The outbreak of the novel coronavirus has profoundly affected many American families. The speed with which economic conditions turned as a result of the coronavirus pandemic — changing drastically from one week to the next — makes it difficult to capture the impact of the shock in a timely manner. We use real-time data on hourly service workers and find that the coronavirus crisis has already led to drastic reductions in work hours, income and family well-being. Our results come from surveys we gathered from hourly service workers with a young child in a large U.S. city that has had a typical progression of the crisis: it closed schools and nonessential businesses early in the week of March 16, and had several hundred confirmed COVID-19 cases as of March 25.
- As part of an ongoing study of service workers in a large U.S. city, we were able to include questions about the effect of the crisis the week after schools and nonessential businesses were closed. We were conducting this study to investigate the effects of work experiences on worker and family well-being. In summer and fall of 2019, we recruited participants by visiting randomly selected retail, food service, and hotel establishments at random times, and enrolling any parents of young children who were at work there. Because hourly service workers often change jobs, the sample now works across service industries including retail, food service, hospitality, house cleaning, delivery, and home health care. Daily survey data were gathered from this sample of 690 workers between February 20 and March 24, 2020. A subsample was contacted for a one-time survey about the effects of the crisis between March 23 and 25 (this subsample included 405; 80 percent of those contacted).
- This outbreak has led to drastic reductions in work hours and to job loss. Work hours among parents who have hourly service jobs fell precipitously during the 8-day period from March 16, the day when nonessential businesses were ordered closed in the city, through March 24. On a typical day, 67 percent of these parents work a shift; over the last 10 days, that fell to 41 percent (see chart above). Moreover, as of March 25, 21 percent of our sample reported being permanently laid off and another 20 percent temporarily laid off. A majority, 55 percent, reported that someone in the household had been laid off. Of those who retained employment, over half, 51 percent, saw their hours reduced. This is much more drastic and faster than the job losses even of the Great Recession. The most disadvantaged workers, those with less than a high school education, saw their unemployment peak at 15.6 percent during that economic crisis (the worst in modern history), and that peak represented a gradual shedding of jobs over 18 months. By contrast, during the coronavirus crisis, 41 percent of hourly service workers in our study have lost their jobs in a matter of weeks.
- Both parents and their children have reported a deterioration in their mental health since the start of the crisis. The share of parents who felt anxious or depressed all day rose from 6 percent over the first month of our study to 10 percent last week, a 67 percent increase in severe mental health symptoms. Children, too, felt worse; the share exhibiting what developmental psychologists call externalizing behaviors, a measure of child mental health, increased from 14- to 20 percent, a 42 percent increase. Our family mental health index, a composite of parent and child measures, fell by 2 standard deviations. Unfortunately, these mental health effects of job loss are unlikely to be short-lived. Previous research has found large increases in both adult and youth suicidality in response to economic downturns. Mental health deteriorates significantly even among those who do not experience family unemployment, and even during downturns in which the increase in unemployment is an order of magnitude smaller than what we are observing now. These effects spill over into other domains, causing decreases in student test scores and, in the long run, lower college attendance among those who experienced community downturns during adolescence. All of these effects, both short- and long-term, are greater for disadvantaged populations, meaning health disparities and achievement gaps, already large, are likely to increase (see here).
- Policy supports had not reached families yet. The federal government, states, and localities have quickly sought to address families’ needs, but we find a gap between announced policies and what families are actually getting on the ground. Very few families are accessing announced resources:
- Only 45% of those who have been laid off have applied for Unemployment Insurance (UI)
- Only 4% of those who have been laid off have received any Unemployment Insurance (despite the waiting period being waived)
- Only 11% have picked up a grab-and-go meal at a public school
- Only 1% have accessed emergency child care
- Only 50% of families with a school-aged child have received promised distance learning
- Only 51% currently receive SNAP (formerly known as Food Stamps)
- Some of these resources — grab and go meals at schools, emergency child care, and distance learning — are new, so it is not surprising that governments are having trouble reaching everyone eligible. For existing programs, such as UI and SNAP, governments are facing the problem that these programs are designed with many hurdles to enrollment, and therefore have less than perfect enrollment among people who are eligible even under the best circumstances. UI take-up among those eligible is estimated to be 77%. SNAP take-up among eligible working families has been around ¾ in recent years, and because income cutoffs are low, many low-wage workers are not eligible. Low pre-existing enrollment, combined with a flood of applications to these programs that overwhelms administrative systems, means that emergency aid through these mechanisms is likely to be cumbersome and slow to reach families who have recently lost jobs and become eligible or are newly interested in benefits
- But these families need help immediately. Two-thirds of our sample report income declines since the crisis hit, and for over one-third, income has fallen by more than half. Despite encouraging reports by some grocery and delivery employers that they are hiring, only 3 percent of respondents reported that someone in their household had gotten a new job since the crisis started. And hourly workers like these generally don’t have a lot of savings to fall back on: most report that they will be able to pay rent or mortgage for no more than two months and will be able to buy groceries for two and a half months under the current circumstances. A quarter of parents report they will be unable to either pay rent, buy groceries, or both next month if the crisis continues.
- Employer-provided benefits are reaching some families. A more efficient way to reach families appears to be to get their employers to keep paying them. Policies that get employers to keep paying people appear to be the most immediately effective way to stabilize income. Those who are receiving some pay are doing much better financially than those who aren’t (see chart above). Even with the new policies of some employers and the government to provide pay for lost hours, however, fewer than half of respondents, 49%, report receiving any pay for lost work. To leverage this mechanism effectively, legislation would need to require a broader group of employers to maintain payroll, and provide the support necessary to do so. For example, the United Kingdom has instituted an employment guarantee program during this crisis that provides grants to employers to continue paying 80 percent of wages to employees instead of laying them off. Our research suggests that this is the most immediately effective way to stabilize family incomes.
What this means
As the coronavirus crisis has intensified, low-wage working families immediately experienced drastically reduced work hours and layoffs. The economic and psychological consequences for families have been severe. Although employer-provided supports have helped some families maintain income, these efforts reach fewer than half of families, and the broad set of public policies that were immediately enacted have reached even fewer. Vulnerable families’ circumstances will only worsen unless efforts to reach them greatly intensify immediately.
Acknowledgements: Support for this research was provided by the Eunice Kennedy Shriver National Institute of Child Health and Human Development, National Institutes of Health (Grant #1R21HD100893-01), the National Science Foundation (Award # SES-1921190), the Russell Sage Foundation (Grant #1811-10382) and Washington Center for Equitable Growth. Outstanding research assistance was provided by John Fitz-Henley II. Excellent project support was provided by Jennifer Copeland.
This article was published by Econofact on March 30, 2020. You can find the original post here.