Racial and Ethnic Disparities in Access to COVID-19 Relief

Last week’s blog post found that low- to moderate-income (LMI) communities of color were more likely to report significant pandemic-related disruptions than white communities in 2021. Could the differences in reported disruptions be related to the challenges that LMI communities of color faced when trying to tap the federal government’s pandemic relief funds?

Today’s blog post, the second in a two-part series, explores this question. Many efforts have been made to reduce the hardships caused by the COVID-19 pandemic in LMI communities. Using data from the 2021 Community Impact Survey (CIS),Community Impact Survey was conducted in August 2021 by the Federal Reserve System together with eight national partners. Survey respondents were service providers to the community; these providers included nonprofits, financial institutions and public entities. this post found that unequal access to government relief and recovery plans can help explain almost 30% of the disruption difference between LMI communities of color and white LMI communities. The distinction between primarily white communities and communities of color comes from the following survey question: “Does the entity you represent primarily serve a community of color?”

Communities of Color Were Significantly Disrupted in 2021

The figure below shows that communities of color were more likely to be significantly disrupted by COVID-19 than white communities: The gap between the two communities was about 20 percentage points. This finding is in line with previous work using the 2020 Community Impact Survey.

Significant Disruption Reported in the Community

SOURCES: 2021 Community Impact Survey and author’s calculations.

NOTES: Share of service providers, such as nonprofits, that reported their low- to moderate-income (LMI) communities being significantly disrupted; the data are disaggregated type of community served. The black vertical bars represent the 95% confidence interval for each estimate.

The difference in disruption could be explained by a variety of factors. For example, people of color experienced larger income losses and this made it harder for some to make ends meet. Workers in communities of color also had less ability to telecommute, which may have resulted in unequal health risks affecting overall employment and labor force participation. A 2022 study by Federal Reserve Bank of Minneapolis found that by late 2021, workers of color had not fully recovered to their pre-pandemic employment level. Racial differences in access to health care and health insurance could also be contributing to the gap.

Unequal Access to Government Relief Plans

Government relief measures reduced poverty, helped people access health coverage, and reduced hardships like the inability to afford food or meet other basic needs. The Brookings Institution podcast series “Recession Remedies” provides an analysis of U.S. economic policy responses to COVID-19. According to a 2021 briefing paper by Patrick Cooney and H. Luke Shaefer, the federal government responded to the COVID-19 pandemic with a flexible, broad and cash-based safety net (PDF) that went a long way in preventing widespread hardship. Similarly, the 2021 Community Impact Survey indicated that funds and resources were substantial for LMI communities: Almost two-thirds of the respondents reported that stimulus checks, unemployment insurance benefits and rent relief were very critical last year during the pandemic.

However, the figure below also shows that a larger share of communities of color reported having greater difficulty in accessing government funds than white communities.

Serious Challenges in Accessing Government Funds in the Community

SOURCES: 2021 Community Impact Survey and author’s calculations.

NOTES: Share of service providers, such as nonprofits, that reported their low- to moderate-income (LMI) communities having significant challenges accessing government funding. The black vertical bars represent the 95% confidence interval for each estimate.

Often, people of color work in low-wage or part-time jobs, or work in independent contractor positions that result in exclusion or lack of eligibility from the regular state unemployment insurance (UI) system. For example, 53% of applications by Black workers in Georgia were denied regular UI benefits in 2020, compared with 42% for white workers. In addition, it took 31 days for small businesses with paid employees in majority-Black ZIP codes to Paycheck Protection Program (PPP) loans—seven days longer than those in majority-white communities. Also, businesses in ZIP codes with the largest proportions of white residents received twice as many loans per capita than those in ZIP codes with the smallest proportions of white residents.

Unequal Access to Relief Plans May Have Shaped Disparities in Reported Disruptions

This blog post found that challenges faced by communities of color in accessing government relief package may explain approximately 30% of the disruption gap between white communities and communities of color. Obstacles to government relief package include lack of bank relationship and hardship applying to funds, as well as overall challenges accessing funds.

In the next figure, the first bar represents the gap in the overall rate of reported significant disruptions between communities of color and white communities. The second bar reports the overall gap within the same geographic location (urban or rural), while the third bar shows the gap when adjusted by the communities’ ability to access relief. The fourth bar shows the gap when taking geography and access are both taken into account.

Gap between Share of Significant Disruption in LMI Communities of Color and the Share in White LMI Communities

SOURCES: 2021 Community Impact Survey and author’s calculations.

NOTE: Adjusting for geography considered whether the community was rural or urban.

As shown in the figure, the disparity in the share of reported disruptions between white communities and communities of color falls from 20.8% overall to 15.2% when including challenges in accessing government relief as an explanatory factor. In other words, unequal access to government relief plans appears to have played a key role in differentiated COVID-19 disruption across demographic groups in 2021. If geography is also included as a factor along with access, the share declines to 13.7%. This result is consistent with earlier findings by Janet Holtzblatt and Michael Karpman, who show that receipt of Economic Impact Payments from the CARES Act occurred more slowly—or not at all—for some groups. Barriers to payment receipt included no recent history of filing taxes, lack of internet access, and being unbanked. Furthermore, the PPP incidence was highly regressive, with low-income families and small business that needed funds being less likely to receive support.

Relief Fund Access and Distribution Appear to Be Unequal

While government relief during the pandemic has been substantial and beneficial to many, access and distribution of these funds appears to have not been equal across demographic groups.

Though federal income support has helped (PDF), communities of color were less likely to receive unemployment insurance, and they faced barriers to receiving Economic Impact Payments and to accessing PPP loans. As a lesson for the future, further efforts to improve the distribution of funds are crucial for an equitable recovery.

Notes

¹ Community Impact Survey was conducted in August 2021 by the Federal Reserve System together with eight national partners. Survey respondents were service providers to the community; these providers included nonprofits, financial institutions and public entities.

² The distinction between primarily white communities and communities of color comes from the following survey question: “Does the entity you represent primarily serve a community of color?”

³ The Brookings Institution podcast series “Recession Remedies” provides an analysis of U.S. economic policy responses to COVID-19.