Data-Driven Harvard Economist: Recession Hits Low and High Incomes

Data-Driven Harvard Economist: Recession Hits Low and High Incomes

Raj Chetty is a world-famous economist, considered one of the brightest in his profession. His team created a data tracker that views the economy by state and by neighborhoods, and the tracker suggests that the recession hits low-income workers the hardest.

The data tracker uses nonpublic data from American corporations to give a “God’s Eye” view of the economy in real time. The tool is extremely valuable to anyone trying to track the COVID-19 recession. Given its usefulness, more corporations have agreed to give access to their data to strengthen the tracker. Policy makers are also paying close attention to the results of the data tracker, to guide their decisions.

What has the data tracker shown?

As of April, workers who made less than $27,000 lost approximately 11 million jobs. This loss was three times more than workers making over $60,000 a year. The gap widened in June. By that time, the highest-paid workers got most of their jobs back. Meanwhile, the poorest 50% of Americans accounted for approximately 80% of jobs gone.

These numbers fit with North Carolina’s unemployment data. The recovery has gone the slowest for low-income jobs that need face-to-face interactions. The jobs hit worst included hospitality and leisure and construction (which usually can’t be done remotely).

The tracker also measures usage rates for Zearn, an online math platform. That specific data revealed that high-income kids were completing more lessons than before. Participation dropped among low-income kids by over 50%. Chetty suggests this is because public schools leveled the playing field.

Recession Hits Low-Income Workers the Hardest. But Why?

Closed Pandemic Business COVID Workers Low Income High
Image courtesy of Anastasiia Chepinska on Unsplash.

Chetty notes there is a relationship between high- and low-income workers, specifically in their respective revenue losses. The recession hits low-income workers the hardest, because jobs disappeared when businesses in affluent neighborhoods closed their doors. Early in the pandemic, small businesses in affluent neighborhoods had revenue drops twice as large as those in less-affluent areas. Business closures were quick to follow. In turn, high-income Americans spent less, which made things worse for those businesses. In August, there was another round of revenue loss when the $600 a week unemployment benefit ended.

Chetty’s tracker is able to pinpoint which industries and areas need help. Policymakers around the country have been using this data to target the recession. It has proven a useful tool for looking at what went wrong and how to fix it, but Chetty notes there is still a lot to figure out.

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