SBA’s negligence over the years.

HUBZone

In 1997, the SBA created the HUBZone program, which set aside federal contracts for businesses located in “Historically Underutilized Business Zones.” While not directly providing support to minority-owned businesses, this program served low-income communities, many of which have disproportionate levels of racial and ethnic minorities. This program would help channel funds into these communities, providing much-needed economic opportunity and growth.

Yet, since its inception, HUBZone faced many of the same issues plaguing 8(a). The SBA inaccurately reported data on HUBZone participants, which led to errors in reported levels of growth and achievement, according to one GAO report. Another report criticized the SBA’s communication about program guidelines to participating firms.

Beyond mismanagement and data entry errors, the SBA used inaccurate maps to determine whether small businesses were located in economically distressed areas. A 2008 GAO report found that the SBA awarded HUBZone contracts to small businesses in wealthy communities due to inaccurate maps and failed to address these inaccuracies with regular monitoring required by SBA policy. 

Despite the numerous warnings from GAO and OIG, the SBA did not effectively improve HUBZone, and in 2019, the Washington Post reported that $800 million in HUBZone contract dollars went to just 11 businesses, many of which were located in Washington, D.C.’s wealthy neighborhoods, including Dupont Circle, Navy Yard and downtown. Meanwhile, business owners in poorer neighborhoods were left behind. In the program’s 20-plus-year history, it has never once met its goal of awarding 3% of federal contracts to HUBZone firms. 

Reimagining the SBA

The SBA’s consistent failure to adequately fulfill its congressional mandate, especially in the age of Covid-19, requires that we reimagine what the agency could look like. If future administrations provided the SBA with adequate funding and appointed a Small Business Administrator willing to invest in these defunct programs, the SBA might be able to help build a more inclusive, stronger economy.

Democratic nominee Joe Biden has reportedly begun hearing proposals for closing the racial wealth gap from his economic advisors. He’d do well to look at what tools would already be available to accomplish that ambitious goal should he become president in 2021—the SBA is one of them. 

Unfortunately, over the past several decades, presidents have cut the SBA’s budget while its own leaders have supported these cuts in the name of balanced budgets and efficiency. Decades of budget cuts have starved the SBA of the resources needed to conduct proper oversight and tracking of its minority lending programs and its PPP and EIDL programs. 

The SBA must do better. As Connie Evans of the Association for Enterprise Opportunity recently told the Senate Committee on Small Business and Entrepreneurship, the pandemic’s “economic consequences are projected to erase decades of minority enterprise growth in underserved markets.” But with a new administration and Small Business Administrator dedicated to uplifting communities of color, the SBA could finally accomplish its long-disregarded goals.

This blog originally appeared at In These Times on July 8, 2020. Reprinted with permission.

About the Author: Miranda Litwak is a researcher for the Revolving Door Project.


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Women, minorities disproportionately reliant on jobless aid, data shows

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“It is not a stretch to say this policy choice is also a racial justice policy choice,” the Economic Policy Institute’s Heidi Shierholz said.

Women and racial minorities are disproportionately reliant on unemployment insurance, economic data shows, leaving them most vulnerable if Congress decides not to renew the expanded benefits that are set to expire at the end of the month.

Both groups are not only more likely to be out of work and eligible to receive state-administered benefits, but are also to receive less because of historically low wages, research shows. That creates outsize dependence on the federally supplied additional $600 a week enacted via coronavirus aid legislation and slated to end at the end of this month.

Forty-seven percent of recipients of state unemployment benefits in July are projected to be nonwhite, according to the Congressional Budget Office. Thirteen percent of female workers will receive benefits the same month, compared with 11 percent of male workers. At the same time, women make up two-thirds of the lowest-paid workers in the U.S. And nonwhite workers are far more likely to be paid poverty-level wages than their white peers.

The extra aid accounts for an average two-thirds of recipients’ benefits, and letting it lapse could risk widening gender and racial wealth gaps and causing irreparable harm to the economy, economists say.

“Cutting off that $600 will exacerbate racial and ethnic inequality, it will exacerbate gender inequality,” said the Economic Policy Institute’s Heidi Shierholz, former DOL chief economist. She called the money “a lifeline for many women, many minorities — Black and Hispanic workers in particular.”

“It is not a stretch to say this policy choice is also a racial justice policy choice.”

The question of whether to extend the extra $600 a week, known as Federal Pandemic Unemployment Compensation, is a key fault line in the negotiations over the next coronavirus response package, which Senate Majority Leader Mitch McConnell has said he hopes to clear before Congress’ August recess.

