Written Testimony of Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute

April 28, 2021

Chair Burrows, Vice Chair Samuels, and members of the commission, thank you for the opportunity to testify today on the civil rights implications of the COVID-19 pandemic. My name is Heidi Shierholz and I am a senior economist and the director of policy at the Economic Policy Institute (EPI) in Washington, D.C. EPI is a nonprofit, nonpartisan think tank created in 1986 to include the interests of low- and middle-wage workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-wage workers, and assesses policies with respect to how well they further those goals. Prior to this position at EPI, I was the Chief Economist at the U.S. Department of Labor during the Obama administration.

In this testimony I will give a broad overview of the economic impact of the COVID-19 pandemic, and other members of the panels will provide much greater detail on the impact on specific groups. I will focus on the labor market in this discussion, due to the fact that for the vast majority of nonelderly households, the only source of income is the labor market, so for most people, the labor market is by far the most important manifestation of “the economy.”

The damage to the labor market as a result of the COVID-19 pandemic has been dramatic. In March and April of 2020, the labor market shed an unprecedented 22 million jobs. Since that time, jobs have been returning, but an enormous gap in the labor market remains. We still have 8.4 million fewer jobs than we did in the month before the COVID-19 recession began. And furthermore, that 8.4 million is not the total gap in the labor market. Before the recession, we were adding about 200,000 jobs per month. At that pace, we would have added 2.6 million jobs since the recession began, which means the total gap in the labor market right now is on the order of 11 million jobs (8.4 + 2.6 = 11 million jobs.)

Recessions always hit low and middle-wage workers the hardest, but the unequal impact of the COVID-19 recession has been unprecedented. As Figure A shows, in 2020, the lowest wage workers lost nearly 7.9 million jobs, while the highest-wage workers gained nearly a million.[1] This disparity has a great deal to do with the types of jobs that have been lost. Due to the public health nature of this recession, sectors where the core work involves a high level of face-to-face interactions—which tend to be low wage service sectors like restaurants and bars, hotels, brick and mortar retail, and personal services—got hit extremely hard. However, research shows that the steep employment decline of low wage workers is not entirely due to these workers being concentrated in low wage sectors—even within sector, the lowest wage workers tended to see the most job loss.[2] 

Figure A

At the beginning of the pandemic, it became clear that there was a crucial distinction between three types of workers: (1) “essential” workers—workers who could not telework and were working on-site, (2) workers who could not telework and whose jobs were not deemed essential, and (3) workers who could telework. Because of dynamics like occupational segregation, discrimination, and other labor market disparities related to structural racism and sexism, women and people of color are concentrated in the first two groups. The first group, essential workers, are those who put their health on the line and the health of the people they live with, to keep society going during the pandemic. They are often very low-paid workers, working in dangerous conditions, and are disproportionately people of color.[3] The second group are workers who cannot telework and who are not deemed essential. These are the workers who were most likely to lose their job. They were often low-wage service workers and were disproportionately women and people of color. The third group, workers who can telework, were the most advantaged in this recession and the least likely to face job loss and income declines. This privileged group is relatively small; data from the Bureau of Labor Statistics (BLS) show that at its peak in May of 2020, just over one third of workers (35.4%) reported having teleworked or worked from home because of the pandemic.[4] And Black and Latinx workers were much less likely to be in this group—at the peak, only 29.3% of Black workers and 23.0% of Latinx workers reported having teleworked or worked from home because of the pandemic.

Another factor that has led to greater disparities by race and gender is the fact that so many jobs were lost early on in this recession in state and local governments. Typically, these jobs are more protected, at least early on in a recession. In the COVID-19 recession, however, state and local government jobs were shed immediately. Today, we are still down 1.2 million state and local government jobs—more than two-thirds of them (863,000) in education. Given that people of color, and particularly women of color, are disproportionately likely to be in state and local government jobs, this is yet another dynamic that has generated more inequities in this recession than in prior recessions.

