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America’s Dual Recession

Before COVID-19 shut down entire sectors of the US economy, the US workforce was becoming increasingly polarized along educational, racial, and geographic lines. Now, those trends have been accelerating, underscoring the need for a smart, worker-focused policy response.

BERKELEY – Americans heading into the fall and the new school year are grappling with interrelated upheavals in health, the economy, family life, and race relations. The COVID-19 crisis is falling hardest on the most vulnerable: people of color, people with disabilities, immigrants, women, the less educated, and other workers trapped in precarious, non-standard, and low-wage jobs without health insurance or benefits. Worse, the jobs susceptible to the pandemic-induced recession overlap with those that will be susceptible to accelerating digitization and automation as the economy recovers.

All of this points to a “dual” recession in which America’s “haves” suffer a much softer blow than its “have-nots.” At the beginning of 2020, workers earning less than the hourly median wage comprised an estimated 44% of all workers, despite record-low unemployment rates and rising wages at the bottom of the income distribution (owing largely to many states’ minimum-wage increases). Low-wage workers are twice as likely as middle- and high-wage workers to have no more than a high school diploma. Around 54% are women and 45% are people of color, who are overrepresented relative to their share of the total workforce.

Low-wage workers are concentrated in labor-intensive, in-person leisure, hospitality, retail services, and transportation, all of which have collapsed as a result of lockdowns and social distancing. At the same time, the pandemic has fueled the demand for digital services, which have mitigated job losses for those with a college education or higher. In June, the unemployment rate for those with a high-school education was 12.1% compared to 6.9% for those with a college education. Surveys from mid-April show that about half of all Americans who are usually employed are now working from home, but high-income workers are six times more likely than low-wage workers to be able to do so. Among low-wage workers who are still employed, many are in essential but high-risk sectors such as meatpacking and food processing.

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