Democrats say the expanded benefits are critical to support hard-hit demographics.

“The findings in last week’s CBO report show how certain, vulnerable populations particularly feel Covid-19-related economic hardships, making the need to extend the supplemental pandemic unemployment compensation more urgent,” House Ways and Means Chairman Richard Neal (D-Mass.) said in a statement to POLITICO. “Women and people of color have been disproportionately affected by coronavirus layoffs, and if we don’t continue emergency support until it is safe to return to work and safe, affordable child care is available, there will be devastating, long-lasting consequences for families and for our economy.”

Republicans counter that the benefits discourage workers from returning to their jobs and may prevent the economy from making a timely recovery.

“The unemployment benefits are a barrier for people coming back to work,” the top Republican on the Ways and Means Committee, Kevin Brady of Texas, said on CNBC Monday.

McConnell has said he opposes including the $600 a week enhancement in the next coronavirus response package, calling it “a bonus not to go back to work.”

The unemployment rate for women and minorities has remained consistently higher over the course of the pandemic. In June, the rate for women was 11.2 percent, according to Labor Department data, compared to 10.2 percent for men. In the same month, the jobless rate for Black and Hispanic workers was 15.4 and 14.5 percent, respectively; the rate for white workers was 10.1 percent.

Part of this is because female and minority workers hold a majority of jobs in sectors that saw the greatest percent of job loss due to the pandemic. Despite some gains, the child care industry is still down 237,000 workers from June 2019, per DOL’s Bureau of Labor Statistics. More than 93 percent of child care workers are women, according to the agency, and 45.3 percent are Black, Asian or Latino.

Losing the additional benefits “can be devastating,” said Andre Perry, a fellow at the Brookings Institution. “Women, and Black and brown women in particular, needed that pay to make up for the inequality that is present in their everyday lives.”

“There was an epidemic before this pandemic, and it was inequality.”

This blog originally appeared at Politico on July 9, 2020. Reprinted with permission.

About the Author: Eleanor Mueller is a legislative reporter for POLITICO Pro, covering policy passing through Congress. She also authors Day Ahead, POLITICO Pro’s daily newsletter rounding up Capitol Hill goings-on.


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The thing about systemic racism is it’s systemic: This week in the war on workers

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According to government statistics, the wage gap between white men and Black men has shrunk dramatically since the 1950s. But that’s only true, The New York Times’ David Leonhardt points out, if you compare workers—and the problem is, a lot of Black men have been pushed out of the workforce, in significant part by mass incarceration. When comparing Black men and white men, regardless of if they work, the wage gap is about the same as it was in 1950. “An end to mass incarceration would help,” Leonhardt writes. “So would policies that attempt to reverse decades of government-encouraged racism—especially in housing. But it’s possible that nothing would have a bigger impact than policies that lifted the pay of all working-class families, across races.” 

It’s the combination of racism and inequality we can see in this pattern that set the stage for the disproportionate impact of the coronavirus on Black people. Black people have been more likely to lose their jobs during the pandemic than white people, but they also disproportionately work at essential jobs that require them to expose themselves to possible infection. They’re less likely to have paid sick leave, the ability to work from home, and health insurance. Racism and inequality produce chronic health problems that make Black people more vulnerable to COVID-19. The list goes on and on and on.

This blog originally appeared at Daily Kos on June 27, 2020. Reprinted with permission.

About the Author: Laura Clawson has been a Daily Kos contributing editor since December 2006. Full-time staff since 2011, currently assistant managing editor.


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Unemployment situation is improving for some groups and not others, and you’ll never guess who

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Unemployment is still terrible, but with some signs of improvementWhat signs of improvement is an interesting question, and The New York Times’ Upshot jobless tracker suggests the answer is all too predictable, because what’s more predictable in the U.S. economy than inequality?

The tracker finds the unemployment situation improving slightly for white people … while layoffs of Black people grow. And unemployment hasn’t dropped for women, but men’s employment has risen. So that’s what the start of reopening looks like: things are getting better for white people and men, not improving for women, and getting worse for Black people.

Where have we heard that story before? Oh, right, everywhere, all the time. The data doesn’t allow a detailed explanation for why this is—“One possibility is that the pandemic is disproportionately hitting industries and regions that are more heavily African-American,” and the industry explanation almost certainly applies to the gender gap—but while it will be good to be able to pick it apart more fully as more data emerges, we don’t want to lose the bigger story about U.S. racial and gender inequality.

