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The Digital Divide Starts With a Laptop Shortage

When the Guilford County Schools in North Carolina spent more than $27 million to buy 66,000 computers and tablets for students over the summer, the district ran into a problem: There was a shortage of cheap laptops, and the devices wouldn’t arrive until late October or November.

More than 4,000 students in the district had to start the school year without the computers they needed for remote learning.

“It’s heartbreaking,” said Angie Henry, the district’s chief operations officer. “Kids are excited about school. They want to learn.”

Millions of children are encountering all sorts of inconveniences that come with digital instruction during the coronavirus pandemic. But many students are facing a more basic challenge: They don’t have computers and can’t attend classes held online.

A surge in worldwide demand by educators for low-cost laptops and Chromebooks — up to 41 percent higher than last year — has created monthslong shipment delays and pitted desperate schools against one another. Districts with deep pockets often win out, leaving poorer ones to give out printed assignments and wait until winter for new computers to arrive.

That has frustrated students around the country, especially in rural areas and communities of color, which also often lack high-speed internet access and are most likely to be on the losing end of the digital divide. In 2018, 10 million students didn’t have an adequate device at home, a study by education nonprofit Common Sense Media found. That gap, with much of the country still learning remotely, could now be crippling.

“The learning loss that’s taken place since March when they left, when schools closed, it’ll take years to catch up,” Ms. Henry said. “This could impact an entire generation of our students.”

Sellers are facing stunning demand from schools in countries from Germany to El Salvador, said Michael Boreham, an education technology analyst at the British company Futuresource Consulting. Japan alone is expected to order seven million devices.

Global computer shipments to schools were up 24 percent from 2019 in the second quarter, Mr. Boreham said, and were projected to hit that 41 percent jump in the third quarter, which just ended.

Image
Credit…Jeremy M. Lange for The New York Times

Chromebooks, web-based devices that run on software from Google and are made by an array of companies, are in particular demand because they cost less than regular laptops. That has put huge pressure on a supply chain that cobbles laptop parts from all over the world, usually assembling them in Asian factories, Mr. Boreham said.

While that supply chain has slowly geared up, the spike in demand is “so far over and above what has historically been the case,” said Stephen Baker, a consumer electronics analyst at the NPD Group. “The fact that we’ve been able to do that and there’s still more demand out there, it’s something you can’t plan for.”

Adding to the problem, many manufacturers are putting a priority on producing expensive electronics that net greater profits, like gaming hardware and higher-end computers for at-home employees, said Erez Pikar, the chief executive of Trox, a company that sells devices to school districts.

Before the year began, Trox predicted it would deliver 500,000 devices to school districts in the United States and Canada in 2020, Mr. Pikar said. Now, the total will be two million. But North American schools are still likely to end the year with a shortage of more than five million devices, he said. He added that he was not aware of any large-scale efforts to get refurbished or donated laptops to school districts.

Districts that placed orders early in the pandemic have come out ahead, industry analysts said, while schools that waited until summer — often because they were struggling to make ends meet — are at a disadvantage.

The Los Angeles Unified School District, for example, spent $100 million on computers in March and said in September that it was unaffected by shortages. But Paterson Public Schools in New Jersey had to wait until it received federal coronavirus relief money in late May to order 14,000 Chromebooks, which were then delayed because of Commerce Department restrictions on a Chinese manufacturer, Hefei Bitland.

In July, the Commerce Department added Hefei Bitland, which worked with the computer giant Lenovo, to a list of companies accused of using Uighurs and other Muslim minority groups in China for forced labor. That worsened laptop shortages just a month or two before schools were set to reopen.

“It took a bad situation and made it worse,” Mr. Pikar said. “It was quite dramatic — there were hundreds and hundreds of school districts that got caught.”

A spokesman for the Commerce Department said Lenovo should have known that “they are supplying computers to American schoolchildren that could have been produced from forced labor.” Lenovo did not respond to requests for comment.

Paterson was able to secure more laptops just nine days before school started, but other districts have not been as lucky.

Alabama schools are waiting for more than 160,000 devices, and Mississippi did not receive the first of the 320,000 computers the state had ordered until early October. Staples said it would receive 140,000 Chromebooks for schools in November and December, 40,000 of which are earmarked for California districts.

