In the early days of the pandemic, economists and other experts worried about how the fallout might affect low-income and middle class Americans. The rapid loss of jobs over the spring of 2020—when tens of millions of Americans applied for unemployment, at a clip that rivaled only the record highs of the Great Depression—seemed to presage a more sweeping economic recession that would touch all but the most privileged of knowledge workers. Low-wage workers were some of the hardest hit at the start of the pandemic, but the people who had maintained a precarious hold on the middle class were at risk, too.
Nearly 21 months later, there’s no denying the devastating impact of the pandemic, as the death toll has surpassed 750,000 and many workers are reeling from financial challenges and the endless disruptions to their lives. Communities of color, in particular, bore the brunt of the pandemic, both in terms of unemployment and health outcomes. More recently, the spread of the Delta variant slowed the economic recovery, as did supply chain issues—and there’s no telling how the new Omicron variant might upend that progress. But the economic outlook is still rosier than many experts could have anticipated, far outpacing the recoveries from previous recessions.
“One thing that has been so different in this period is that Congress has stepped up and actually done the things that needed to be done to put the economy back on track,” says Heidi Shierholz, president of the nonprofit Economic Policy Institute. “Nothing is perfect, but in broad strokes we got the policies right to set us up for a strong recovery, which is exactly what we’re seeing. We have just seen breathtakingly fast job growth.” Some of the handwringing over the Great Resignation, she says, glosses over the fact that hiring is on the upswing, and that Americans are returning to work: In October, employers added 531,000 jobs.
It’s hard to overstate the role of an effective vaccine in catalyzing this unprecedented economic recovery. But another major reason has been the federal response, which was far more robust than during the last recession. “We did not see a hollowing out of the middle class,” Shierholz says. “The macroeconomic effects of all this spending is a super boost to the middle class. The entire relief and recovery package is really geared toward getting jobs back, and that is incredibly important to middle class workers.” While there was a 2.9% drop in the median household income in 2020, Shierholz says it was still a fraction of what it could have been without support from the government. In fact, taking into account that additional income, the poverty rate actually declined last year.
Over half of Americans live in middle-income households, according to the Pew Research Center, though the actual definition of middle class is far more nebulous than it once was, in part due to vast differences in the cost of living across regions. (That said, its cultural markers lead many people to self-identify as middle class, whether or not economists would agree with the assessment.) In most recessions, lower income and middle class Americans are significantly impacted, especially because many low-wage workers are actually part of middle class households. Without a strong social safety net, the most vulnerable American workers are often left to fend for themselves.
“Just take unemployment insurance,” Shierholz says. “We have such an insufficient unemployment insurance program. The benefits are totally meager. The eligibility requirements are draconian. It doesn’t ramp up and down effectively with actual economic conditions. What we need is a full overhaul of our unemployment insurance system.”
But in this recession, the damage to many low-wage and middle-income workers was somewhat mitigated by measures like the widely distributed stimulus checks, as well as the expansion of unemployment benefits, which included extending benefits to freelance workers and independent contractors who wouldn’t ordinarily be eligible. The enhanced child tax credit—a policy passed through President Biden’s American Rescue Plan earlier this year that was widely seen as an anti-poverty measure—provided additional support to nearly 40 million households. And while the future of paid family and medical leave still hangs in the balance, the Families First Coronavirus Response Act passed back in March 2020 did provide temporary relief by securing paid leave for some employees (albeit with many exceptions).
Of course, none of this guarantees the financial health of the middle class in the long term. Many of the stopgap measures passed in the wake of the pandemic were hardly radical, but they were temporary nevertheless. The last stimulus checks, for example, were distributed in the spring. The expanded child tax credit expires at the end of this year; the current iteration of the Build Back Better Act (which recently passed in the House and moved to the Senate) would extend it, assuming the policy makes it into the final bill, but only by another year. And while Shierholz says workers have a “little burst of power” right now, that too may be temporary. “Because of the weirdness of this recovery, we have depressed labor supply,” she says. “People are still out of the labor force because of health concerns and ongoing caregiving responsibilities.” That means workers have more leverage right now, but chances are that won’t last.
As the Omicron variant looms, the federal response to date offers some lessons on how to navigate a potential new surge of infections. But to ensure that middle class Americans can keep hanging on well beyond this period—and perhaps even fulfill the promise of social mobility for lower-income folks—Shierholz believes it’s crucial that pandemic-era policies inspire more permanent changes. “These are choices,” she says. We could have programs like this that actually push us toward an economy that works for everyone, not just for the luckiest few at the very top. We absolutely could do this. It’s a choice we are making if we don’t.”