The COVID-19 pandemic has exposed numerous structural weaknesses in America’s economy, society, and institutions. As we approach the end of the year 2020, and a new president and Congress prepare to govern in 2021 and beyond, Brookings’s Blueprints for American Renewal & Prosperity offers policymakers new ideas for how to tackle not only the pressing challenges of the ongoing health and economic crisis, but also the longer-running issues that preceded and exacerbated the pandemic’s toll.
Interim Vice President and Director - Brookings Metro
Interim Vice President and Director - Governance Studies
Director - Race, Prosperity, and Inclusion Initiative
The unequal impacts of COVID-19 and its antecedents
Launched today, the first series of Blueprints addresses both the acute and chronic problems facing our nation’s vulnerable workers and communities of color. Through November 2020, the U.S. economy had regained about 12 million of the 22 million jobs it shed in the initial months of the pandemic. But its slowing rate of recovery in recent months foreshadows difficult times ahead for many workers, including a growing number facing permanent displacement from their jobs.
The pandemic has had pronounced impacts on lower-wage workers, who represent disproportionate shares of the workforce in heavily affected industries such as food services, personal services, travel and tourism, and retail. The Census Bureau reports that 55% of households earning less than $50,000 annually have experienced a loss of employment since March, compared to only 38% of households earning at least $100,000. These challenges add to the already substantial economic burdens that tens of millions of low-wage American workers faced even in a pre-2020 economy with nearly record low unemployment.
The pandemic has also shone a harsh light on unequal circumstances by race in America, circumstances which are frequently artifacts of public policy. This begins with the impacts of the virus itself, which has claimed Native American, Black, and Latino or Hispanic lives at three times the rate of white Americans, accounting for age differences among these populations. People of color have also borne the economic brunt, with unemployment rates for Black and Latino or Hispanic workers now up more than 4 percentage points from their pre-pandemic levels, compared to less than 3 points for white workers, according to the Bureau of Labor Statistics.
Small business owners of color were also more likely to shutter operations in the initial months of the pandemic than their white counterparts. Here, too, the pandemic-induced challenges facing Black, Native American, and Latino or Hispanic individuals and families lay bare the chronic health and wealth inequities against which these communities have long struggled. Renewed calls for racial justice in the wake of police violence against Black Americans are motivating long-overdue attention to these burdens.
Against these backdrops, our Brookings colleagues offer a series of concrete ideas that the incoming Biden administration and its colleagues on Capitol Hill should consider to advance racial justice and worker mobility. The proposals bring a particular focus to three subthemes: helping workers navigate a turbulent economy, narrowing wealth gaps, and promoting better health for all Americans. Ideas across all three of these themes foreground a common imperative to address racial inequities.
Helping workers navigate a turbulent economy
The pandemic has created twin labor market challenges for millions of vulnerable individuals: finding meaningful work and earnings in a time of possibly protracted low labor demand, and gaining equitable access to skills and experiences that can prepare them for high-quality, in-demand fields.
As Senior Fellow Martha Ross and Research Analyst Nicole Bateman describe in their brief, the pandemic and accompanying economic crisis have had staggering effects on work and education for young adults, all amid sharpening social divisions among people of different political beliefs, economic circumstances, and races and ethnicities. In response, they propose greatly increasing the number of positions available through national service programs such as AmeriCorps, YouthBuild, and conservation corps, which connect young people to work in a variety of socially useful activities at this moment: tutoring children, building affordable housing, assisting with disaster response, maintaining public infrastructure, and restoring the environment. Sustaining an expanded national service infrastructure over the longer term could also address key issues predating COVID-19, including young adults’ need for more stability and guidance to get a foothold in the labor market, and for structured opportunities allowing people to interact and work with others different from themselves.
More broadly, the pandemic has induced social and economic shifts that exceed the capacity of our education and labor market systems to keep up. In response, David M. Rubenstein Fellow Annelies Goger argues for a new approach that would greatly expand access to so-called “earn-and-learn” strategies, which are much more common in other industrialized countries. These strategies hold promise for providing multiple pathways to career mobility that better meet the needs of learners, workers, and employers, while overcoming the legacies of racialized tracking in education and the subsequent proliferation of nonaccredited, online, and informal training options that fail to effectively signal quality in the labor market. To achieve real systems change, Goger recommends that federal policymakers modernize existing programs and create more substantial and stable federal funding streams; state policymakers implement new frameworks that allow learners to “stack” their learning and switch pathways over time; and cross-sector leaders collaborate to define, legitimize, and socialize earn-and-learn options.
Narrowing wealth gaps
A second trio of ideas aims to reduce deep and long-standing wealth disparities by income and race in America, which have left too many families and entrepreneurs with insufficient cushion to withstand the pandemic’s economic fallout, and reflect the failures of past public policies to ensure equal opportunity to accumulate assets.