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Credit…Michael Starghill Jr. for The New York Times

Daniel Santos, an eighth-grade teacher in Houston, logs into his virtual classroom from home each morning and starts the day’s American history lesson. Once he turns his students loose to work on assignments, the hard conversations begin.

If students stop turning in homework consistently, Mr. Santos asks them privately: Do you have access to a laptop? One boy said he and his brother were sharing one computer at home, making it difficult for both to attend class. Others were completing assignments on their cellphones.

“It breaks my heart,” said Mr. Santos, who hears the “demoralization” in students’ voices. “They want to do their work.”

Nearly all of the almost 700 students at the school, Navarro Middle School, are Hispanic or Black, and most are eligible for free lunches. Mr. Santos said Navarro had been underfunded for years. It does not even have a functioning library, he said.

The district said it had spent $51 million and obtained more than 100,000 devices since April. But a month into the school year, Houston teachers are still encountering children without laptops.

Mr. Santos’s students are intelligent, inquisitive and unaccustomed to struggling in school, he said. But since classes started in early September, about 10 of his 120 students have told him that they need a laptop. For the first time, some are falling behind, he said.

Guilford County Schools, with 73,000 students, is encountering the same problem in North Carolina. The district ordered laptops in August with help from the March coronavirus relief bill, Ms. Henry said.

Many children in the area live in poverty and lack personal computers or reliable internet service, she said. Those who cannot attend virtual classes are receiving printed assignments delivered to their houses. Some are watching recordings of classes when they can log onto a device, and a small number have been allowed into district buildings for occasional access to computers and Wi-Fi, Ms. Henry said.

The district is pushing to resume some in-person instruction in late October because of the growing divide between rich and poor.

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Credit…Jeremy M. Lange for The New York Times

For about a month, Samantha Moore’s four school-age children shared one iPad provided by the Guilford district and took turns going to class. Their grades have suffered as a result, she said.

“Not everybody is financially stable enough to buy laptops, and some families are big like mine,” said Ms. Moore, the manager at a sports bar. “I can’t just go out and buy four computers.” She said she received food stamps, and had lost out on a $6,000 work bonus because the pandemic temporarily closed the bar.

Eric Cole, who teaches Ms. Moore’s 13-year-old son, Raymond Heller, eventually secured more tablets for the family and other students through his church.

Being unable to attend class was “a little frustrating,” Raymond said. Now that he has his own device, “the work is easy — the live classes make everything easier.”

In eastern Idaho, the Bonneville Joint School District is holding in-person classes, but hundreds of students have had to quarantine after possible virus exposure — and the district said it did not have enough Chromebooks for them all. It didn’t place its $700,000 order for 4,000 devices until late September because of budget challenges, said Gordon Howard, Bonneville’s technology director.

While they wait for the order, students without computers are missing out on education.

“Those that are behind continue to get further behind, and it’s through no fault of the kids at all,” said Scott Miller, the principal of the Bonneville district’s Hillcrest High School in Ammon.

Many students at the Sante Fe Indian School, operated by New Mexico’s Pueblo tribes, live in tribal homes without Wi-Fi access, said Kimball Sekaquaptewa, the school’s technology director. The school ordered laptops with built-in SIM cards that do not require Wi-Fi to connect to the internet.

But the delivery date for the July order was pushed to October, forcing students to start the school year without remote classes. Instead, they were asked to find public Wi-Fi twice a week to download and upload assignments.

“There’s a lot of frustration,” Ms. Sekaquaptewa said. “We really wanted to hit the ground running, and now we’re in limbo.”

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While Millions Lost Jobs, Some Executives Made Millions in Company Stock

Even as millions of people have lost their jobs during the pandemic, the soaring stock market since the spring has delivered outsize gains to the wealthiest Americans. And few among the superrich have done as well as corporate executives who received stock awards this year.

Executives With the Biggest Gains

Corporate leaders whose stock options or grants this year have appreciated the most.




Total value of all stock options

or grants given in 2020

Appreciation

value

Current

value

William

Lynch

0

*

$64.4

mil.

$64.4

mil.

Peloton Interactive

Edward

W. Stack

$7.0

mil.

67.4

60.4

Dick’s Sporting Goods

Frederick

W. Smith

0

*

36.9

36.9

FedEx

Stéphane

Bancel

0

*

29.9

29.9

Moderna

Marc

Benioff

13.3

40.9

27.6

Salesforce

Total value of all stock options

or grants given in 2020

Appreciation

value

Current

value

William Lynch

0

*

$64.4

mil.

