Oct. 6, 2020

Who does this recession hurt most?


Every recession causes its economic fractures in different ways. This one has disproportionately wrecked the service economy...and along with it, the young workers, women, and people of color who make it tick.

Listen to today’s episode with NYT econ reporter Eduardo Porter for an honest understanding of how we ended up in this recession, who stands to lose the most, and how we stage a recovery.

Want to keep up with Kinsey over email? Sign up here: businesscasual.fm/signup.

Transcript

Kinsey Grant, Morning Brew business editor and podcast host [00:00:06] Hi, everybody, and welcome to Business Casual. I'm your host, Kinsey Grant, and we have a lot to learn. So, let's get into it. [sound of a ding] 


Kinsey [00:00:13] Over the last six months, we've had a lot of conversations about the scars the coronavirus pandemic will leave on our economy. We've also done our best to apply a little salve here and there. But let's be honest, we've all lived a lot of life since March. And to be even more honest, we're not through it yet, for as much as outdoor dining makes us feel like we're maybe getting a little closer to this new normal, we're just not. Neither is our economy. 


Kinsey [00:00:36] This recession, the great lockdown, as some have called it, has hurt so many of us. But in recessions, as in life, nothing is created equally. This economic downturn has impacted certain groups more than others. And many of these groups were already down when COVID kicked them. So this week, we are figuring out how recessions and importantly, recoveries from those recessions, feel different for different groups. To kick off this conversation, I am thrilled to welcome to Business Casual, Eduardo Porter. Thank you for being here. 


Eduardo Porter, economics reporter for The New York Times [00:01:05] Thanks a lot, Kinsey, good to be here. 


Kinsey [00:01:07] So there are a lot of people who cover the economy under major mastheads, but you are one of the very best. You're an econ reporter for the business section of The New York Times, done a ton of incredible work covering the intersection of the economy and race and race relations. Written a couple books as well. We are lucky to have you here to get some insight on these issues. 


Eduardo [00:01:26] Thank you. Let's go. Let's do it. 


Kinsey [00:01:29] Let's do it. So, like I said, your CV would suggest as well, you've been covering the economy for a while now. I'd like to draw on those experiences to get a better idea of where we kind of go next. Where we go from here has been a huge question on this show. And I want to make sure that when we have this conversation, we keep in mind that the recovery from this recession is one that works for as many people as possible. 


Kinsey [00:01:49] There is no cure-all for a lot of these issues, but I think that there are a lot of ways to have these conversations in a meaningful fashion that consider all of these very many different kind of groups of people and industries and what have you in the U.S. So, all of that said, [chuckles] I'm going to start with a question that's certainly easy to ask, perhaps a little more difficult to answer. But what makes this recession meaningfully different from the last recession a decade ago, other than the root causes differing significantly from one another. What feels different about this one? 


Eduardo [00:02:20] The fact that the root cause of this recession is so different from that, not only of the Great Recession 10 years ago, a little over 10 years ago, but also of recessions prior to that, means a lot of things. That generates a lot of differences in the way this downturn has manifested. Maybe let's do start with how this recession's origins are different from those of any other recession that we know about. 


Eduardo [00:02:48] Normal recessions are recessions brought about by a decline in economic activity due to essentially economic reasons. Normal recessions used to be induced by the Federal Reserve, which would rise interest rates when it saw inflation getting pretty high. And those interest rates would cool down consumer spending, cool down investment, and the economy would go into a recession in order to bring down inflation. And that was kind of like your cookie-cutter recession. 


Eduardo [00:03:17] The one 10 years ago was different from that in that it wasn't like the Fed kind of like trying to cool the economy, but it was the implosion of the financial sector due to the housing bust. And that not only reduced consumer spending because people were bloated with mortgage debt that they couldn't pay and so they didn't really have money to spend. And on top of that, we had a financial sector that just went into a deep freeze because all the banks and financial institutions were loaded with mortgage-backed securities that were now kind of like maybe worthless. 


