By CultureBanx Team
- Minorities will likely bear the brunt of the economic impact of coronavirus
- The Federal Reserve cut its target rate range to 0% – 0.25%
Just six weeks ago, the U.S. economic picture was very bright with unemployment at a 50-year low, strong wage growth, and record optimism among small businesses, until COVID-19, the novel coronavirus came to the U.S. Now the virus is widespread causing the central bank to adjust its target range for the federal funds rate to 0% – 0.25% to support the economy. This move will disproportionately impact low-income earners with minorities likely bearing the brunt of the economic impact of coronavirus, as a recession is likely to ensue.
Why This Matters: There is a very real risk of families losing income and businesses of all sizes suffering, as a result of the negative impact COVID-19 will have on slowing economic growth. Even with a drop in the federal funds rate, which is a short-term interest rate at which banks lend money to one another when their reserves fall short, typically lowers interest rates on various types of loans including mortgages and credit card debt. This only helps people and businesses who can get access to these loans and lines of credit.
Roughly 8% of Black and Hispanic workers earn wages below poverty level
Low interest funds won’t be easy to come by for minorities with limited access to money and very few assets. In 2016, Pew Research found the U.S. median wealth for African Americans was 10 times lower than their white counterparts, at roughly $17,100. Even worse, on a national level across all races during the last recession the top 1% captured 85% of post-recession income growth from 2009 to 2013, according to the Economic Policy Institute.
During the last recession minorities also suffered the most when the economic downturn caused the unemployment rate to soar. By October 2009, the unemployment rate for Blacks was 13.1%. Currently, the unemployment rate for African Americans is 5.5%, a number that’s likely to rise.
With several major cities across the country closing down businesses due to COVID-19, low-wage workers will feel the most pressure. According to the Bureau of Labor Statistics, only a third of the workforce in the country is able to work from home. Roughly 8% of Black and Hispanic workers earn wages below poverty level, compared to just 4% of white workers.
Situational Awareness: If history were to repeat itself, minorities will struggle the most and be hardest hit during a recession, thanks to its impact on housing and the job market. Despite the gains made in the economy over the last decade, Blacks and Latinos have not made the same strides during this period of economic recovery. Basically, minorities haven’t made enough gains to weather a new impending storm.
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