$64.4

mil.

Peloton Interactive

Edward W. Stack

$7.0

mil.

67.4

60.4

Dick’s Sporting Goods

Frederick W. Smith

0

*

36.9

36.9

FedEx

Stéphane Bancel

0

*

29.9

29.9

Moderna

Marc Benioff

40.9

13.3

27.6

Salesforce


Notes: *The value is zero in these cases because the company’s stock price at the time of the grant had not risen above the stock price at which the options were granted. Current value as of Oct.7.

Source: Institutional Shareholder Services

By Karl Russell

Edward W. Stack, the chief executive of Dick’s Sporting Goods, and William Lynch, president of Peloton, for example, are each sitting on paper gains of over $60 million on stock-based awards they mostly received in the first three months of the year, based on Wednesday’s closing stock prices, according to an analysis by Institutional Shareholder Services, which advises investors on how to vote on corporate matters.

And Stéphane Bancel, the chief executive of Moderna, a drug maker developing a coronavirus vaccine, received options in January that have appreciated by nearly $30 million.

The pay gains are a result of the sharp rise in the stock prices of these companies, which investors are betting are well positioned to grow during the pandemic. Another reason these stock awards have appreciated so much is that some of the grants were made when the stock market was close to its lowest point for the year. Of course, many executives are also sitting on gains on stock they got in earlier years.

But the surge in wealth also highlights how the compensation of senior executives is designed to give them enormous windfalls, which they have gotten even during one of the sharpest economic downturns in decades.

These gains are also a reminder that income and wealth in the U.S. economy are tilted heavily toward a tiny number of top earners who own significant amounts of stock. Most Americans own little or no stock, according to a recent Federal Reserve report, and many had less in savings in 2019 than they did before the last recession a decade ago.

“The stock market is not an indicator of the health of the economy for working people; it’s an indicator of economic inequality,” said Brandon Rees, deputy director of corporations and capital markets at the A.F.L.-C.I.O. “These C.E.O. payments reflect that reality.”

For decades, corporate boards have tried to tie executive pay to the performance of the company’s stock in an effort to make managers more accountable to shareholders. Yet executives still often end up doing far better than might be justified by a company’s fundamental business performance.

Mr. Stack’s compensation shows how top executives can rack up such large gains so quickly.

In March, when the stock market was close to its low point and the share price for Dick’s Sporting Goods was also at a nadir, he received 355 percent more stock options for his 2020 award than for his 2019 grant and 142 percent more restricted shares, according to the I.S.S. analysis and the company’s securities filings. (Businesses often hand executives stock in two forms: stock options or restricted shares. An option usually provides its owner the right to acquire company stock at a future date at the price it was trading on the day it was issued. A restricted share is stock that executives cannot sell for months or years.)

When asked to explain how the company arrived at Mr. Stack’s 2020 stock grants, it said in a statement: “As in prior years, the compensation committee considered a number of factors, including the company’s 2019 performance.”

Then, everything started to move in Mr. Stack’s favor. Investors, believing that Dick’s could profit in the pandemic economy and encouraged by stimulus from Congress and the Federal Reserve, bid up the price of the company’s stock. But because Mr. Stack had far more shares in the 2020 stock grants than he did in 2019, the overall value of that awards have ballooned. The 2020 awards were worth about $7 million when they were issued and are now valued at a combined $67.4 million. By contrast, Mr. Stack’s 2019 awards are worth $15 million at Wednesday’s stock price.

Of course, the gains could shrink if Dick’s stock declines. Mr. Stack can exercise and sell all his stock options only after four years. In a filing, the company said his restricted stock awards would become available over time but did not specify the period.

Still, the award raises questions. Shareholders may object to an arrangement that could give Mr. Stack compensation far in excess of what they might have expected when the stock grant was made.

“If you don’t adjust your approach when there is a shake-up in the market and your stock price is down significantly, investors are going to raise concerns,” said Brett Miller, head of data solutions for the responsible-investment arm of I.S.S. “What you don’t do is give executives more opportunities to increase their value.”

Employees may also feel left out. As Mr. Stack’s stock grant was swelling in value, Dick’s furloughed many of its employees for several weeks. In the company’s last fiscal year, his compensation was 1,487 times the pay of the company’s median employee, a measurement that includes many part-time workers. Mr. Stack has a large stake in Dick’s and controls the company through powerful voting shares.