Eduardo [00:03:47] But in any event, very hard to value. So financial institutions stopped lending. In fact, they even stopped lending to each other. So there was this fear at one moment that everything was going to freeze because so much of our economy relies on credit, that when the credit channel disappears, well, the economy kind of like goes into rigor mortis. Now, this one is entirely different from any of that. 


Eduardo [00:04:09] This one was brought about by a health crisis. We basically stopped the economy because we were afraid of what continuing our economic activity would do to our health. We shut it down on purpose. People stopped traveling. People stopped going to restaurants. People stopped going to the grocery store because, you know, they were naturally afraid that going to these places might increase their risk of getting COVID. 


Eduardo [00:04:34] And then, of course, we got state and municipal shutdowns of nonessential businesses that, by regulation or law, basically shut down big chunks of the economy. So what does that mean? How does that affect the economy differently from what we've seen in the past? If you look at what happened in the Great Recession, the big hit is the construction industry. A huge hit to the construction industry is kind of like residential construction basically freezes. 


Eduardo [00:05:05] And then, in fact, you also have commercial construction sort of freezing, that leads to a massive increase in unemployment because the construction sector is a big, big employer. And also, declines in consumer spending leads to the drop in spending on big ticket items like cars, that really hits the auto sector. And so you have these big sectors that closed down really fast. In this recession, because of the nature of the stoppage, this recession hit other parts of the economy more directly. 


Eduardo [00:05:41] And in particular, the service sector across urban America was the one that was first hit. It was the restaurants, the theaters, the hotels, the airlines, all these kind of like social interaction things that are very, very prevalent in American cities, were the ones that were first hit. That changes the shape of unemployment. 


Eduardo [00:06:05] So, for instance, unlike prior recessions, this recession hit women particularly hard. Normally you see recessions hit male employment more than female employment. But in this one, it's exactly the other way around. And why? Because women tend to hold a lot of these service jobs, jobs in building maintenance, restaurant workers, home aides of all sorts, household workers, cleaning workers. Women tend to hold a lot of these jobs. And these jobs were hurt particularly intensely. 


Kinsey [00:06:37] Eduardo, I feel like we just tapped into so many of these big questions that I want to ask you during this conversation. Specifically, the service industry and the specific groups of people within these industries that are being impacted most. Before we get into that, though, it's clear in this conversation already that, like we said at the beginning, no two recessions are really created equally, that there are different financial, oftentimes underpinnings, for different economic downturns. 


Kinsey [00:07:00] Before we went into this almost self-imposed recession here, what were the fundamentals like in the economy? Were they strong? Was there a recession predicted to be on the time line? I know that we exist in a cyclical economy, but what did it look like pre-COVID? 


Eduardo [00:07:18] Pre-COVID, we had the lowest unemployment rate since, I believe, the end of World War II. And the economy was actually, seemed to be, blowing on all cylinders, which, in fact, had a lot of people worried because, you know, as you just pointed out, economies function on a cycle. 


Eduardo [00:07:37] And the expansion part of the cycle had gone on already for a very, very long time, since 2010. This expansion was, I think, already the longest one on record. And so there was this fear that, given the extremely low unemployment and the length of the recession, that we could be building the sort of bubbles that have brought the economy down in the past. Somewhat like in 2008 or even in the year 2000, where we also had a boom and bust that delivered a recession when the dot-com economy that was bubbling up in the second half of the 1990s, kind of like went bust and people started pulling their money out of that. 


Eduardo [00:08:21] So there was this fear that this economy could be overheating. But it was difficult to pinpoint exactly where that might blow up. There was a sense [indistinct] unemployment is really low. This expansion has been going on for a long time. But I really couldn't quite, you know, build the narrative, OK, this is what the next recession is going to look like. It was a fear rather than an understanding that the expansion was about to end. 


Kinsey [00:08:53] Right. Right. When we think about where we were in terms of the possibility of overheating within the economy, before the COVID-19 pandemic hit, what does that mean for recovery efforts now that we have existed in this COVID world for six-plus months? It's not like we can just go back to where we were at the top of a 10-year-long bull market in stocks and unemployment at generational lows. We have to build back up to that, right? 


