Second stimulus checks will help, but U.S. income crisis runs much deeper than Covid

As lawmakers in Washington, D.C. race to finalize a $900 billion Covid-19 relief package on Sunday that would include another round of stimulus checks, additional unemployment benefits, and food and rent relief for millions of Americans, there is one economic challenge that won’t be solved: the income inequality compounded by the pandemic that has hit working parents at lower income levels with the highest levels of stress.

In the tenth month of a nation under the grip of a pandemic, working parents with income below $50,000 remain the most likely to say balancing work and family is difficult, and that they are spending more money and time on child care and education than they did before Covid-19.

Among U.S. parents with children under the age of 18 and making less than $50,000, 68% say the pandemic has made it harder to balance work and family responsibilities, according to the Q4 CNBC|SurveyMonkey Workforce Happiness Survey. Forty-two percent say they are spending more money on child care, versus 19% of those making more than $100,000. While income is the most influential factor in the results, a racial gap is evident as well:  41% of non-White parents say they’re spending more money on childcare versus 28% of White parents.

“The pandemic has exacerbated the already tough challenge working parents face juggling jobs and family life, raising the degree of difficulty and the costs. The fresh obstacles also hit hardest on those with lower incomes, expanding inequality even more,” said Jon Cohen, chief research officer at SurveyMonkey, which conducted the Q4 2020 Workforce Happiness Survey for CNBC. The survey, which was conducted between Nov. 30 and Dec. 7, included responses from 2,921 working Americans with children under age 18 among the over 9,000 total respondents.

“This year has been stressful for everyone but these data indicate working parents have had some unique challenges,” said Laura Wronski, research science manager for SurveyMonkey. “In one respect, the coronavirus has been the great equalizer at work: everyone from individual contributors to C-suite executives is having to figure out how to get time to focus on their job while also coordinating with their children’s teachers, being their personal IT consultants, and helping them adjust to learning from home. But not all workers have the resources to dedicate the time and money to make the experience easier for their children.”

The results are no surprise to experts who study U.S. income inequality and poverty.

“We have known there is a large number of people who don’t have $400 to pay for an emergency for a long time, and now the problems that families had before are on steroids,” said Gina Adams, senior fellow and director of the Low-Income Working Families Project and the Kids in Context Initiative at Urban Institute.

Adams has watched with some frustration as the media narrative during Covid-19 has often focused on the struggles of telecommuting parents, and women dropping out of the workforce as a result of childcare needs, or those unemployed and facing the gravest financial situations. While these are all significant issues and challenges — 61% of working parents overall say the pandemic has made it harder to balance work and family, according to the new CNBC survey — Adams said one national statistic often gets overlooked: there are 42 million workers who do not have the option of remote work.

“There are parents still having to leave homes every day and work, and keep families healthy and keep children strong,” she said. “That’s been literally a life or death decision for lots of low-income parents, and parent in communities of color with a high risk of Covid.”

Income is the ultimate factor in work environment during the pandemic, according to an analysis conducted by the Urban Institute. Only 1 in 6 households with income under $50,000 were able to perform jobs on a remote basis. Households earnings over $100,000 were four times as likely to have that option.

“This is not hyperbole. It has always been hard but the process of working is now much more complicated and risks of not working much scarier,” Adams said. “Low income parents will do anything to keep that job.”

This dynamic can have severe repercussions in the education of children. While all parents, even those who can telecommute, have struggled to handle education needs of remote students, Adams said for the 42 million parents who do not have the option of working from home, the challenge is greater. “We knew the system was not working for working parents already, even the telecommuters, but what happens when the parent is not there, and it is a neighbor or grandma, and kids need to Zoom or the kids are left alone?” 

Government resources devoted to child care typically are structured for centers that meet licensing requirements and many were closed or continue to operate at reduced capacity. The system had no method of pivoting to financial support for child-care that needed to be delivered by an individual at a home, or for parents who had to commute to work but were nervous about their children entering a center. Child care is a fragile economic sector to begin with, due to high labor costs and low margins, and it has now endured its own crisis — many centers are closed and may never reopen. That is likely to create even more long-term problems in lower-income communities.

Many states have designated child care workers as essential workers, which showed the sector to be a critical part of parents’ ability to work. New Hampshire was among the states to make that decision, and it also suspended eligibility redeterminations for families receiving child care scholarships, a benefit that allows many essential workers to pay for child care as they work. Poverty researchers say child care is an industry in need of immediate, and continued, investment.