The I.S.S. analysis covers top executives whose pay details are included in companies’ proxies, documents that publicly traded businesses file with the Securities and Exchange Commission annually. Proxies provide investors with important financial information and instructions on how to vote on corporate proposals and board appointments.

Not all executives have gains on their 2020 grants, because many companies have struggled in the pandemic. In its survey, which covers 2020 grants made by companies in the Russell 3000 stock index, I.S.S. found that 1,675 “named executive officers,” or the executives who appear in proxies, had gains while 1,388 had losses, as of Wednesday’s closing stock prices. The average appreciation was nearly $1.5 million and the average loss $827,000.

The chief executives of technology companies, many of which have thrived during the pandemic, have done particularly well. Their average gain on 2020 grants was $3.2 million, while the average loss was $543,000.

The largest combined gain in the survey was Mr. Lynch’s $64 million on his 2020 options grants from Peloton. Its stock is up 500 percent from its 2020 low.

If a company’s stock soars like Peloton’s, employee stock awards will most likely produce immediate paper fortunes. But Mr. Miller said companies could structure stock awards to reduce that likelihood if they wanted to. For example, companies can space out grants so they are not all granted when the stock is at a low or a high point.

Peloton declined to comment.

Ray Jordan, a spokesman for Moderna, said Mr. Bancel’s options vested over several years, meaning that “paper gains in a few months do not necessarily translate to long-term gains if the stock performance is not maintained.”

Some executives at companies that have been hit hard by the pandemic have still done well. In March, William J. Hornbuckle, chief executive of MGM Resorts International, gave up the remainder of his 2020 salary in exchange for restricted stock units worth $700,000, the amount of his forgone salary. After MGM stock recovered somewhat from the lows it plumbed in March, that grant is worth $1.3 million on paper — and all his 2020 awards have appreciated by a combined $4 million.

“At a time of great uncertainty when all of our properties were closed with no clear plan for reopening, Mr. Hornbuckle and several of our executives volunteered to help the company conserve cash by exchanging all or a portion of their cash compensation for the remainder of 2020 for restricted stock units that vest at the end of the year,” Debra DeShong, an MGM representative, said in a statement. “By doing so, they took on great risk, risk that still exists in that we are not operating under normal circumstances and we are still in a period of recovery.”

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U.S. Household Wealth Rose Before the Pandemic, but Inequality Persisted

Families were making gains in income and net worth in the three years leading up to the pandemic, according to Federal Reserve data released on Monday, but wealth inequality remained stubbornly high.

Median household net worth climbed by 18 percent between 2016 and 2019, the Fed’s Survey of Consumer Finances showed, as median income increased by 5 percent. The survey, which began in 1989, is released every three years and is the gold standard in data about the financial circumstances of U.S. households. It offers the most up-to-date and comprehensive snapshot of everything from savings to stock ownership across demographic groups.

The figures tell a story of improving personal finances fueled by income gains, the legacy of the longest economic expansion on record that had pushed the unemployment rate to a half-century low and bolstered wages for those earning the least. Yet despite the progress, massive gaps persisted — the share of wealth owned by the top 1 percent of households was still near a three-decade high.

Nearly all of the data in the 2019 survey were collected before the onset of the coronavirus. Economists worry that progress for disadvantaged workers has probably reversed in recent months as the pandemic-related shutdowns threw millions of people out of work. The crisis has especially cost minority and less-educated employees, who are more likely to work in high-interaction jobs at restaurants, hotels and entertainment venues. Many economists expect the crisis to worsen inequality as lower earners fare the worst.

“The economic downturn has not fallen equally on all Americans and those least able to shoulder the burden have been hardest hit,” Jerome H. Powell, the Fed chair, said at a news conference earlier this month. “In particular, the high level of joblessness has been especially severe for lower wage workers in the services sector, for women and for African-Americans and Hispanics.”

The newly released 2019 data suggest that families with lower pretax incomes were catching up to their richer counterparts between 2016 and 2019. Families with high wealth, college educations, and those who identified as white and non-Hispanic — who all have higher incomes — enjoyed comparatively smaller earnings growth over the period, the Fed said.

Even so, inequality in both income and wealth remained high.