Eduardo [00:09:19] Yeah. Well, I would actually, before anything else, I would like to kind of assert that the stock market and the economy are not the same thing. They're, in fact, very, very different things. And sometimes they operate entirely divorced from each other. And I would suggest that some of the stock highs that we've seen recently are an example of this. I think right now investors in equities are motivated by Federal Reserve policy more than anything that's going on in the real economy. 


Eduardo [00:09:51] If it was a real economy that was determining investment patterns, I don't think we'd be seeing the kind of stock market that we've seen in the last few months. Having said that, and if the question is about how the economy is going to perform, I am very skeptical of the argument that we're going to have a very quick and robust rebound. Or to put it differently, we might have a kind of a quick bounce, but that bounce is not going to bring us anywhere near where we were at before we went into the hole. 


Kinsey [00:10:22] So one of the big tools for people who write about the economy in the last six months has been what shape the recovery looks like. We talked about a V shape, where you go from the very high to the very low, way back to the very high. The Nike swoosh-shaped recovery. What kind of recovery are you expecting? 


Eduardo [00:10:37] Well, at the beginning of this, I was thinking of the Dilbert hairdo, [Kinsey laughs] kind of recovery, because if we're gonna go back into, you know, if the economy is going to come back a bit, then people go out in the streets, and then we get a second or then a third and then a fourth wave of COVID that sends us back home again, well, then, it would look like a little bit of a W going on. 


Eduardo [00:11:05] Now, hopefully, this will not happen. Hopefully we won't get recurrent waves of COVID infections. I mean, hopefully because it does look like that's what we are getting in much of the country. And hopefully we will either develop a vaccine or develop some massive testing regimen that can allow us to manage this disease better—this pandemic better. Assuming that we can do that, even if we assume that we can do that, that we develop a vaccine or that we get mass testing or whatever, I really don't expect the economy to recover to where it was in a really, really long time. 


Kinsey [00:11:46] How long is really, really long? 


Eduardo [00:11:48] If I were that good, [Kinsey laughs] I'd be making money on Wall Street. A lot of this temporary shock, a lot of temporary shocks become permanent. And so you can see this, for instance, in brick-and-mortar retail. Brick-and-mortar retail was already having a hard time. Then COVID came and basically froze its business, and you've seen retailers go bust left and right. Those guys are not coming back. 


Eduardo [00:12:14] So there's a chunk of the economy that's gone, a chunk of employment that's gone. How that's going to affect other parts of the economy, it's unclear to me, but that fact is, I think, a permanent fact. I think we're gonna get a lot of the same with hotels, you know, leisure, entertainment businesses, a lot of that is not coming back. And, you know, restaurants, a lot of that's not coming back. Arts and culture. 


Eduardo [00:12:39] So a lot of these components that have been non-trivial components of city economies, and, in fact, not only non-trivial components of the economy, but one of the main points that made people want to live in cities in the first place, is likely not going to come back soon. 


Kinsey [00:12:56] Right. 


Eduardo [00:12:56] We've got a lot of permanent damage that's, I think, already built in, even if we have a vaccine tomorrow. 


Kinsey [00:13:02] I think it speaks tremendously to the expectation that so many of us had, when COVID first became a thing, that this would just be a quick, temporary issue that we would all face. And maybe we got furloughed, but you'd go back to work, certainly go back to work. 


Kinsey [00:13:16] And that hasn't been the reality for so many people who are participating in our economy and for so many businesses as well. We think about trying to bet on the future of what our economy looks like. That future, to your point, isn't built overnight, just like a restaurant that replaces one that had to close isn't built overnight. It takes time to make sure that we can get to that point at which we feel robust growth again. 


Eduardo [00:13:37] Yeah, yeah. And I would add that that makes the future of the government response particularly important, because one of the really surprising things of the reaction to COVID is that things weren't much, much worse than they actually were. In fact, if you look at the poverty stats, poverty did not increase despite, you know, tens of millions of newly unemployed people. Poverty did not increase. And why was that? 


