Struggling Workers’ Financial Woes Mount
The COVID-19 economy is really a tale of two worlds.
The stock market and housing market have largely shrugged off the economic slowdown. But severe financial problems are brewing for millions of workers who have lost their jobs or are earning less in a lackluster economy.
The assistance passed by Congress will certainly help. Still, half of all workers reported in a Transamerica Institute survey late last year that they are experiencing at least one employment disruption, whether a layoff, reduced work hours, shrinking paychecks and commissions, or an early retirement. A crisis also looms for thousands of renters if the Centers for Disease Control allows its eviction moratorium to expire at the end of this month.
Paying taxes is another big worry. When the pandemic struck and unemployment spiked last spring, the IRS postponed the deadline for filing federal taxes by three months, to July 15.
COVID-19 hasn’t gone away – and neither has concern about paying taxes. More than half of taxpayers said they might have to borrow money to pay their 2020 taxes this April, according to a LendEdu survey last month.
Other aspects of Americans’ financial problems were captured in two more surveys about the pandemic’s impact:
The Millennials who are still saddled with student loans have struggled for years to pay their other living expenses. The COVID-19 relief bill gave them a respite by suspending their monthly payments for most of 2020, and the U.S. Department of Education extended that at least through January. But one financial problem has been replaced by others for the young adults who are unemployed or earning less.
About one in five people in their late 20s and 30s reported in a 2020 survey by Georgetown University’s business school that the pandemic forced them to take a variety of stopgap financial measures. These have included dipping into retirement funds, delaying or reducing credit card payments, and getting food and rental assistance from non-profits.
Millennials who have started a family are worse off than single people. For example, 26 percent of young parents have applied for food stamps, Medicaid, or other government assistance, compared with 19 percent of single Millennials.
The financial disruptions facing this generation could have “lasting, long-term impacts,” the report concluded.
The retirement outlook was shaky prior to the pandemic for about half of Americans. The slowdown due to COVID-19 hasn’t made the situation materially worse, because two of the biggest sources of workers’ future retirement wealth – retirement saving accounts and their homes – have increased in value over the past year.
But the pandemic is, once again, falling hardest on the Americans who have the least – lower-income workers who have suffered the brunt of the layoffs or have seen their hours cut. One in five workers of all ages said the pandemic has hurt their confidence in being able to retire, according to the non-profit Transamerica Institute.
“It will take years for many workers to financially recover – and some may never recover,” said Catherine Collinson, chief executive of the Transamerica Institute, a partner of the Center for Retirement Research, which sponsors this blog.
Read our blog posts in our ongoing coverage of COVID-19.
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