By: Druta Bhatt
The COVID-19 pandemic impacted everything from the global economy to work styles, but many families had a worse pandemic experience than others.
While overall net income and wealth rose between 2019 and 2022, the increases in income during the pandemic increased more for the already wealthy, furthering income inequality, according to a report by the federal reserve. Negative effects of the pandemic, like net decrease in employment, negative health events and inability to telework also disproportionately affected lower income families.
The federal reserve report, based off insights from the latest Survey of Consumer Finances (SCF), also points that a third of families with the lowest incomes experienced net decreases in employment during the pandemic while one fifth of the top income population experienced this, the impact of which still lasted, after the pandemic. Lower-income families were about twice as likely to have been hospitalized or to have developed persistent symptoms from a COVID-19 infection, and around 5 percent as likely to have teleworked, as those in the top income group.
Net employment decreases had the strongest impact on wealth followed by COVID-related health impact. Families who experienced significant health events during the pandemic had 70% less wealth in 2022. Families that have experienced employment loss had 12% less income in 2021 and 70% less wealth in 2022, after the pandemic, compared to other families in the same income group. This was despite the fact that over 90% of the total respondents and 82% of lower-income individuals who had experienced employment decreases during the pandemic were employed in 2022, at the time of the interview.
Racial Wealth Gap
With low interest rates, home ownership rose between 2019 and 2022, and with higher asset values, wealth also increased on average, for all racial groups.
Even today, the wealth of a typical Black family is still only 15% of the wealth of a typical white family. However, there is a slight uptick in Black homeownership rates between 2019 and 2022 which led to a marginal decrease in the racial gap in homeownership rates according to the Fed’s analysis of the 2022 SCF. Growth of business assets grew at an even higher rate in non-white families, especially Black families. However, the increase in net housing wealth (accounting for housing debt) contributed most towards wealth increases for Black and Hispanic families. Business was second to home assets in contributing towards wealth increases in Black families and stocks contributed very little. White families have a more diversified wealth portfolio, and for white families, stocks contributed the most to wealth growth, followed by almost equal contributions of net housing wealth and businesses.
It is debated how much of the pandemic-era wealth gains will sustain, especially as the Fed’s rate increases started in March 2022. Gains in financial assets became nil by the end of 2022. However, increase in homeownership and businesses in Black families are long-term wealth building measures and their true value/appreciation cannot be predicted this soon.