Eduardo [00:14:05] Because we had a very, very robust government reaction. You know, the 1,200 bucks for every family earning less than a certain amount of money. And then the extended unemployment, 600 bucks a week, was an amazing floor to put under the well-being of American families. And I think that was absolutely crucial, also to keep consumer spending from going further down into the tank. 


Eduardo [00:14:28] But now that's over, and my fear is that if that does not—if we don't find some robust kind of program to continue these payments or similar payments, it's going to look really awful in a few months. Poverty is going to look really awful. Consumer spending is going to look pretty awful. We've really been hanging on the federal government response for a few months. But if it goes away, it augurs a pretty bleak future. 


Kinsey [00:14:58] Right. I think it's worth taking a moment to recognize how enormous [chuckles] the Care Act was, and to think about, you know, $2 trillion on paper, many more trillion dollars in practice with Fed policy added into all of that. This was a huge influx for our economy. But do you think that there are any lessons from the aftermath, like you mentioned, of the Great Recession when it was so difficult to pass relief? What did we learn from that? Were there any sort of lasting impacts of that difficulty, of passing that relief, that we can observe and use those lessons to inform our strategy now? 


Eduardo [00:15:33] Oh, of course. Number one was that the sky does not fall. 


Kinsey [00:15:39] Right. 


Eduardo [00:15:39] Because the main argument against it, perhaps the only even mildly cogent proposition against relief, was that it would bust the budget. It would, you know, by increasing government debt, it would send interest rates soaring, which would at the end of the day, hurt the economy by lowering investments and so forth. And the predictions about what this was going to do to interest rates—they were gonna go through the roof. The dollar was going to plummet. And none of this happened. 


Eduardo [00:16:09] In fact, interest rates have remained at—you know, real interest rates have remained near zero for a full decade after that and more. And so, if anything, it proved the argument that these debt levels are not, in fact, that problematic, that we can sustain this level of debt. And in fact, I think made the point that as long as your investments in your society are reaping more than zero return, you're fine because you're paying zero for the money. 


Eduardo [00:16:41] And a lot of these social investments have a way higher than zero returns, just in terms of kind of like the social outcomes that you're preventing. And so I do think that it made a great case for stimulus, and it also made a great case for not stopping stimulus. Because you saw what happened in the United States when [indistinct] wound down, and you saw it even more starkly in Europe, where they cut down their economic stimulus very early in the game and moved into austerity, buying into this idea that they didn't want their debt to rise. And they went into much more protracted and deep downturns, economic downturns than we did. 


Eduardo [00:17:18] And so I think, if anything, the evidence out there suggests that the case for further assistance is very, very sound, very, very solid. Now, how our political system is going to read that and act upon it is another matter. 


Kinsey [00:17:33] Right. We're going to get a little bit deeper into the industries and the people that this recession is impacting specifically. But first, a short break to hear from our partner. —


Kinsey [00:17:43] And now back to the conversation with Eduardo Porter. So we understand this recession a little bit better now. I want to talk more about the more nuanced aspects of this recession, especially as we have drawn these comparisons to previous recessions, previous actions, monetary and fiscal. Who stands to lose the most in this recession right now? You touched on it a little bit earlier, but explain to me who is the most at risk? I think we should talk about both industries and groups of people. Let's start with industries. 


Eduardo [00:18:11] OK. Well, so far, the ones that have been hit most hardly are the services in American cities, because that's what we stopped consuming. We are still consuming food and we're still consuming durables, except that rather than going to Best Buy to get them, we're actually ordering them on Amazon. But we're still roughly, roughly—and again, this isn't the forecast, this is a description of what's happened in the last few months—up consuming goods, both durable and non-durable goods. 


Eduardo [00:18:49] What we've stopped doing—abruptly—is consuming personal services, especially all the stuff that requires in-person contact. That's all gone. And it didn't like go slowly, gradually. It went like from one day to the next—boom—over. And so that's the part of the economy that has been most hurt. But it's a highly non-trivial part of the economy. 


Eduardo [00:19:13] In fact, most of the American economy is composed by services and they employ a ton. A lot of small business is in the urban service economy, and they are the greatest employers in the country. So, you know, the hit on employment from this particular shock is enormous. 


