Why Did COVID-19 Hit Households of Color Harder Financially in 2020?

As the United States continues to navigate the pandemic, the financial repercussions are complex. Many American families are struggling financially. As we observe the economic effects of COVID-19, one inequity is constant: households of color are facing more negative financial impacts than others.

Throughout the course of the pandemic, Hispanic/Latino, black and indigenous Americans have suffered disproportionately from job and wage losses and severe financial stress. In all categories of financial stressors from a study by the American Staffing Association, households of color were more likely to worry about severe issues than white households.¹

Where Does This Gap Come From? 

The question is, then: why is this gap occurring? The answer isn’t a simple one, and much of it stems from racial inequalities that have been present in our country for decades. These disproportionate struggles aren’t a symptom of COVID-19. Rather, they’re the result of persistent inequalities that existed long before the pandemic. 

Systemic Disadvantages 

Our country has come a long way in the fight for racial equality. Nonetheless, communities of color have long been disadvantaged in terms of upward mobility and wealth accumulation in the United States. This leads to disparities in education, income and job opportunities that are perpetuated over many generations.

To illustrate, the median wealth of white families in 2019 was $188,200. That of black families was $24,100, and that of Hispanic families was $36,100.² Moreover, the income gap between white families and families of color has remained significant for years.³ 

Lack of Preparedness, Lack of Support 

These inequalities, in normal conditions, leave households of color at financial risk. In a pandemic, they’re amplified tenfold. For instance, over 70 percent of both black and Hispanic households report lacking emergency funds, as opposed to 47 percent of white households. Households of color are more likely to have difficulty paying their bills in normal conditions and less likely to be financially prepared for retirement.⁴

Combine all of these factors, and households of color are less equipped to handle the financial stresses of COVID-19. For example, someone at high risk for COVID-19 may not have the financial resources to stop working in order to limit their exposure, whereas someone else would.

Moreover, households of color benefitted less from governmental financial assistance programs. Many poor people of color had to go through more roadblocks in order to receive CARES Act benefits, and unemployed people of color were actually less likely to receive unemployment benefits.⁵

Coronavirus in Communities of Color

Of course, it must also be addressed that communities of color are disproportionately impacted by the virus itself. Compared to the white population, Hispanics, blacks and Native Americans are more likely to contract, be hospitalized by and die from COVID-19.⁶

Poor communities of color, particularly in urban settings, are at high risk; they’re more apt to live in crowded conditions and be essential workers. They’re much less likely to have the ability to work from home and shelter in place, and also more likely to have comorbidities that are poorly managed due to lack of healthcare.⁷

It’s impossible that we’ll close the racial wealth gap or completely eradicate any trace of systemic racism overnight. As we move forward, we can advocate for policy aiming to close this gap - and as the pandemic continues, it’s crucial to ensure that households of color have adequate support.

1. https://americanstaffing.net/ASA-workforce-monitor/
2. https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm
3. https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2019-economic-commentaries/ec-201903-what-is-behind-the-persistence-of-the-racial-wealth-gap.aspx
4. https://www.pewresearch.org/fact-tank/2020/05/05/financial-and-health-impacts-of-covid-19-vary-widely-by-race-and-ethnicity/
5. https://www.stabenow.senate.gov/imo/media/doc/DPCC%20Economic%20Justice%20Report.pdf
6. https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/hospitalization-death-by-race-ethnicity.html
7. https://www.hopkinsmedicine.org/health/conditions-and-diseases/coronavirus/covid19-racial-disparities

This content is developed from sources believed to be providing accurate information, and provided by LJAKE Financial Group. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.