April 29, 2020
COVID-19 has exposed deep flaws in the United States’ health system and social social safety net. Tens of thousands have died from the virus—and millions more are at risk of disease, death, and economic devastation.
We can point to countless examples of inequality, from income and wealth gaps to disparities in health care, job protection, and internet access. But alongside them is a growing, society-wide problem: inequality of risk.
Suppose you have a cousin who enjoys a hobby or sport that comes with a higher risk of injury. Would you recommend that they forgo health insurance? Or a neighbor living near a lake—would you advise them to skip the flood insurance? Of course not.
The reason we have insurance is to make sure an accident or natural disaster doesn’t turn into financial ruin. And the greater the risk, the more important it is to have insurance.
The same is true for economies and workers. Consider that 40 percent of workers over 50 years old—the population most vulnerable to the novel coronavirus—lack paid sick leave. An estimated 21 percent of all workers are in “high-contact” occupations, where they work in close proximity to others; in an era of social distancing, many of them will find it difficult to keep working. Tens (likely hundreds) of thousands of families turn to bankruptcy each year due in part to medical issues and bills.
Like so many kinds of inequality, risk inequality is only getting worse. For many workers, financial health is becoming more unstable, and work more precarious. This isn’t just about “gig” work (although that's part of the story); secure, full-time employment that pays an adequate wage is hard to find. The U.S. Financial Diaries project vividly demonstrates many of the challenges people face in trying to achieve financial stability in this era: On average, surveyed households experience six months when their monthly family income is 20 percent above or below their typical monthly income. In short, work is becoming increasingly precarious, uncertain, and variable.
These changes aren’t impacting everyone the same way. There is a bifurcation in the experiences of workers: At the top are higher-income, salaried workers with a suite of benefits, including health care, retirement savings, and paid sick leave. At the bottom are lower-income hourly workers without benefits, and with limited savings. Inequality isn’t just about income; it’s also about disparities in risks faced by workers—both health-related and financial.
We now know that over 24 million people have filed for unemployment insurance in just the past five weeks. Forecasts of the U.S. unemployment rate show that the peak will far exceed what we experienced in any recession of the past century—potentially double the peak from the 2008-09 Great Recession. And the inequality of risk means vulnerable, low-income populations will be the first to feel the impact, and the last to recover.
It doesn’t have to be this way.
Protecting people from risk is at the heart of why we need a sound social insurance infrastructure. Our present infrastructure has been exposed as inadequate by the pandemic: If it were in solid shape, we wouldn’t have to ask Congress for an extra $3 trillion and wait weeks or months for assistance. A better system would automatically provide the relief people need.
The necessary changes start with strengthened social security for our elders and access to affordable health care for all; Congress’s steps to boost unemployment insurance in response to COVID-19 should also be expanded and made permanent. Once the immediate crisis has subsided, we need to take a broader look at our safety net and guarantee employment to everyone seeking it, both in good times and in bad. These policies would not only help individual households, but create an economy that’s more resilient to future disruptions.
Beyond expanding social insurance, we also need to find ways to address the underlying drivers of risk inequality, particularly for the most vulnerable workers. Workers’ collective power must be enhanced to give them greater say in their work lives. And in the months to come, we’ll need to take a hard look at our economic systems—both public policy and private sector practices—with an eye toward creating greater stability for households. Because as devastating as the pandemic is, it’s the underlying risk inequalities predating the virus that will demand our boldest, most aggressive prescriptions.