Kinsey [00:19:32] Yeah. I also want to just draw attention to the fact that when we think about the services economy, I think a handy example that a lot of people say is like, go and get your haircut. We're going to get our hair cut again. But that's not the services economy. It is so much broader than that. It's thinking about the people who go in and clean an office park or who offer food services for giant corporate headquarters. These people are out of work right now for the most part. 


Kinsey [00:19:57] And for a lot of them, these companies that they were kind of working in a supporting fashion for are not going to go back to normal. They have said go work whenever you want for the foreseeable future. That is going to be a huge, enormous, and lasting impact on this service economy. 


Eduardo [00:20:11] Yeah. I mean, you don't even need everybody to leave cities and go work from their suburban homes. Say, you know, one-fifth of office workers in a city like New York decide to go to Westchester and set up a home office. And rather than coming into the city every day, they'll come in three times a week. 


Eduardo [00:20:32] That's a 60%—excuse me, that's a 40% hit to the cabbies that are going to drive them around, to the restaurants where they would have lunch, or the corporate cafeteria where they would have lunch. It will really reduce the usage of all this building space, so that will cut into the demand for janitors and building guards. And so this is kind of dominoing around that. 


Eduardo [00:20:54] And a very important part, a very important sector, is travel. Business travel, my guess, is that's going to be hit, but much more than 40%, because corporate executives [indistinct], you don't need to send the manager halfway across the country for a one-day meeting anymore. So who's going to do that? So think of all the airplane pilots, and the people who clean the planes, and do the food, and bring the food around, and the steward, all the airport service staff and security guards, all that entire economy, which is, again, a large industrial sector, all that is at risk. 


Kinsey [00:21:35] So how should we think about geography in all this conversation? A lot of what we've talked about has to do with people who are in and around cities. Is this going to be—we think about the service economy meltdown. Is this limited mostly to cities or has it spread throughout wherever you are? 


Eduardo [00:21:50] Well, yeah. America's big cities are particularly dense in these services. In fact, these services are one of the reasons why young, smart people flock to cities, where they then get hired by companies like Facebook and Google, and they have very highly paid and very productive jobs. And this is kind of like the equilibrium of cities is rested on these kind of propositions. 


Eduardo [00:22:13] Cities are very expensive, but you also get paid very well, and there's lots of stuff for you to do. So if you're highly educated and can work as a computer programmer or whatnot, the deal is good and you'll come. If you are middle-income or low-income, the deal has become much more problematic. So you have, in fact, cities have been losing a lot of lower-income workers for years now because you just can't afford to pay the rent. 


Kinsey [00:22:40] Right. 


Eduardo [00:22:40] So cities have become very, very polarized. You have this pool of very well-educated, very highly paid workers. And then a bottom of the service workers, you know, that work in the restaurants, and drive the cabs, and so on, that are not very well-paid. For those, the economy of cities is getting particularly problematic. But anyway, that's a very large part of the labor force—of the national labor force. 


Eduardo [00:23:07] Now, you do have some of that in smaller cities. All cities have somewhat of a service economy, but it's much, much less dense. And if you go into small town and rural America, it is really very small, this part of the economy. Rural America, for the last, you know, up until the 1980s and 1990s, was mostly held up by manufacturing industries. And this has changed a lot as manufacturing employment has declined very sharply, and which has left a lot of rural America in very deep economic trouble. 


Eduardo [00:23:42] Now, the new sort of industry that I think is holding it up is things like Amazon warehouses. And my guess is that that particular business is doing gangbusters. 


Kinsey [00:23:53] Right. 


Eduardo [00:23:57] The bottom line is, I do think that cities are going to get particularly hit by this by this economic shock. 


Kinsey [00:24:05] Right. It's such a good point. This word of the year for 2020 on this show, and I think every other podcast [laughs] that's covering business and COVID, has been acceleration. That everything is accelerating. And that acceleration has really laid bare a lot of issues that already were present within our economy and within our ways of doing business. I think that this is a great example of that—that we had seen prior to COVID-19, this almost early stages of an exodus for people who the bargain just wasn't worth it living in New York. And other cities, you could say the same thing. 


