Coronavirus Compounds Challenges for Low-Income Communities and Communities of Color

April 24, 2020

The COVID-19 pandemic affects everyone across the country. As new challenges add onto existing economic and health inequities, what are the implications for the most vulnerable people in our District? How are the human and economic tolls of the coronavirus different for low-income communities and communities of color? History shows that low-income communities and communities of color suffer disproportionately during epidemics, and early numbers suggest the same for this crisis. The novel coronavirus once again demonstrates a need to close these gaps through a strong collective response—a response that is necessary for all communities to weather this public health crisis.

The San Francisco Fed’s Community Development team summarizes five key challenges where relief and resources are needed most.

1. Reduced income is a heavier burden for low-wage workers and small businesses

People around the country are doing their part to curb the spread of the coronavirus by sheltering in place and by limiting travel and recreation. Companies and venues are holding their events virtually, postponing them, or canceling altogether. These actions are essential for community health and safety. At the same time, a slowdown in business activity disproportionately affects the livelihood of small businesses and workers who have thin financial cushions.

Small businesses cannot make payroll.
Small businesses are at the heart of many communities, and those considered non-essential have closed in response to shutdown orders to protect the health of employees, customers, and their neighbors. However, reduced revenue affects payroll, with ripple effects for workers’ ability to pay for necessities such as food, rent, and medical expenses. Banks and local governments are instituting temporary relief for small businesses to help address immediate needs, but additional support will likely be necessary. The federal Small Business Administration has recently announced forgivable loans to small businesses that keep paying their workers during the shutdown.

“People need to understand this is not a typical downturn. What’s happening here is people are being asked to close their businesses, to stay home from work, and to not engage in certain kinds of economic activity, and so they’re pulling back.”

Federal Reserve Chair Jerome Powell, Today interview, March 26, 2020

Reduced hours and layoffs are prevalent.
Along with small-business workers, people with lower-wage jobs in tourism, hospitality, food service, the performing arts, specialty trades, automotive service, and retail are experiencing reduced hours and massive layoffs. In the nonprofit space, the arts—which depend on ticket sales—are particularly hard hit. One bright spot is that some large companies are continuing to pay their hourly and contract workers, even as offices temporarily close.
Options for financial relief are limited.
Many low-wage workers, such as part-time, self-employed, and gig workers, do not traditionally qualify for unemployment insurance. However, the Department of Labor announced expanded unemployment eligibility and benefits , which will temporarily extend state unemployment insurance benefits to cover these workers, as well as people who have had their hours reduced. Additionally, the Treasury Department and IRS recently announced an extension to the federal tax-filing and payment deadline and economic impact payments, which will provide some cash relief to lower-income individuals and families. Even with assistance, low-wage workers may have trouble covering their expenses, and those in the informal economy, such as many domestic workers, do not have access to unemployment benefits.
Financial stresses are also housing stresses.
Worries over rent and mortgage payments are especially high. To help people stay in their homes, the federal department of Housing and Urban Development (HUD) as well as some cities and states are instituting temporary eviction moratoria. HUD also announced a temporary moratorium on foreclosures on federally-backed mortgages. In addition, local governments in the West are providing emergency shelter for homeless people at hotels and fairgrounds. However, benefits may not be enough to maintain the economic security of low-income people in the long run, when postponed rent becomes due and local governments face losses in tax revenue that they use to fund services.

2. Essential workers face higher exposure risks

Frontline medical workers and first responders are still working, but they are not the only ones doing essential work during the COVID-19 pandemic. For example, many restaurants offer takeout for pickup or delivery, and grocery and office supply stores remain open. Essential retail, childcare, restaurant, delivery service, nursing home, and hospital workers continue to show up to work every day.

Frequent contact with the public increases the risk of transmission.
Lower-wage work heavily concentrates in service industries that rely on in-person, face-to-face contact, which increases risks of getting sick. And the virus can quickly spread within the community when workers return home to potentially crowded housing.
Low-wage workers often lack sick leave.
When lower-wage service workers and gig workers get sick, staying home becomes a financial hardship. According to the Economic Policy Institute, prior to this crisis less than a third of Americans in the bottom 10% of wage earners had access to paid sick leave, compared to 93% among the top 10% of wage earners. Now, many will receive emergency coronavirus-related coverage under the Families First Coronavirus Response Act (FFCRA). FFCRA provides temporary sick leave to workers at companies under 500 employees, with possible exemptions for companies under 50 employees. Companies with over 500 employees vary in whether they previously provided sick leave to lower-wage service workers and whether they are adjusting their policies in response to the pandemic. Additionally, some cities have sick leave requirements for workers in their jurisdiction, and some—such as Los Angeles—have expanded these policies in response to COVID-19.