All of these dynamics have contributed to large disparities in unemployment by race, ethnicity, and gender, with disparities by race and ethnicity being particularly profound. As of March 2021, the overall unemployment rate was 6.0%, but the Black unemployment rate was 9.6%, the Latinx unemployment rate was 7.9%, the Asian unemployment rate was 6.0%, and the white unemployment rate was 5.4%. This recession has deeply exacerbated existing inequalities.

Further, the official unemployment rate is greatly understating weakness in the labor market, both overall and within subgroups. For example, in March, there were 9.7 million workers who were officially unemployed. But BLS has discussed at length that there have been many workers who have been misclassified as “employed, not at work” during this pandemic who should be classified as “temporarily unemployed.”[5] In March, there were 636,000 such workers.[6] Accounting for these workers, the overall unemployment rate would be 6.4%.

Further, some workers who are out of work as a result of the COVID-19 crisis are being counted as having dropped out of the labor force instead of as unemployed. In order for a person without a job to be counted as unemployed, they must be available to work and actively seeking work. However, during the pandemic, many people who are out of work as a result of the crisis do not meet those criteria. For example, many workers—particularly women—are out of work because of care responsibilities as a result of COVID-19 (e.g., a young child’s school being remote, or an elderly parent’s day care closing), and many workers are out of work because potentially being exposed to the virus at work is not safe for them. Workers who do not meet the definition of officially unemployed but are nevertheless out of work because of the coronavirus shock number in the millions—if the labor force participation rate had not dropped during the pandemic, there would be an additional 4.8 million workers in the labor force. Accounting for these workers, the unemployment rate would be 9.1%.

As shown in Figure B, the White House Council of Economic Advisors further broke down this “adjusted” unemployment rate by race and gender.[7] The adjusted unemployment rate was still well into double digits for both Black and Latinx workers in March, at 13.4% for Black workers and 11.5% for Latinx workers. I have calculated additional breakdowns at the intersection of race and gender using BLS microdata and these calculations reveal that of all major categories, Latinx women have by far the highest adjusted unemployment rate, at 13.8%.

Figure B

Further, none of these calculations accounts for the fact that millions of workers who have kept their jobs have seen a drop in hours and pay because of the pandemic. BLS reports that 5.8 million people who were working in March had been unable to work at some point in the last four weeks because their employer closed or lost business due to the coronavirus pandemic, and they did not receive pay for the hours they didn’t work.[8] This high level of underemployment represents an enormous amount of pain, and given that trends in underemployment roughly track trends in unemployment, it is undoubtedly the case that Black and Latinx, and particularly Black and Latinx women, are those who are facing the highest levels of underemployment caused by the pandemic.

One aspect of the vast inequality of the recovery from the COVID-19 recession is long-term unemployment. Right now, more than two-in-five unemployed workers (43.4%) have been unemployed for over six months, and nearly one-in-four unemployed workers (23.9%) have been unemployed for at least a year.[9] Long-term unemployment is a key dynamic in the “K-recovery”—many people who lost their jobs at the start of the pandemic have been unemployed ever since. And again, given that trends in long-term unemployment roughly track trends in standard unemployment, it is undoubtedly the case Black and Latinx workers, and particularly Black and Latinx women, are those who are facing the highest levels of long-term unemployment.

The good news is that the labor market is headed in the right direction. After the recovery appeared to be stalling over the winter, more than 900,000 jobs were added in March. If virus-suppression measures work and it is safe to return much closer to economic normality in coming months, the relief and recovery measures in the American Rescue Plan will continue to drive rapid and large increases in employment. This is very welcome news. But it is worth keeping in mind that simply returning to a pre-COVID state of the world—with skyrocketing inequality,[10] the unemployment rate for Black workers twice that of white workers, and the unemployment rate for Latinx workers 1.5 times that of white workers—cannot be the goal. We must seize this moment to build an economy that works for everyone.