Since the survey started, families in the top 1 percent of the income distribution have gradually taken home a bigger share of the nations’ income while the share of the lower 90 percent of earners has gradually fallen. The bottom 90 percent’s income share increased slightly in 2019 — reversing a decade-long decline — but a Fed report on the data noted that the rebound happened from record lows and only took the group back to roughly its share from 2010 to 2013 share.

Affluent families have held a growing share of the nation’s wealth over recent decades, and they retained that advantage as of 2019. In 1989, the top 1 percent of wealth holders held about 30 percent of the nation’s net worth, but that had jumped to nearly 40 percent in 2016 and was little changed in the latest survey, Fed economists said.

Families in the bottom half of the wealth distribution held just 2 percent of the nation’s wealth in 2019, the Fed data and a related report showed.

The wealth measure does not include defined benefit pension plans and Social Security benefits, which are hard to value. An augmented measure that incorporates pension plans still shows that wealth at the top has still risen, but by less, according to a Fed report.

The concern now is that inequality — especially in income, which derives heavily from wages — could increase again as workers at the bottom lose jobs.

The unemployment rate was 8.4 percent in August, according to the Labor Department, but the rate was 13 percent for Black people. Likewise, the jobless rate for those with less than a high school diploma was more than twice that for adults with a bachelor’s degree or more.

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Is an Algorithm Less Racist Than a Loan Officer?

In 2015, Melany Anderson’s 6-year-old daughter came home from a play date and asked her mother a heartbreaking question: Why did all her friends have their own bedrooms?

Ms. Anderson, 41, a pharmaceutical benefits consultant, was recently divorced, living with her parents in West Orange, N.J., and sharing a room with her daughter. She longed to buy a home, but the divorce had emptied her bank account and wrecked her credit. She was working hard to improve her financial profile, but she couldn’t imagine submitting herself to the scrutiny of a mortgage broker.

“I found the idea of going to a bank completely intimidating and impossible,” she said. “I was a divorced woman and a Black woman. And also being a contractor — I know it’s frowned upon, because it’s looked at as unstable. There were so many negatives against me.”

Then, last year, Ms. Anderson was checking her credit score online when a pop-up ad announced that she was eligible for a mortgage, listing several options. She ended up at Better.com, a digital lending platform, which promised to help Ms. Anderson secure a mortgage without ever setting foot in a bank or, if she so desired, even talking to another human.

In the end, she estimated, she conducted about 70 percent of the mortgage application and approval process online. Her fees totaled $4,000, about half the national average. In November 2019, she and her daughter moved into a two-bedroom home not far from her parents with a modern kitchen, a deck and a backyard. “We adapted to the whole Covid thing in a much easier way than if we were still living with my parents,” Ms. Anderson said this summer. “We had a sense of calm, made our own rules.”

Image
Credit…Bryan Anselm for The New York Times

Getting a mortgage can be a harrowing experience for anyone, but for those who don’t fit the middle-of-last-century stereotype of homeownership — white, married, heterosexual — the stress is amplified by the heightened probability of getting an unfair deal. In 2019, African Americans were denied mortgages at a rate of 16 percent and Hispanics were denied at 11.6 percent, compared with just 7 percent for white Americans, according to data from the Consumer Finance Protection Bureau. An Iowa State University study published the same year found that L.G.B.T.Q. couples were 73 percent more likely to be denied a mortgage than heterosexual couples with comparable financial credentials.

Digital mortgage websites and apps represent a potential improvement. Without showing their faces, prospective borrowers can upload their financial information, get a letter of pre-approval, customize loan criteria (like the size of the down payment) and search for interest rates. Software processes the data and, and if the numbers check out, approves a loan. Most of the companies offer customer service via phone or chat, and some require that applicants speak with a loan officer at least once. But often the process is fully automated.

Last year, 98 percent of mortgages originated by Quicken Loans, the country’s largest lender, used the company’s digital platform, Rocket Mortgage. Bank of America recently adopted its own digital platform. And so-called fintech start-ups like Roostify and Blend have licensed their software to some of the nation’s other large banks.

Reducing — or even removing — human brokers from the mortgage underwriting process could democratize the industry. From 2018 to 2019, Quicken reported a rise in first-time and millennial home buyers. Last year, Better.com said, it saw significant increases in traditionally underrepresented home buyers, including people of color, single women, L.G.B.T.Q. couples and customers with student loan debt.