3. Families are in a bind due to school and daycare closures

Larger daycare centers are closed, and schools are transitioning to distance learning models. Parents everywhere are faced with learning how to homeschool or juggle digital platforms for learning. For many, this comes on top of the adjustment to working remotely. What are the implications for low-income workers and their children?

Increased time off work.
Parents who have jobs that cannot be done remotely are struggling to find alternative childcare options as daycare centers close, or they have to take time off work to care for their children.
A scramble to access technology.
As schools move to online distance learning in the wake of closures, low-income and rural families that may lack broadband access or home computers need to find workarounds. School districts are allowing parents and guardians to pick up basic laptops and tablets along with textbooks. The California Department of Education is collaborating with Google to provide laptops and WiFi hotspots for students in rural areas until the end of the school year. Still, state education officials estimate the efforts will help about half of the students without digital access.
Food insecurity.
Many low-income children receive free or reduced-cost meals at school, and closures may worsen food security issues. Some school districts are allowing parents to pick up meals that their children would normally receive in the cafeteria.

4. Low-income communities and communities of color are more susceptible to COVID-19 complications

Homelessness, living in close quarters, and postponing seeking medical care because of high costs all increase COVID-19 risks for low-income communities.

Underlying health conditions already disproportionately affect low-income people and people of color.
Low-socioeconomic status, experiences of racism, and related stress have been associated with diminished endocrine and immune functioning. Chronic conditions and respiratory disease that are more common among low-income people and in communities of color add to the risk of developing severe or fatal cases from complications related to COVID-19. People with chronic conditions face obstacles to seeking routine in-person care during the pandemic, such as reduced public transit service and reduced hours at clinics, which could lead to worse health outcomes or a need for emergency care.
Access to the doctor and effective treatment, once diagnosed, might take more time.
Many people lack a regular source of medical care and have difficulty securing timely appointments. Given predicted medical care shortages, access will likely depend on having a regular source of care, citizenship status, and English fluency. In addition, gaps in culturally-relevant and high-quality care—as well as fears related to immigration status—may worsen these issues.
Seniors are particularly vulnerable.
Low-income older adults are more likely to have existing health conditions and fewer economic resources, which makes them particularly vulnerable. In addition, the rise in homelessness among older adults is particularly concerning given compounding exposure and health risks.

5. Community service providers are feeling the strain, too

As more and more individuals seek services and resources to cope with financial strains and health concerns, nonprofits across the West are reporting high call volumes and spikes in demand. But their budgets are stretched to the limit because of canceled critical revenue sources, such as annual conferences and fundraising galas. At the same time, many nonprofits were not set up for remote work conditions, so shifting operations from traditional in-person services is a challenge. For example, food banks are facing an increase in demand, but their usual processes for preparing and distributing food are being disrupted by social distancing protocols.

The importance of a collective response is clear

Coronavirus-related impacts are disproportionately burdening low-income communities and communities of color. They are worsening existing economic and health inequities. The strength of our collective response depends on our ability to mitigate these underlying inequities related to issues of employment, cost of living, and healthcare.

What will help now?

Support for low-wage workers and small businesses facing lost wages and revenue.
Ongoing efforts to reduce ripple effects through communities.
Providing financial and other services, such as backup dependent care and sick leave to reduce financial burdens.

At a moment like this, it is more evident to all of us that our collective health as a country depends on creating conditions for each of us to thrive.

The current crisis highlights the many gaps in systems needed to support low-income communities, communities of color, and areas where more action is needed in response to COVID-19. Our hope is that lessons from this public health crisis may also provide an opportunity to strengthen the safety nets that will enable a more resilient and inclusive economy in the future.

Bina Patel Shrimali is a senior researcher in Community Development at the Federal Reserve Bank of San Francisco, where she conducts research at the intersection of economic opportunity and health. She holds a Doctorate in Public Health from UC Berkeley.

Elizabeth Mattiuzzi is a senior researcher in Community Development at the Federal Reserve Bank of San Francisco, where she conducts research on regional transportation and housing governance, equity, and economic opportunity. She holds a Doctorate in City and Regional Planning from UC Berkeley.

Laura Choi manages the Community Development research team at the Federal Reserve Bank of San Francisco, where she also serves as the Community Development regional manager for Hawaii. She holds a Master of Public Policy from the University of California, Berkeley.