Low-Income Americans May Have a Long Economic Recovery Ahead of Them

by Maurie Backman | Updated July 25, 2021 - First published on May 31, 2021

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A waiter wearing a medical mask while standing in the doorway of an empty restaurant with a Closed sign hanging on the door.

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The U.S. economy is improving, but not everyone will recover at the same pace.

The coronavirus pandemic certainly did a number on the U.S. economy. In April of 2020, the U.S. unemployment rate reached its highest level in history. And in the course of the past year, many people have depleted their savings in the absence of having a steady job.

At this point, though, things are looking brighter. The jobless rate has steadily declined since peaking a year ago, and with coronavirus vaccinations rolling out to the public, some restrictions are already being lifted. That should help open up the economy, create more jobs, and allow for an eventual recovery.

But we shouldn't expect that recovery to be even across all economic groups. In fact, lower earners may have a much more difficult time moving past the pandemic than those who earn more.

Lower earners continue to struggle

Though the jobless rate has declined nicely over the past year, employment is still down 30% compared to pre-pandemic levels among the bottom third of earners in the country, according to Opportunity Insights. By contrast, the country's highest-paid earners -- those who make more than $60,000 a year -- have fully regained the jobs they lost in the course of the past year.

Now, a big part of that gap stems from the fact that lower earners are more likely to work in industries that were notably hard-hit during the pandemic. Food service workers, for example, generally earn lower wages (though there are exceptions), and restaurants were battered by the pandemic more so than other industries. Similarly, many lower-paying hotel jobs were lost over the past year, which helps explain why the bottom third of workers are still experiencing a higher jobless rate than those who earn more.

Still, the fact that lower earners have a slower recovery ahead is a problem. It's estimated that more than 3 million jobs in the leisure and hospitality sector have yet to return. And the longer those who work in that industry remain unemployed, the harder it may be to move past the economic fallout of the pandemic.

Will more aid be made available?

In mid-March, the American Rescue Plan was signed into law, and with it came a series of benefits, from $1,400 stimulus checks to boosted unemployment to an expanded Child Tax Credit. At this point, many people are wondering whether a fourth stimulus check will be in the works, but it's really too soon to say. However, if another stimulus check is made available, there's a good chance it will be limited to those who have yet to recover from the pandemic -- meaning, the country's lowest earners and the long-term unemployed (which are likely to overlap with each other).

President Joe Biden is also looking to provide more aid to families with his American Families Plan. While that proposal doesn't include a stimulus check, it does include a host of provisions designed to help those impacted by the pandemic recover more easily. And if that plan gets signed into law, it could help the country's lowest earners in a very meaningful way.

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