Coronavirus recession will hit low-wage workers hardest
A global recession caused by the spreading coronavirus is likely to hammer the lowest-paid workers and the most economically-disadvantaged communities, segments of the workforce that had only just begun benefitting from an uneven economic recovery.
The workers and places most likely to suffer in the near term are those who were left behind during the decadelong recovery from the last recession, and who had only recently begun to make real wage gains.
Governors and local officials around the country have ordered restaurants, gyms, salons and other nonessential businesses to close to stem the spread of the virus that already has infected more than 163,000 Americans.
More than 3 million Americans filed initial claims for unemployment benefits last week, and millions more are likely to this week, while economic analysts suggest the unemployment rate could increase five-fold or more.
Those most likely to lose their jobs are people working in customer-facing service positions — waiters, bartenders, retail clerks and hotel workers. These are all positions that tend to earn low wages in the first place.
“The face of this crisis is often precarious, low-pay service workers, and especially those in eating, drinking, leisure, vacation,” said Mark Muro, senior fellow and policy director at the Metropolitan Policy Program at the Brookings Institution. “It differs a lot from the financial crisis, which was about the financial sector and how it indirectly impinged on the rest of the economy.”
The service-based shutdown will disproportionately fall on communities where economies rely most heavily on tourism and travel. That puts both large cities like Las Vegas, New Orleans and Honolulu and smaller towns like Myrtle Beach, S.C.; Savannah, Ga.; and Gulfport, Miss., at substantial risk, both of hemorrhaging jobs and losing the income that comes from those tourist activities.
At the same time, a shocking drop in the price of oil has imperiled energy-dependent communities that benefitted from a fracking boom during the last recession. With oil trading lower than at any time since the late 1990s, fracking is no longer profitable.
Midland, Texas, is the most exposed city in the country to a steep drop-off in energy-producing jobs. More than 42 percent of the entire metro area’s jobs are in high-risk industries. Energy hubs like Odessa and Laredo, both also in Texas, are also among the most at-risk regions.
About a third of all jobs in the Las Vegas metropolitan area, more than 340,000 in all, are in industries at high risk of losing jobs. More than a quarter of all jobs in resort towns like Myrtle Beach and Orlando, Fla., are in those same industries, Muro said.
Many of those communities most likely to be hit hard by both the virus and a longer-term recession have only recently begun to regain the ground they lost in the last recession, said John Lettieri, president and CEO of the Economic Innovation Group.
Those communities are disproportionately rural, concentrated in a long stretch from Appalachia south through the rural South, the Texas Panhandle and New Mexico. They are already struggling to confront a loss of health care facilities that have closed at a depressing clip in recent years. Between 2006 and 2017, the least prosperous counties in the country lost 16 percent of their hospital beds, according to EIG’s research, a lowered capacity that may exacerbate negative outcomes if systems in those mostly rural areas become overwhelmed.
Making matters worse, residents of those most vulnerable communities tend to be older, and they are more likely to suffer from the underlying conditions that make them more vulnerable to the virus.
“Every single health indicator you look at gets worse as the surrounding economic distress gets worse,” Lettieri said. “For something that preys upon people who are already weaker or more disadvantaged when it comes to their health and their community well-being, this is a particularly pernicious type of disease.”
In the longer term, the very businesses under the most recession-caused stress are the restaurants, bars and entertainment venues that helped fuel a more recent resurgence of mid-size metropolitan areas that struggled through the recovery even as larger coastal cities boomed.
“The national economy can look and actually be pretty strong at an aggregate level, and tens of millions of people can be left out of that recovery,” Lettieri said. “We have an even more potentially devastating economic shock that is almost perfectly tailored to undo even the modest gains the most vulnerable people and the most vulnerable communities have made since the last recession.”
The cities that are best positioned to withstand the worse of the loss of service jobs are small university towns, places where government employs a large number of workers, and agriculture hubs where crops must still be harvested. Among the metropolitan areas with the least exposure to high-risk industries are Durham and Chapel Hill, N.C., home of Duke University and the University of North Carolina; Ann Arbor, Mich., home of the University of Michigan; and prime apple- and wheat-growing areas in eastern Washington state.
“Complexity and diversification will provide some stay against disruption. Government and education towns look pretty good. We learned that from the financial crisis,” Muro said.
But even those communities are likely to see their unemployment rates skyrocket, because more than 10 percent of their workforces are still engaged in high-risk service jobs.