Racial wealth disparities in the United States are especially large and pernicious, the result of historical and contemporary discrimination in public policies and private markets. In her brief, Senior Fellow Vanessa Williamson observes that only a transformational effort can address the racial wealth gap. Direct payments to the descendants of American slaves and other forms of reparations—such as those suggested by Brookings’s Rashawn Ray and Andre M. Perry—can be part of the solution. In light of the fact that the 400 richest American billionaires have more total wealth than all 10 million Black households combined, Williamson argues that high and progressive wealth taxation also has a critical role in achieving racial equality. She recommends a comprehensive tax strategy involving higher top marginal income tax rates, higher taxes on estates or inheritance, and/or a direct tax on wealth, as proposed by economists Emmanuel Saez and Gabriel Zucman.
In a related set of proposals, Fellow Jenny Schuetz attributes a portion of America’s income- and race-based wealth disparities to an overreliance on homeownership as a means of wealth-building. She argues that a more balanced set of policies to stimulate savings could both increase financial security (particularly for low- and moderate-income households) and shrink the racial wealth gap. Schuetz recommends replacing the current mortgage interest deduction with a first-time homebuyer tax credit targeted to moderate-income households; subsidizing individual/child development accounts that help families save for designated longer-term investments; and creating new short-term savings vehicles that operate through employers, much like 401(k) plans.
The racial wealth disparities which Williamson’s and Schuetz’s proposals seek to narrow also help to explain the stark racial differences in business ownership that undermine the nation’s economic dynamism. Fellow Joseph Parilla and co-author Darrin Redus, executive director of Cincinnati’s Minority Business Accelerator, observe that Black and Latino or Hispanic Americans represent 28% of U.S. population, but only 8% of its business owners with employees. Unequal access by race to mainstream capital, personal wealth, and entrepreneurship in family and social networks limits minority entrepreneurs’ ability to start and grow businesses. Parilla and Redus document that small businesses are most likely to succeed when surrounded by other entrepreneurs, investors, and customers in their same region who are open to collaboration and knowledge sharing. In that vein, they recommend the next administration and Congress create a new Minority Business Accelerator grant program to invest in a network of existing or new regional accelerators—about 25 overall—dedicated to supporting local minority-owned businesses that demonstrate the potential to achieve significant job and revenue growth.
Enhancing health security
The hundreds of thousands of Americans who have died from COVID-19 and the millions more who have suffered from the illness expose the profound weakness of America’s health care system and the state of the nation’s public health. Improving access to care and outcomes for vulnerable populations are essential steps toward achieving an equitable recovery.
Senior Fellow Richard V. Reeves cites the startling statistic that despite spending more of our GDP on health care (17%) than other wealthy nations (10% on average), the United States has dropped to the near-bottom of the pack on its age-standardized mortality rate. Food and nutrition policies, Reeves argues, contribute significantly to poor health outcomes, especially for Black and Latino or Hispanic Americans. Policies that subsidize the production of poorer-quality, less nutritious, and more sugary food contribute to the comorbidities—including hypertension, obesity, and diabetes—that have elevated illness and death rates for those populations in the pandemic. In response, Reeves proposes a set of reforms to America’s broken food system, most notably a new federal tax on sugary drinks. A growing number of expert groups have endorsed such a tax, which research projects could save half a million lives and reduce health care costs by $100 billion over a lifetime. The largest health benefits would accrue to less affluent consumers, and Reeves proposes that the proceeds of the tax be earmarked for additional investments in preventive measures proven to reduce health disparities.
Behind America’s poorer and more inequitable health outcomes lie inadequate access to quality care and unacceptable differences in resources and health conditions related to income, race, and location. In his contribution, Senior Fellow Stuart M. Butler pinpoints the key problems plaguing our misguided approach: resources are misallocated, the health care infrastructure in many communities is inadequate, and financial support for health coverage is disjointed and inefficient. He recommends a three-pronged strategy to provide adequate, affordable, and accessible care to all U.S. residents, including creating an effective “grassroots” population health system (including expanding health clinics and other local access points, as well as addressing coverage gaps in states that have not expanded Medicaid), reforming the tax treatment of employment-based coverage to create universal insurance subsidies (toward an arrangement Butler calls “Medicare Advantage for All”), and using program flexibility—including a waiver process—and state innovation to create a truly national health system with appropriate state variation.
A down payment toward a more equitable and cohesive nation
This initial series of Brookings Blueprints offers specific, implementable actions that the next administration and Congress can take to ensure that U.S. workers and families emerge from the COVID-19 crisis better positioned to share in the next wave of growth and prosperity than when they entered. Our colleagues’ proposals illustrate just a few ways in which the federal government can set the foundations for a more equitable and just society, and renew America’s promise as it emerges from a turbulent era.