Private enterprise is showing heightened awareness to the issue, said Kimberly McNeil, an HR Knowledge Advisor at Society for Human Resource Management. “Pre-Covid, I could count on one hand the questions I got about employer support, and now I can’t quantity this. I don’t get a Covid call without this question,” McNeil said.

The ways in which family issues play out at different income levels are stark, and employers and HR professionals are being forced to take a long, hard look at the way organizations handle benefits related to child care and family needs. Employers knew the issues existed before Covid, but many now realize it is “far worse than speculated” and talking about it as a permanent issue. “They see employes drowning and they want to catch them before they leave,” McNeil said.

In many areas around the country far from the most-expensive urban centers, the $50,000 income mark can mean a white-collar, office position that has allowed work-from-home for the employee. But for workers in retail or a warehouse who cannot be telecommuting, employers need to start looking at what to do to long-term to offer more child care options, such as offering on-site care and tutoring programs.

The pandemic could have a long-term positive effect in making government and private enterprise more understanding of how important child-care funding is as an economic and labor market issue. It was getting more attention from business interests, including the U.S. Chamber of Commerce, well before the pandemic.

Companies are experiencing how much more difficult it is to rehire workers amid the current family challenges. That may lead more companies to think more about flexible work policies and paid time off benefits, which in the past have generally not been widely available to low-income workers. Typically, employer-enacted measures benefit workers in higher-income brackets, according to researchers, implying that government intervention will remain necessary to extend benefits to the most vulnerable workers and industries. 

Research conducted over the past 15 years by the National Center for Children in Poverty at the Bank Street Graduate School of Education indicates that it takes about twice the poverty level to meet basic family needs (like child care, food, housing, and health insurance), and can be higher depending on where an individual lives. That equates to roughly $52,000 for a family of four, if not more. Pre-pandemic, 38% of all children lived in low-income families, defined as twice the poverty level. For Black and Latino children, those numbers are 58% and 52%, respectively.

Heather Koball, co-director for the National Center for Children in Poverty, said it is not surprising that lower-income families are experiencing high stress levels. “With many children at home because of virtual schooling, many lower-income parents are in an impossible situation where they need to be home to care for their children, but they also need to be at work, and they cannot take paid leave. On top of that, child care and housing costs have risen during the pandemic, stretching budgets even thinner.”

Policy responses have primarily focused on temporary measures to get through the current crisis, but unequal labor market benefits and the shortage of affordable child care will persist beyond it.  Policymakers are right to prioritize direct resources to those who are struggling the most right now, Koball said, such as stimulus checks. But they also need to look at policy solutions for affordable, high quality child care and paid family and medical leave, short-term sick leave and housing protections.

The paid family and medical leave provisions in the Families First Coronavirus Response Act (FFCRA) was an encouraging sign. “Even before the pandemic, too many workers had to face the impossible choice of choosing between the health of their family/themselves and work because the U.S. is the only OECD nation without a national paid leave program,” Koball said, “We hope the federal leave provisions in the FFCRA will be extended in the long term to include more low-wage and essential workers. Enacting a national paid leave policy to protect the health of workers and their families and bolster long-term job security/workforce attachment is long overdue.”

Some national relief systems have been responsive, like the SNAP program, under which families have received more benefits to deal with food insecurity. Planned changes in eligibility for SNAP benefits, formerly known as food stamps, were delayed by the pandemic. Koball said the changes would have drastically reduced the number of people receiving these benefits and the amount of SNAP they would have received, and those changes are likely to be rescinded during the new administration before going into effect.

But there are still several months left during which the pandemic could get worse in terms of overall number of cases and deaths before vaccines are widely distributed, and Adams said there is no assurance yet that all children will be back in school next September.

Once the need for emergency relief finally passes, the public policy focus should shift to what needs to be done to make sure this kind of financial crisis for lower-income workers and families never happens again. And there will be new economic challenges making it even more difficult to craft policy responses, with state and local budgets, key to education spending, devastated by the pandemic.

Even the most simple daily tasks are complicated for lower income parents, such as how much easier it has been for telecommuting parents to choose less busy times to go grocery shopping, lowering the risk of exposure to Covid in a crowded supermarket.

“It’s been the perfect storm for low-income working parents,” Adam said.

Given how long it has taken to come up with a stimulus package for basic financial needs that most people understand easily, like food and housing, tackling the broader issues related to child care for lower-income families will not be easy. “The trauma and losses kids have been facing is pretty immense. We may not see it yet, but this is our future workforce. And it has been hard to get a lot of air on this issue,” Adams said.