“Discrimination is definitely falling, and it corresponds to the rise in competition between fintech lenders and regular lenders,” said Nancy Wallace, chair in real estate capital markets at Berkeley’s Haas School of Business. A study that Dr. Wallace co-authored in 2019 found that fintech algorithms discriminated 40 percent less on average than face-to-face lenders in loan pricing and did not discriminate at all in accepting and rejecting loans.

If algorithmic lending does reduce discrimination in home lending in the long term, it would cut against a troubling trend of automated systems — such as A.I.-based hiring platforms and facial recognition software — that turn out to perpetuate bias. Faulty data sources, software engineers’ unfamiliarity with lending law, profit motives and industry conventions can all influence whether an algorithm picks up discriminating where humans have left off. Digital mortgage software is far from perfect; the Berkeley study found that fintech lenders still charged Black and Hispanic borrowers higher interest rates than whites. (Lending law requires mortgage brokers to collect borrowers’ race as a way to identify possible discrimination.)

“The differential is smaller,” Dr. Wallace said. “But it should be zero.”

Image

Credit…Benjamin Rasmussen for The New York Times

Better.com started in 2016 and is licensed to underwrite mortgages in 44 states. This year, the company has underwritten about 40,000 mortgages and funds roughly $2.5 billion in loans each month. After a Covid-19 slump in the spring, its fund volume for June was five times what it was a year ago.

With $270 million in venture funding, the company generates revenue by selling mortgages to about 30 investors in the secondary loan market, like Fannie Mae and Wells Fargo. The company attracts customers as it did Ms. Anderson: buying leads from sites like Credit Karma and NerdWallet and then marketing to those customers through ads and targeted emails.

In 2019, Better.com saw a 532 percent increase in Hispanic clients between the ages of 30 and 40 and a 411 percent increase in African-Americans in the same age bracket. Its married L.G.B.T.Q. client base increased tenfold. “With a traditional mortgage, customers feel really powerless,” said Sarah Pierce, Better.com’s head of operations. “You’ve found a home you love, and you’ve found a rate that’s good, and somebody else is making the judgment. They’re the gatekeeper or roadblock to accessing financing.” Of course, Better.com is making a judgment too, but it’s a numerical one. There’s no gut reaction, based on a borrower’s skin color or whether they live with a same-sex partner.

Trevor McIntosh, 35, and Brennan Johnson, 31, secured a mortgage for their Wheat Ridge, Colo., home through Better.com in 2018. “We’re both millennials and we need to immediately go online for anything,” said Mr. Johnson, a data analyst. “It seemed more modern and progressive, especially with the tech behind it.”

Previously, the couple had negative home buying experiences. One homeowner, they said, outright refused to sell to them. A loan officer also dropped a bunch of surprise fees just before closing. The couple wasn’t sure whether prejudice — unconscious or otherwise — was to blame, but they couldn’t rule it out. “Trevor and I have experienced discrimination in a variety of forms in the past, and it becomes ingrained in your psyche when interacting with any institution,” said Mr. Johnson. “So starting with digital, it seemed like fewer obstacles, at least the ones we were afraid of, like human bias.” (Better.com introduced me to Ms. Anderson, Mr. McIntosh and Mr. Johnson, and I interviewed them independently.)

Digital lenders say that they assess risk using the same financial criteria as traditional banks: borrower income, assets, credit score, debt, liabilities, cash reserves and the like. These guidelines were laid out by the Consumer Finance Protection Bureau after the last recession to protect consumers against predatory lending or risky products.

These lenders could theoretically use additional variables to assess whether borrowers can repay a loan, such as rental or utility payment history, or even assets held by extended family. But generally, they don’t. To fund their loans, they rely on the secondary mortgage market, which includes the government-backed entities Freddie Mac and Fannie Mae, and which became more conservative after the 2008 crash. With some exceptions, if you don’t meet the standard C.F.P.B. criteria, you are likely to be considered a risk.

Fair housing advocates say that’s a problem, because the standard financial information puts minorities at a disadvantage. Take credit scores — a number between 300 and 850 that assesses how likely a person is to repay a loan on time. Credit scores are calculated based on a person’s spending and payment habits. But landlords often don’t report rental payments to credit bureaus, even though these are the largest payments that millions of people make on a regular basis, including more than half of Black Americans.

For mortgage lending, most banks rely on the credit scoring model invented by the Fair Isaac Corporation, or FICO. Newer FICO models can include rental payment history, but the secondary mortgage market doesn’t require them. Neither does the Federal Housing Administration, which specializes in loans for low and moderate-income borrowers. What’s more, systemic inequality has created significant salary disparities between Black and white Americans.

