This article was originally published in The Hill.
When we considered the financial cost of coronavirus, many experts and commentators first thought about the plummeting stock market and the slowing global economy. It’s natural to consider these headlines first, but these aren’t the most important indicators. Seventy-one percent of American households are considered financially unhealthy, and the global coronavirus pandemic is now crashing headlong into our years-in-the-making financial health epidemic, resulting in a mutually reinforcing downward spiral.
The result? Tens of millions of American households can’t afford to make important decisions—like staying home from work, or keeping children away from grandparents—that could keep this virus from spreading. Beyond necessary shutdown orders, city, state, and business leaders can act now to mitigate the financial problems their employees and residents face—and doing so may help keep the virus from spreading.
Health Crises Hit Vulnerable Populations the Hardest
Experts have been sounding the alarm on the financial vulnerability of American households for years. The Pew Charitable Trusts found that today’s average hourly wage has the same purchasing power it did in 1978, but costs for low-income households have risen faster than the Consumer Price Index, leaving millions with no slack in their budget. A survey by AARP found that 53 percent of U.S. households have no emergency savings account to weather financial crises like those that coronavirus is causing to American households.
Health crises can exacerbate household precarity: according to a Kaiser Permanente survey, 27 percent of Americans said they have put off or postponed getting health care they needed because of costs. Women—especially women of color—bear a disproportionate role in dependent care and forego more wages than men do when needs arise to care for a sick loved one. People of color, low-income workers, hourly workers, and people with disabilities disproportionately experience financial hardships, due in large part to policies and systems that have not been designed to help them thrive.
At the Aspen Institute Financial Security Program we are all too familiar with these trends and the consequences of coronavirus and other financial shocks on vulnerable American households. Millions of workers in already precarious employment situations lack sufficient protection from income losses if faced with the need to take time off work. Approximately 37 million workers lack access to paid sick leave and could be forced to sacrifice their wages or jobs if they or their dependents contract coronavirus. Without action, this will put many in the impossible situation of choosing between protecting public health and putting food on the table for their families.
Coronavirus is a dramatic demonstration of why the lack of paid leave is dangerous: with 31 percent of American households paying more than 30 percent of their income in housing costs—and 1 in 4 renters paying more than 50 percent of their income in rent and utilities—there is a significant risk that an extended period of reduced wages could result in evictions, pushing more families into homelessness. Not only is stable, affordable housing the foundation of financial security; it’s also essential for the social distancing measures that will help slow the spread of the pandemic in America.
When the health crisis recedes, reduced hours for hourly workers, job loss, and the inability to pay bills will lead to increased household debt, which is already at record highs in America. Northwestern Mutual found that the average American household owes $29,800 in consumer debt, not including home mortgages. After the coronavirus threat fades, millions of American households will be on the hook for the bills they couldn’t pay during this crisis — plus interest and fees. Struggling American households can’t afford that, and neither can we.
Governments and businesses are acting now to reduce the financial harm of coronavirus
States, local governments, and companies have already started taking important action that will mitigate financial harm facing the American public.
- Over ninety cities and more than a hundred municipal water and utility companies are suspending utility shutoffs to millions of residents who lacked service due to unpaid bills, with water being especially critical for washing hands
- Los Angeles, Denver, Miami-Dade County and other localities have suspended evictions while the pandemic unfolds, helping minimize individual family disruption as public health officials and the White House call for social distancing
- Companies across the United States are offering various forms of relief to customers, including waiving late fees and halting internet service suspensions for those unable to pay their bills.
- Banks in the UK have taken a range of responses, including offering additional support to small- and mid-sized businesses and providing mortgage and other loan relief for affected customers
- California is allowing those who have contracted coronavirus, are quarantined, or are caring for a loved one with coronavirus to apply for paid family leave
- Walmart, Uber, and other companies are expanding sick leave policies for workers directly affected by coronavirus
Public and private leaders can take these — and other — actions to reduce the financial damage and help free up people to make decisions based on household and community health — not ones driven by financial necessity.
Leaders can, and should, act now to address financial insecurity amidst coronavirus
The World Health Organization’s guidance for a country’s response to coronavirus implores leaders to take large-scale and rapid action to limit the spread of the disease’s health impacts. Similarly, leaders need to take immediate, bold action to mitigate the financial harms the pandemic is already imposing on households across America. By reducing existing household debt, lowering the costs of financial services, and strengthening workplace policies, our public and private institutions can take decisive action to respond to the financial threat that coronavirus poses to households — and maybe help slow the spread of the virus itself.
Karen Biddle Andres is director of policy & market solutions and project director of the retirement savings initiative of the Financial Security Program at the Aspen Institute. Tim Shaw is senior policy manager for the Aspen Financial Security Program’s Policy and Market Solutions team.