The Upshot notes that its tracker isn’t official government data, but is “an analysis of daily surveys by Civis Analytics, a data science firm that works with businesses and Democratic campaigns.” While it’s not official data, it has been “roughly consistent” with that data when it comes out, having shown some improvement ahead of the May jobs report.

This blog originally appeared at Daily Kos on June 17, 2020. Reprinted with permission.

About the Author: Laura Clawson has been a Daily Kos contributing editor since December 2006. Full-time staff since 2011, currently assistant managing editor.


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Mounting unemployment crisis fuels racial wealth gap

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Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show.

The economic meltdown that has devastated the country amid the coronavirus pandemic has proven uniquely damaging for black Americans, threatening to exacerbate an already staggering racial wealth gap and fueling nationwide protests focused on racial justice.

Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show — and less than half of black adults are now employed. More than 1 in 6 black workers was out of a job in May, the Labor Department reported Friday, and the black unemployment rate continued to rise even as the overall rate ticked downward.

Black workers are also more heavily represented in frontline industries that leave them more likely to be exposed to the coronavirus — which has been killing disproportionate numbers of black Americans — and less likely to be able to work from home.

At the same time, black Americans have also historically earned lower wages, owned fewer homes and accumulated less wealth than their white counterparts, leaving them less able to weather an extended period of time with little or no income. And economists warn that long-term economic effects are likely to be more damaging for workers of color.

“Every corner of inequality has been exposed,” said Lisa Cook, an economics and international relations professor at Michigan State University who served on the Council of Economic Advisers during the Obama administration. “From the health care system, to wealth data, to income data, to occupational discrimination — all of it seems to be laid bare right now.”

The 16.8 percent jobless rate for black workers in May compares to 12.4 percent for white workers — a sizable gap but not a dramatic one for a statistic that is typically twice as high for black workers, even in strong economies. Still, it marks a stunning reversal for African Americans, who were finally starting to reap the benefits from a decade of economic expansion and hit their lowest-ever unemployment rate of 5.4 percent late last summer.

While it took 10 years for the employment rate for black workers of prime working age to climb 10 points, for example, those gains are likely to be wiped out in a matter of months, said Janelle Jones, managing director for policy and research at Groundwork Collaborative, an advocacy group promoting progressive economic causes.

“When the economy bounces back,” she said, “we know that it’s not going to bounce back as quickly for black workers.”

The composition of the labor market also leaves black workers at heightened risk of long-term unemployment compared to white workers. Workers of color are more heavily represented in jobs with higher risk of coronavirus exposure — customer service, food service and security, for example — which were hit first and hardest and are likely to be among the last to come back, according to a new analysis led by PolicyLink and funded by JPMorgan Chase.

Some of those concerns may have already begun to play out. The May jobs report showed an unexpected drop in the overall unemployment rate as the economy gained jobs in industries like hospitality and construction. But jobs in local government, where black workers are heavily employed, continued to drop sharply.

As a result, the white unemployment rate dropped nearly 2 percentage points — while the black unemployment rate rose 0.1 percentage point.

In other areas, too, black workers and families are bearing the brunt of the deep recession being felt across the country. More than 55 percent of black households report having lost employment income since mid-March, according to a Census survey released this week, as compared to 43 percent of white households.

And any signs of recovery could be just as uneven: More than 2 in 5 black households expect to continue losing income over the next month, the survey showed, while just over a quarter of white households reported the same.

“So you can imagine the financial strain that a lot of these families are under,” said Connor Maxwell, a senior policy analyst at the left-leaning Center for American Progress. “Even if they’re able to get jobs after this recovery, are they going to be able to bounce back economically the same way as a lawyer who has been working remotely for the past three months?”

Economists and analysts are increasingly calling on Congress to step in to boost recovery efforts, allocate more aid and ensure the funding that is available is being distributed evenly.

The Paycheck Protection Program, in its initial iteration, offered an early warning sign of how hundreds of billions in government-backed loans allocated to support small businesses could be less accessible for those with black owners, in part because they are less likely to have had relationships with major banks.

As a result, a Goldman Sachs survey from late April found only 79 percent of black business owners had applied for a PPP loan versus 91 percent overall. And those who did apply had more trouble earning approval: Only 2 in 5 black applicants were approved, Goldman found, compared to 52 percent of business owners overall.

In the same way that black Americans lost their homes at far higher rates than their white counterparts during the Great Recession — a factor that contributed to the uneven recovery — there’s concern that black business owners could now be more at risk of losing their livelihoods.