“We know the wealth gap is incredibly large between white households and households of color,” said Alanna McCargo, the vice president of housing finance policy at the Urban Institute. “If you are looking at income, assets and credit — your three drivers — you are excluding millions of potential Black, Latino and, in some cases, Asian minorities and immigrants from getting access to credit through your system. You are perpetuating the wealth gap.”

For now, many fintech lenders have largely affluent customers. Better.com’s average client earns over $160,000 a year and has a FICO score of 773. As of 2017, the median household income among Black Americans was just over $38,000, and only 20.6 percent of Black households had a credit score above 700, according to the Urban Institute. This discrepancy makes it harder for fintech companies to boast about improving access for the most underrepresented borrowers.

Software has the potential to reduce lending disparities by processing enormous amounts of personal information — far more than the C.F.P.B. guidelines require. Looking more holistically at a person’s financials as well as their spending habits and preferences, banks can make a more nuanced decision about who is likely to repay their loan. On the other hand, broadening the data set could introduce more bias. How to navigate this quandary, said Ms. McCargo, is “the big A.I. machine learning issue of our time.”

According to the Fair Housing Act of 1968, lenders cannot consider race, religion, sex, or marital status in mortgage underwriting. But many factors that appear neutral could double for race. “How quickly you pay your bills, or where you took vacations, or where you shop or your social media profile — some large number of those variables are proxying for things that are protected,” Dr. Wallace said.

She said she didn’t know how often fintech lenders ventured into such territory, but it happens. She knew of one company whose platform used the high schools clients attended as a variable to forecast consumers’ long-term income. “If that had implications in terms of race,” she said, “you could litigate, and you’d win.”

Lisa Rice, the president and chief executive of the National Fair Housing Alliance, said she was skeptical when mortgage lenders said their algorithms considered only federally sanctioned variables like credit score, income and assets. “Data scientists will say, if you’ve got 1,000 bits of information going into an algorithm, you’re not possibly only looking at three things,” she said. “If the objective is to predict how well this person will perform on a loan and to maximize profit, the algorithm is looking at every single piece of data to achieve those objectives.”

Fintech start-ups and the banks that use their software dispute this. “The use of creepy data is not something we consider as a business,” said Mike de Vere, the chief executive of Zest AI, a start-up that helps lenders create credit models. “Social media or educational background? Oh, lord no. You shouldn’t have to go to Harvard to get a good interest rate.”

In 2019, ZestFinance, an earlier iteration of Zest AI, was named a defendant in a class-action lawsuit accusing it of evading payday lending regulations. In February, Douglas Merrill, the former chief executive of ZestFinance, and his co-defendant, BlueChip Financial, a North Dakota lender, settled for $18.5 million. Mr. Merrill denied wrongdoing, according to the settlement, and no longer has any affiliation with Zest AI. Fair housing advocates say they are cautiously optimistic about the company’s current mission: to look more holistically at a person’s trustworthiness, while simultaneously reducing bias.

By entering many more data points into a credit model, Zest AI can observe millions of interactions between these data points and how those relationships might inject bias to a credit score. For instance, if a person is charged more for an auto loan — which Black Americans often are, according to a 2018 study by the National Fair Housing Alliance — they could be charged more for a mortgage.

“The algorithm doesn’t say, ‘Let’s overcharge Lisa because of discrimination,” said Ms. Rice. “It says, ‘If she’ll pay more for auto loans, she’ll very likely pay more for mortgage loans.’”

Zest AI says its system can pinpoint these relationships and then “tune down” the influences of the offending variables. Freddie Mac is currently evaluating the start-up’s software in trials.

Fair housing advocates worry that a proposed rule from the Department of Housing and Urban Development could discourage lenders from adopting anti-bias measures. A cornerstone of the Fair Housing Act is the concept of “disparate impact,” which says lending policies without a business necessity cannot have a negative or “disparate” impact on a protected group. H.U.D.’s proposed rule could make it much harder to prove disparate impact, especially stemming from algorithmic bias, in court.

“It creates huge loopholes that would make the use of discriminatory algorithmic-based systems legal,” Ms. Rice said.

H.U.D. says its proposed rule aligns the disparate impact standard with a 2015 Supreme Court ruling and that it does not give algorithms greater latitude to discriminate.

