Major financial crises have a way of creating wealth divides. There was one after the 2008 housing crisis, The COVID-19 pandemic, which has had a significant impact on the economy, is certainly an example of that.
The financial losses of this pandemic have been vastly different for everyone. For some – particularly white collar workers – the effects have been more minor. These workers had more opportunities to keep business humming along via Zoom meetings and email.
But for lower-wage workers, especially those in the hospitality and restaurant industries, the effects have been much more significant.
How Americans view the wealth gap
According to the PEW Research Center, 61% of Americans believe that there’s too much economic inequality in the U.S. (Note that those numbers were released in January of 2020, before the pandemic really took hold.)
Economic equality does have well-documented impacts on society, like an increase in health and social issues, lower overall levels of satisfaction and happiness, and detrimental impacts to economic growth.
How the COVID wealth gap is different
The pandemic has affected American households in vastly different ways. According to a poll from TIAA, 29% of Americans say they are worse off financially because of the pandemic, while 24% report they are actually better off.
There are a couple other telling figures from this survey: 37% of households earning below $50,000/year described themselves as worse off because of the pandemic, compared to 15% of households earning above $100,000/year.
That means that this pandemic hit families earning less than $50,000/year twice as hard as those earning more than $100,000. It also showed just how many people are not prepared for unforeseen expenses or situations.
How Businesses Were Affected
Some companies, like Amazon and Walmart, thrived through the pandemic. The companies’ combined profits surged 56% in 2020.
For other U.S. businesses, the pandemic wasn’t so kind. There were an additional 200,000 business closures in the U.S. compared to previous years. One-third of those closures were individual businesses, as opposed to locations of chain businesses.
For the most part, the stock market held up well during the pandemic. That can be largely attributed to the big businesses, which have the most investors, holding steady throughout the year. But the economy still suffered, which we talked about in this post.
What will the impact be?
It’s going to be years before we can fully understand the impact of the COVID-19 pandemic, but we do know a few things for sure.
It did lead to a wealth gap, one that we might be working through for a while. And it also changed the way that many businesses work, which led to major success for some, and failure for others.
On an individual level, it changed the way many people work and think about finances, especially because so many people were caught off guard with too little in savings.
Studies suggest that this wealth inequality hinders economic growth, meaning everyone gets less overall. In addition to less money to go around, the wealth gap also contributes to an increase in crime. It’s certainly not the only factor, but there is a correlation. What this means, ultimately, is that it is in the country’s best interest to shrink the wealth gap.
We will continue to learn and adjust as we ride out the rest of this pandemic.
Do you need help planning for your financial future? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track