Kinsey [00:24:37] So, you know, to me, this suggests that while right now everything is kind of bananas, and nothing really makes sense, and everything happened really quickly, we're already kind of on this trajectory that we had been on before. And eventually things will even themselves back out and we'll figure out what works for the most people as the economy morphs. You know, we can't make a prediction on what's going to happen, just like we couldn't have predicted COVID-19 happening. 


Eduardo [00:25:02] I think that's right. And, if you want to look at sort of like little silver linings, actually, Facebook and Google just leased enormous amounts of space in New York City, but like gargantuan halls. So presumably these companies expect to be hiring still a bunch of people in New York City into the future. And that makes sense. 


Eduardo [00:25:24] The thing that has kept cities together, really, is the fact that the high-tech companies want to be in places where a lot of creative, smart, highly educated workers are. And young, smart, highly educated workers want to be with these companies, and they want to be in places where they can, you know, where they can go to socialize and go to the movies, and the theater, and the restaurants. And there's many things that keep cities glued together. And you could argue that that dynamic—that COVID will not really make that go away. 


Kinsey [00:25:59] OK, Eduardo. It is time to talk about the most important aspect of all of this, which is the people impacted most. But first, we're going to take a short break to hear from our sponsor. —


Kinsey [00:26:10] And now back to the conversation with Eduardo Porter. So much like we just sort of talked about with industries, there are groups of people who are feeling the impacts more than others. I want to talk about why this matters, you know, most importantly, but to begin with, I think the most important question here is just like who gets the short end of this recession stick? What groups are the most at risk in a recession of the nature of this one? 


Eduardo [00:26:34] OK. So there's two hits we're talking about. One is a health hit. And one is an econ hit. Unfortunately, they're both falling on same people, particularly intensely. So I was looking at how COVID had struck in different communities and data from the CDC. And so, if you just look at cases of coronavirus for every white, non-Hispanic American that got the disease, 2.6 African-Americans got the disease, and 2.8 Latinos got the disease. 


Eduardo [00:27:02] So the incidence of the disease among the Black and brown is way higher than it is among white folks. And if you look at hospitalizations and death rates, it's roughly similar. The death rate among African-Americans is 2.1% higher than for whites. For Latinos, it's not. For Latinos, it's kind of similar to that of whites. And I'm guessing that that is because the Latino population is particularly young. And so, you know, and the death rate among young people is lower than among higher people. 


Eduardo [00:27:34] So how has the econ crunch panned out? And again, you have the same sort of lopsided response. About 5.5% of white workers had lost their jobs between February and August. But it's 8.4% of Hispanic workers and 9.9% of Black workers have lost their jobs. Why are these two things happening at the same time? Why the double whammy to the same—roughly the same communities? 


Eduardo [00:28:01] Well, one is that the people that are most likely to be exposed in their job are the people that come in face-to-face contact with other people, the people that do in-person services. So it's the clerk at the grocery checkout, maybe the cab driver, the home health aide, the personal care aide, those people working in person-to-person services. And those people tend to be in American cities, mostly people of color. 


Kinsey [00:28:33] Why is that? 


Eduardo [00:28:35] They're very low-income jobs. If you look at the fastest-growing job in the American labor force, which is home health aide and personal care aide. We're getting old as a population, so we have a lot of old people that need help with their care. And it's an industry that does not pay very well. Medicaid pays for most of this, and its reimbursement rates are pretty low, and the wages that these people receive are particularly low. 


Eduardo [00:29:03] And so it has been an industry that has been almost—that is today, overwhelmingly employing immigrant women who, presumably, are more willing to accept the low wages for this kind of job for the opportunity of earning a wage in this country. I know this more specifically in the Latino community, which I used to write about, the Latino immigrant community, where you have a lot of undocumented workers who come to the United States to earn the minimum wage or even less than the minimum wage. 


Eduardo [00:29:36] But the comparison to their lives before coming here, the minimum wage is actually much better than what they used to earn. So you have this disproportionate share of workers of color in these industries. Also another correlative to this is that workers of color are less likely to have a college degree. So they're more likely to have a high school degree or less. And these jobs tend to be held by people with folks without a college degree. 


