I still can’t believe it’s been a year. In some ways it feels like just yesterday that the lock-downs started, and in other ways it feels like 10 years ago. In the last year, we’ve learned a lot about our personal finances, our economy, our community, our physical health, our mental health, our government system, and the threads of systemic injustice running through it all. Now that things are beginning to look a little brighter again, I hope we can resist the temptation to stuff the unprocessed experiences and learnings from this year away in favor of just “getting back to normal.” Instead, what we’ve learned can help us shape a brighter future for everyone, not just those in positions of privilege.
Now that we’ve got a year behind us, let’s revisit some of the predictions experts were making a year ago and see what’s actually happened. Keep in mind: Everyone’s individual experience has been different, so I’ll be speaking to the trends as a whole.
Prediction: Everyone will be negatively impacted financially by the pandemic.
Truth: Most American adults report their financial situation either stayed the same or improved over the last year.
According to new research released by Pew Research Center, “Despite the economic downturn caused by the coronavirus outbreak, about half of U.S. adults (49%) say their family’s financial situation is about the same as it was a year ago; three-in-ten say it has improved, and 21% say it is now worse than it was a year ago.” The research breaks those groups down by demographics. The group who says things have improved tend to be upper- to middle-income. They also tend to be men who are white or Asian, ages 18-49, with bachelor’s degrees. The group who say their financial situation has stayed the same is more likely to include those who identify as female, white, and age 50+. While the reasons that the financial situation of those in these two groups has improved or stayed the same isn’t entirely clear, it may be due to decreased spending due to the change in daily activities (this was particularly true for those with upper income levels) and they were less likely to have lost a job, been laid off, or experienced a decrease in income (again, this was especially true for those with upper income levels and those who are white).
Prediction: Everyone would need to drain their savings just to stay afloat.
Truth: While some have had to tap into their savings, many Americans are saving more.
As I mentioned in another article about pandemic finances last December, according to the Federal Reserve Bank of St. Louis, the personal savings rate nearly tripled in April 2020 to a rate of nearly 34%. The percentage slowly decreased to 12.5% in November, then the second round of stimulus payments sent it soaring to 20.5% in January despite holiday spending. To put this into context, the savings rate during the few years prior to the pandemic was 6-9%.
Prediction: Those experiencing wage or job loss will bounce back quickly once the economy reopens.
Truth: Many of those who have been impacted are not experiencing a swift recovery.
The economic recovery has been slower than expected. While the unemployment rate had improved, it was still at 6.7% in November, and about 1 in 3 of those who were unemployed in November had been out of work for 6 months or longer — often categorized as “long-term unemployment”. As of December, there were still 10 million fewer jobs in the U.S. than before the pandemic. According to Pew, about half of employed adults who took a pay cut since the pandemic began are still being paid less. About a quarter of adults age 50+ who have experienced job or wage loss have delayed or think they might have to delay retirement.
Prediction: Men will be impacted most by the recession.
Truth: Women have experienced the brunt of the impact.
In past recessions men have often borne the brunt of the economic impact; however, this recession has had a deeper impact on working women — causing some to dub it the “she-cession.” One of the key reasons is because women are more likely to work in lower-wage jobs where face-to-face work is required (such as retail or hospitality). School and day-care closures and the shift to online education have also caused many women with children to leave the workforce to care for their families. According to the Women in the Workplace 2020 study, “As many as two million women are considering taking a leave of absence or leaving the workforce altogether” as a result of the pandemic. Some of the challenges contributing to this desire to withdraw or downshift include lack of workplace flexibility, a need to be “always available” for work, and additional housework and caregiving duties due to COVID-19. The pandemic has highlighted how childcare responsibilities tend to fall disproportionately on women. The pandemic has been especially challenging for Black and Latina mothers.
Prediction: The virus doesn’t see race or socioeconomic status so it would impact all groups equally.
Truth: The impact has been most keenly felt by specific racial and socioeconomic groups.
According to the recent Pew study, 58% of lower-income, non-retired adults say the pandemic will make it a lot or somewhat harder to achieve their financial goals. Lower-income adults are more likely to be impacted by unemployment and/or wage loss, more likely to be spending more than prior to the pandemic, more likely to have had to take unpaid time off, and more likely to be saving less (or unable to put any savings away). Black and Hispanic American adults are more likely to say their personal financial life is in poor to fair shape and are more likely to be saving less than before the pandemic. Hispanic adults, in particular, were more likely to say their household lost a job or wages during the pandemic.