“This is a traditional entry point to the middle class,” Cook said. And if businesses are forced to close, “there will be another major setback to wealth accumulation in this country.”

That could worsen the already stark racial wealth gap: In 2016, the net worth of an average white family was 10 times that of an average black family — $171,000 versus $17,150.

Labor advocates and the AFL-CIO are also calling on lawmakers to extend the boosted unemployment insurance benefits that are currently set to expire at the end of July, noting that doing so would help all jobless workers but particularly minorities being hit the hardest. Democratic leaders in both chambers are also supportive of a push to automatically tie unemployment aid to the condition of the economy.

Jones of the Groundwork Collaborative noted lawmakers could go further and link benefits to regional unemployment rates, adding: “I don’t want to stop giving people help because New York and California have recovered but the South hasn’t.”

Others say Congress could take additional steps to provide rental assistance, given that people of color are less likely to own their homes, and provide hazard pay for essential workers, who are disproportionately workers of color.

“Congress knows that recessions hit black households harder, and it also knows that it has the power to take action that will weaken the recession and strengthen the recovery,” Heidi Shierholz, a senior economist at the Economic Policy Institute, wrote on Thursday. “If it doesn’t act, it will be yet another assault on black people.”

This blog originally appeared at Politico on June 5, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.


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401(k) Retirement Plans Amplify Income Inequality and Racial Disparities

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Isaiah J. Poole

It’s bad enough that the move toward individual retirement plans has been a massive failure when it comes to providing average working Americans retirement security. But now there’s research that shows that our dependence on individual retirement plans adds fuel to the fire of racial and class inequities in ways that the pension plans that used to be common did not.

The Economic Policy Institute presented that research Thursday in its “State of American Retirement” report. The report underscores the need to keep up the fight for strengthening Social Security and increasing its benefits, rather than cutting them.

“We’re moving toward a retirement system that magnifies inequality,” said Monique Morrissey, the EPI economist who wrote the report. That happened, she said, as the percentage of workers who received a pension (a “defined benefit plan”) declined from 35 percent of private-sector workers in the early 1990s to less than 20 percent today. (In the early 1980s, the percentage of private-sector workers in large companies that had a pension exceeded 80 percent.)

Pension plans were surprisingly egalitarian, Morrissey said, in the sense that once you got a job with a pension, what you received in retirement was affected only by your wages and years with the company. With “defined contribution plans” – like 401(k)s and individual retirement accounts (IRAs) – differences widen by race and class.

According to the report, among the people in the top 20 percent of income, nine out of 10 have retirement account savings; among those in the bottom 20 percent, it’s worse than totally flipped; fewer than one in 10 have any retirement account at all. The workers at the top fifth of the income scale accounted for 63 percent of total income, but have 74 percent of the total stashed in personal retirement accounts.

Only 41 percent of black families and 26 percent of Hispanic families had retirement account savings in 2013; 61 percent of white households do. The average retirement account among African-American and Hispanic workers contains about $22,000; for whites, the average account contains $73,000. On top of that, research shows that African Americans are disproportionately in jobs where retirement plans are simply not offered. “401(k)s have really been a disaster for African Americans,” Morrissey said.

In fact, for all ordinary workers, “401(k)s were never designed to be a primary retirement plan,” Morrissey said. Yet they filled that role at the same time President Ronald Reagan and Congress cut a deal to improve the solvency of Social Security that pushed back the retirement age over time from 65 to 67 – and at the same time worker wages stopped keeping pace with productivity and with income gains for corporate executives.

The result is that today fewer Americans than ever will have a financially secure retirement. The Government Accountability Office in 2014 found that half of all households age 55 and older have no retirement savings at all; close to 30 percent also do not have a pension to rely on, either. Of those who do have a 401(k) or IRA-type plan who were between the ages of 55 and 64, their retirement savings would yield a monthly check upon retirement of about $310 a month.

Morrissey said these realities reinforce the case for expanding Social Security benefits. “That’s the number one thing we need to be doing,” she said. (To support the call for strengthening Social Security benefits, add your name to this petition.)

She added that while waiting for action at the federal level, states can play a role. For example, the California Secure Choice Retirement Plan would opt workers into making regular contributions to a state-managed plan if they did not have a retirement plan available in their job. The state plan would invest in a balanced portfolio of assets that would not be driven by the kinds of management fee incentives that often drive retirement plan investments.

This blog originally appeared at OurFuture.org on March 3, 2016. Reprinted with permission.

Isaiah J. Poole worked at Campaign for America’s Future. He attended Pennsylvania State University and lives in Washington, DC.


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