Eduardo [00:30:08] So, anyway, these in-contact service jobs not only make it more likely that you'll get sick because you're in contact with more people, but they're also the jobs that also got quacked, that got closed down. You know, the restaurants got closed down. So all the cooks and all the busboys and all those guys lost their jobs. I can work from home. My job was not at risk as long as my company is still afloat. So kind of like the college educated mostly kept their jobs because we could, you know, office jobs normally can be done remotely, but these in-person jobs were at the highest health risk and at the highest economic risk. 


Kinsey [00:30:47] Do you think it's possible to create an economy that when a recession does happen, it doesn't discriminate based on race? 


Eduardo [00:30:55] Well, what happens is it's the vulnerable are always the worst hit. And we live in a very unequal society. We live in a society with groups of very vulnerable people and groups of very affluent people. And when we get hit, pretty much by any crisis, it's going to be those at the bottom that are going to suffer most. Now, in this particular one, the channels through which they got hit the hardest are the ones that we just talked about. 


Eduardo [00:31:20] But think of climate change. That's going to create all sorts of challenges. You know who's going to get hit the most? It's going to be probably low-income people who can't fortify their houses to account for rising waters, who will not be able to insure against the economic quack of climate change. I will be able to ensure. 


Kinsey [00:31:45] Yeah. It's just— I don't know—you think that we have all these conversations, especially in recent memory, about the systemic issues facing people of color in our country, and then when you look at the numbers, it's really disheartening to recognize that right now, certainly, and in the future as well, these problems are going to be persistent. It's not like we can just solve this overnight. And I think that is—I don't know—it really makes me think, like, that we're even having this conversation still is shitty. 


Eduardo [00:32:16] It's kind of crazy. And one thing—I think it's an important thought—that these crises do not create the inequality. 


Kinsey [00:32:23] Right. 


Eduardo [00:32:23] We built the inequality and then these crises come on top of it. An interesting, crazy stat—and I don't know if it's going to apply to this recession—but it has to the past recessions, at least, I think since the early 1970s—that income inequality has declined during the recession years. And that is because government efforts like the Care Act and efforts that have happened in recessions prior have actually done a decent job during the period of the recession to hold up to some extent, the incomes and the consumer power and the well-being of those at the very bottom. 


Eduardo [00:33:02] While stock prices [indistinct] tank at the top and so you get somewhat of an equalizing force, but it only lasts for that moment of the recession. Once the recession is over and the uptick starts again, the inequality widens vastly more than it had shrunk. And so what we've had is in every cycle, the concentration of income at the very top has gotten more and more intense. 


Kinsey [00:33:30] Right. So when we think about, obviously, people of color have been hugely impacted by this recession, and in so many other ways in our country as well. Another group that has gotten a lot of attention recently is young people. For a lot of young people, a recession can be a really scarring event when you're early in your career. Can you explain why that is? 


Eduardo [00:33:49] Well, yeah, it's true. The young really get hammered. And the disadvantage lasts. It lasts until they're middle-aged. So, you know, this is a really important effect. And, the thing is, if you come into the job market in a recession, if you come into the job market when there is no jobs to be had, that's going to scar you forever. If you get a job, you are probably going to get a less good fit to the job you'd have if there was a growing labor market. You're going to take a worse job that probably pays less, that offers less opportunity for advancement. 


Eduardo [00:34:24] And then by the time the economy recovers, you're going to be in competition for jobs that start opening with the recovering economy, with people that have more experience than you in that job that is a good fit for you. And also with newer people that are coming into the labor market after you. So you really are squeezed. And that squeeze lasts a decade, or more than a decade. 


Eduardo [00:34:47] Research has found that college graduates who graduate into the labor force, into a recession, are suffering lower wages 10 years out than people with the same qualifications that graduate into a moment of economic expansion. 


Kinsey [00:35:03] Just get on the wrong track and can't get off? 


