It’s tempting to think of the coronavirus as a “great equalizer.” At least that’s what Madonna had to say about the global pandemic in a now-deleted video posted in March. In theory, anyone—no matter their income level—can become sick with COVID-19. Social distancing has also affected almost every single American.
However, the reality is a bit more complicated. Depending on where you are on the spectrum of American wealth, your chances of contracting the virus and the ways social distancing will impact your life will be different from others.
From 1989 to 2016, the wealth gap between America’s richest and poorest families has more than doubled. Upper-class households have seen their incomes grow faster than both middle-class and lower-class household incomes since 1971. While it’s true that everyone has gotten richer, the share of adults belonging to the upper-income tier has actually increased from 14% to 20% from 1971 to 2019. American society as a whole is also becoming more unequal.
Now let’s add an economic downturn into the mix. The coronavirus is causing the largest economic downturn since the Great Recession. Over 22 million Americans filed for unemployment in the first 4 weeks since President Trump declared a national emergency, and that number is expected to increase. Small businesses are facing a particularly challenging time.
Economic downturns like the one we are in now tend to increase wealth gaps. Right before the Great Recession, median household net worth grew at a more or less similar pace to the richest 10% of Americans. This growth changed after 2007. The median American household took on the bulk of the impact from the downturn, primarily due to the crash of the housing market. The result? In 2016, the median American household had a net worth about 30% lower than the median household in 2007.
Tensions are growing in response to stay-at-home orders, as evidenced by the numerous protests across the nation. But even after stay-at-home orders ease up, economic expansion won’t immediately resume. Forecasts are mixed on whether the economy will ever fully recover, in 2021 or later. When it does, economic inequality will be even higher than where it is now, particularly because of the way the virus is diverging in different classes.
If you have a spacious home, you may be enjoying your newfound free time with your family or catching up on hobbies. You could be developing new skills, improving your productivity, planning out future projects, and brainstorming. It’s a lot harder to do any of this when you’re confined in a small or crowded space and lack basic privacy. Crowded living conditions create negative emotional and mental health consequences that can be far-reaching.
For starters, stay-at-home orders cannot apply to homeless people. Lack of access to private space and the need to visit crowded shelters for necessities makes it nearly impossible for the homeless population to adequately practice social distancing and reduce their chances of contracting COVID-19.
But it’s not just the homeless and those in crowded living conditions who are feeling the burden of lack of privacy. With schools and workplaces closed, families are spending a lot more of their time indoors and with each other. Joblessness and financial strain are putting a large burden on millions of households. Many are worried about what that could mean for individuals living with abusive partners or parents. Research has shown that financial troubles increase the occurrences of child abuse and neglect, which results in life long consequences.
The type of job you have—and whether you can work from home or not—is now a determining factor in your chances of contracting COVID-19. Aside from medical field workers, many of the jobs deemed essential (like grocery store clerks and public transportation employees) are generally lower-paying. Many blue-collar workers face a dilemma: go to work and risk the health of themselves and their loved ones or forgo a paycheck.
Then, there are the millions of people that have been let go or furloughed. In the beginning, the coronavirus primarily affected jobs in restaurants, hospitality, and retail. However, indicators are pointing to an onset of a second round of layoffs—this time affecting more white-collar jobs. Business-service workers, such as lawyers, architects, consultants, and advertising professionals, will begin seeing job losses in the millions in the coming months, as unemployment is expected to hit 13% this June.
Although the coming waves of layoffs will affect all types of American jobs, the white-collar workers who remain employed throughout the pandemic will come out with a distinct advantage over their unemployed white-collar and blue-collar counterparts. Being able to retain your savings and actually invest when the market is at a lower valuation will result in significant gains in the years to come.
The coronavirus is highlighting already-prevalent class divisions in American society. It’s also driving a deeper wedge between the haves, the have-nots, and the have-a-lots. The implications are going to be felt for years after we’ve conquered the virus.
What does this mean for small businesses? The main issues around economic inequality in a society surround its negative impact on social mobility and productivity. High levels of economic inequality threaten to squeeze the middle class, and the same can happen for small businesses. Some indicators show that the economic contraction we are in the midst of may close between 17% and 24% of small businesses in the coming months.
Businesses that are able to weather the storm will come out with a distinct advantage once the economy picks up again. Different industries will be affected in different ways, and solutions will also differ accordingly. Fortunately, there are a host of public sector and private sector relief resources available for small businesses.
Any business can benefit from extra liquidity at this time, no matter the industry you are in. Businesses have a variety of options, including short term loans, SBA loans, and merchant cash advances. We’ve also partnered with other companies to create the Help Small Business platform, which allows businesses to create gift certificates. Make sure to read up on additional relief programs available to small businesses.