Danika Miller – Personal Finance ReporterLast Updated: October 23, 2020
The COVID-19 recession is now hardly impacting employment for high-wage workers, while job losses continue for low-wage workers — according to new labor data from the Opportunity Insights economic tracker. Employment rates are nearly back to pre-pandemic levels for salaries over $60,000 per year, while employment for workers who earn under $27,000 is down 19% compared to January.
The rate is concerning when you realize that the majority of essential workers are low-wage earners. Brookings Institution found that “more than 57.1 percent of essential front-line workers earn less than $20 per hour.” At first glance, those data points seem contradictory. How can the majority of our essential workforce also be facing significant job losses? Well, the picture is a bit more nuanced.
Job losses for low-wage workers correlate to industry
The recovery for low-income workers will be slower because the employment rate for those sectors fell much harder when states enforced lockdowns and business closures. High-wage workers are six times more likely to adapt to remote work, making the impact of social-distancing measures less severe.
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“In general, jobs for low-wage workers are more difficult to maintain social distancing, and therefore an increase of operating cost is inevitable,” explains Dr. Tenpao Lee, an economics professor at Niagara University.
Stephen M. Miller, the Director of the Center for Business and Economic Research at the University of Nevada, divided industry sectors by those that require close contact and those that can adapt to a remote environment.
“The ‘gathering together sectors’ tend to have lower wages. So the unemployment rate is higher. These sectors include leisure and hospitality, eating and drinking places, sports entertainment, doctor and dentist offices, hospitals, and so on.”
Essential workers tend to fall into a lower wage job market
Essential workers are defined by the Department of Homeland Security as those whose services are essential to continue critical infrastructure operations. Each state may have varying interpretations for which industries that entails, but it mostly consists of the food industry, healthcare providers, retail, transportation, maintenance and cleaning. In order to do their job, they must be physically present.
The Brookings Institution calculated that about 48 million workers were considered essential occupations, in April of 2020. Of those essential workers, over 4.3 million earn less than $10 an hour while 23 million earn between $10 and $20 per hour.
Lee explains to us the fundamental differences between the high-wage and low-wage labor market — the high wage market has high demand and low supply. While the low wage market has low demand and high supply.
Many essential jobs in the service and hospitality industry fall under that low-wage market where there’s a high supply of workers thus the demand for those employees is lower, making it easier to pay these workers less. Compensation also tends to be lower because these jobs sometimes have lower skill requirements. Unfortunately, additional government support for our crucial workers has been sparse.
What does this mean for our economy?
Our economy can’t survive without the industries that have been decimated due to the pandemic. “In the short term, high-wage workers may have the advantage to recover quickly. In the long term, everything is interrelated. We cannot have low-wage workers unemployed forever. The economy will not be able to sustain this issue,” adds Lee.
But Miller told us that our economy is already recovering faster than economists originally predicted, “Once we can handle the virus, then the economy can come back. In the sectors where face–to–face interaction is not required, as I just said, the economy is already coming back. The gathering together sectors are lagging behind.”
This explains why the Opportunity Insights data found that high-wage workers (and their sectors) are near pre-pandemic employment levels. It’s hard to predict whether the economy will balance itself out once Congress gears up for another round of coronavirus legislation and vaccine efforts reach most citizens. But the numbers present a dire situation for low-wage earners that can lead to bankruptcies and evictions while the wealthy and large companies continue recovering.