Eduardo [00:35:05] And you can't get off the [indistinct]. And then, people have started studying what happens even further out on the curve. What happens 10, 20, 30 years later. And there's this one particular study that I found that floored me—that people who come out into the labor market in a recession are less likely to be married or to have children. They're more likely to die young. They have higher mortality rates starting in their 30s. They're driven by things like heart disease and lung cancer and liver failure and drug overdoses. So, this isn't just like a one-off hit, and then you get over it. This is something that that follows you through the lifecycle. 


Kinsey [00:35:49] Yeah, my face right now is like a little paler than it was 30 seconds ago. [laughs] 


Eduardo [00:35:54] Yeah. Yeah. 


Kinsey [00:35:54] But for younger or, I guess, maybe a little older Millennials, people who are in their, say, 30s, they've been in the job market 10 or so years. This is the second once-in-a-lifetime recession that we are supposed to face. Like this is going to have lasting impressions on an entire generation of workers. And that's just the reality of the situation. Is there anything we can do about that? [Eduardo laughs]


Eduardo [00:36:16] Well, again, what we can do immediately now is employment supports, income supports, to be sure. I mean, we're in an emergency. And so we've got to think about that. It's a five-alarm emergency. We've got to think about that. Now, how do we think about this longer term? It strikes me as a way more complex question that I don't really have very good ideas to solve. My guess is that these things go through, you know, it might have to do with training programs and lifelong training. But even as I say that, I'm trying to think through how that would work. And it's very unclear to me what the appropriate policies might be. 


Eduardo [00:36:59] Now, an interesting thing that I think is a consequence of these shocks is that I think that the young are going to be much further to the left because of the fact that they've been hit so dramatically by the economy than if they weren't. And there is, in fact, research about this. Research about how folks that come of age in a recession move leftwards ideologically and kind of like buying into the belief that your success in life is more due to luck than it is due to ability, which is kind of like the American mythology—is that it's all due to your own ability. You did it all yourself. 


Eduardo [00:37:49] Well, if you come out into the job market and you just happen to be struck by this massive exogenous force, you kind of like, not surprisingly, you come to the realization, well [indistinct], that there's a lot of stuff that kind of determines and constrains your success and your path in life, and that will move you more toward [indistinct]. You know, well, we kind of like need a government to help cushion the blow and steer things and prevent some of these crazy things that the private sector sometimes does. 


Eduardo [00:38:16] And so this move to the left, I think we kind of already see it. The generation that got whacked by the Great Recession was the generation that gave us Occupy Wall Street and propelled Bernie Sanders to two presidential runs. And it gave us Alexandria Ocasio-Cortez. And so let's see what this one does in the future. 


Kinsey [00:38:40] Yeah, it certainly will be interesting to watch. I think this disillusionment with the idea of picking yourself up by the bootstraps and getting that American dream, come hell or high water, has led to a whole cohort of Bernie bros. [Eduardo laughs] This is the evolution that we have experienced in the last decade or so. And to ponder on what that might look like, especially as we experienced two very much polar opposite ends of the political spectrum right now. And polarization has been increasing every single day. As I have spoken through this sentence, people have gotten more [laughs] polarized. To wonder what that's going to look like 10 years from now, given this experience that we've all gone through, is certainly interesting. And then we'll have to come back in 10 years and ask the same question. [laughs] 


Eduardo [00:39:24] I'll be here, hopefully. 


Kinsey [00:39:25] Well, thank you so much for coming on Business Casual. Lucky to have gotten that insight and had a really fantastic and enlightening conversation with you. Certainly, we'll come back and try to find some more stuff to be optimistic about. [laughs] But regardless, I am grateful for your time and for this great analysis. Thank you. 


Eduardo [00:39:43] Thanks a lot, Kinsey, it was fun. 


Kinsey [00:39:51] Thank you so much for listening to this episode of Business Casual. Eduardo brought up one major group that makes up about half of our economy, but we didn't get to touch on in this episode: women. So, that's what we're talking about in our next episode—how this recession impacts women disproportionately. 


Kinsey [00:40:07] Make sure you are subscribed to Business Casual so you don't miss it. And I'll see you next time. [sound of a ding]