Are We Really in This Together? The Divided Nature of the COVID-19 Crisis

Economists often distinguish between idiosyncratic shocks—those that affect a small number of individuals—and aggregate shocks—those that affect a large market or segment of the population. The former can be individually catastrophic, but do not impact the economy overall. The latter, by definition, have direct macroeconomic implications.

In this light, one can hardly find a better example of an aggregate shock than the ongoing COVID-19 crisis. Not only has it affected the health and survival of the entire world, but the consequences for all economies have been large, sustained and ongoing.

Worse for Some

Yet, even though the shock is aggregate, that does not mean it is uniform. Indeed, if anything, the COVID-19 crisis has uncovered abysmal inequities in the population. Death rates have been shown to be strongly associated with economic inequality. The data show that lower-income segments of the population have fared much worse than better-off groups.

As highlighted recently by a group of researchers from Northwestern University, the key variable behind cross-country mortality differences is in fact income inequality. One of those researchers, discussing their statistical exploration on the determinants of mortality rates, was surprised that “other variables didn’t really matter when pre-COVID income inequality was included.”Kellogg Insight, Northwestern University. “Why Do COVID-19 Death Rates Differ Wildly from Place to Place?”

Aside from health and survivorship, the COVID-19 crisis has further aggravated inequalities that existed prior to the pandemic’s onset. As indicated by these and other researchers, the negative effects have tended to be stronger on less affluent groups, some of whom have been battered badly.

Unemployment Gaps before COVID-19

To illustrate this issue, in this post I zoom in on one dimension—unemployment—across gender, race and ethnicity, which still delineate economic inequalities in U.S. society today.

The first figure below shows the unemployment rates for female U.S. workers in three different racial and ethnic groups: white, Black and Hispanic workers. The second figure does the same for male workers in the same racial and ethnic groups. Of course, several similarities become apparent: For all six groups, unemployment rates surge during recessions (shaded areas) and subside during economic expansions.

The figures above also exhibit very significant differences across gender, race and ethnicity. Over the sample period, which ranges from the 1970s to the present, there is a very stable ranking across the three racial and ethnic groups: The unemployment rate is higher for Black workers and Hispanic workers than for whites. On average, the gaps—the differences in unemployment rates between racial or ethnic groups and white workers— are larger for Black workers than for Hispanic workers. These gaps almost always hold true for both women and men.

Gender Differences

We see slightly different patterns for men and women within each racial or ethnic group when comparing the two figures. For white workers, the unemployment rates of women were higher than those of men for much of the 1970s and early 1980s. After that, the unemployment rates converge. For Hispanics, the unemployment rates of women tend to remain above those of men, although the gap shrank in later years.

The big difference is between Black men and Black women, for which the gender gap is the opposite. Black male unemployment is substantially higher than Black female unemployment. This gap was particularly pronounced in the aftermath of the Great Recession, when the difference in unemployment rates between Black men and Black women reached up to 7 percentage points.

Pandemic’s Effect on Employment

Enter 2020, and with it the COVID-19 crisis and, possibly, other negative shocks. At the pandemic’s onset, unemployment rates were near historically low levels for all these groups. But, very quickly, unemployment rates again reached near historic levels, but this time in the wrong direction.

By April 2020, the unemployment rate for white males was 12.3%. Black and Hispanic males fared much worse, reaching an unemployment rate of 16%. For women, the shock was much more dramatic: Unemployment among white women workers reached 15% in April 2020, and; it was a bit higher for Black women, at 16%. Notably, the group hit more intensely were Hispanic women, at a whopping 20% unemployment rate.

The fast but far-from-complete recovery has also been notably unequal across racial and ethnic groups. While the unemployment rates for white workers, both women and men, were about 5% as of March, the unemployment rates for female and male workers of color remained substantially above those of white workers. And the decline in the unemployment rate has not been uniform across race and ethnicity. When comparing the difference between the jobless rate before the pandemic (February 2020) and the current rate, the gap was higher for workers of color than for white workers.

Behind those higher unemployment numbers are many low-income families who were already facing dire conditions, and after all these troubles, they are more likely to be facing truly catastrophic circumstances.

Notes and References

1. Kellogg Insight, Northwestern University. “Why Do COVID-19 Death Rates Differ Wildly from Place to Place?”

Additional Resources

• Regional Economist: Women Affected Most by COVID-19 Disruptions in the Labor Market
• Regional Economist: COVID-19 Containment Measures, Health and the Economy
• Timely Topics: Financial Distress and COVID-19