A year ago, the corporate lending community, including the Mortgage Bankers Association, supported H.U.D.’s proposed rule. After Covid-19 and Black Lives Matter forced a national reckoning on race, the association and many of its members wrote new letters expressing concern.

“Our colleagues in the lending industry understand that disparate impact is one of the most effective civil rights tools for addressing systemic and structural racism and inequality,” Ms. Rice said. “They don’t want to be responsible for ending that.”

The proposed H.U.D. rule on disparate impact is expected to be published this month and go into effect shortly thereafter.

Many loan officers, of course, do their work equitably, Ms. Rice said. “Humans understand how bias is working,” she said. “There are so many examples of loan officers who make the right decisions and know how to work the system to get that borrower who really is qualified through the door.”

But as Zest AI’s former executive vice president, Kareem Saleh, put it, “humans are the ultimate black box.” Intentionally or unintentionally, they discriminate. When the National Community Reinvestment Coalition sent Black and white “mystery shoppers” to apply for Paycheck Protection Program funds at 17 different banks, including community lenders, Black shoppers with better financial profiles frequently received worse treatment.

Since many Better.com clients still choose to talk with a loan officer, the company says it has prioritized staff diversity. Half of its employees are female, 54 percent identify as people of color and most loan officers are in their 20s, compared with the industry average age of 54. Unlike many of their competitors, the Better.com loan officers don’t work on commission. They say this eliminates a conflict of interest: When they tell you how much house you can afford, they have no incentive to sell you the most expensive loan.

These are positive steps. But fair housing advocates say government regulators and banks in the secondary mortgage market must rethink risk assessment: accept alternative credit scoring models, consider factors like rental history payment and ferret out algorithmic bias. “What lenders need is for Fannie Mae and Freddie Mac to come out with clear guidance on what they will accept,” Ms. McCargo said.

For now, digital mortgages might be less about systemic change than borrowers’ peace of mind. Ms. Anderson in New Jersey said that police violence against Black Americans this summer had deepened her pessimism about receiving equal treatment.

“Walking into a bank now,” she said, “I would have the same apprehension — if not more than ever.”

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The Fed Enabled a Record Expansion. Trump Is Taking Credit.

WASHINGTON — President Trump is using the prepandemic economy to make a case for his re-election, highlighting time and again that unemployment rates fell to record low levels for Black and Hispanic workers in 2019, and that wages were climbing steadily under his watch.

He is also seeking to convince voters that he is rapidly returning America to that prosperous place following waves of pandemic-wrought job loss — fostering what he labeled a “Super V” rebound on Sunday — and that Joseph R. Biden Jr. would “destroy” the economy if he wins in November.

But Mr. Trump’s story line about his economic track record, particularly what he showcased during his Republican National Convention speech last month, leaves out a crucial detail. Lucky timing and a patient Federal Reserve was pivotal in driving the strong labor market of the late 2010s, economists said. The Trump administration’s tax cuts and higher government spending temporarily nudged the economy, but the trade wars cooled it off, so the administration’s track record was mixed.

That complicated reality is unlikely to stop Mr. Trump from laying claim to the successes of the 2018 and 2019 job market. But voters who want to understand what drove such strong hiring and growth might be better off looking at the actions of the Fed and its chair, Jerome H. Powell, whom Mr. Trump nominated in late 2017 and then spent more than a year attacking on Twitter and in speeches.

By retaining his predecessor’s patient approach to rate increases — and then stopping them altogether as inflation, which the central bank tries to keep under control, hovered at low levels — Mr. Powell’s Fed helped to keep the longest economic expansion in United States history chugging along. The stretch of unbroken growth pushed unemployment to its lowest level in 50 years, prompting companies to cast a wider net for employees, pulling long-sidelined workers back into jobs.

“Both monetary and fiscal policy were stimulative, and it did lead to a strong labor market,” said Stephanie Aaronson, a former Fed researcher who is now at the Brookings Institution. Very low inflation “has given policymakers the latitude to try new things.”

That matters as more than a talking point: It could fundamentally shape the post-pandemic economy. The Fed has signaled that it intends to leave rates low to push unemployment down again, which could help return the labor market to strong levels. But the challenges posed by business closures and job reshuffling mean that elected officials, who have taxing and spending powers that the Fed lacks, may prove crucial to the speed and scope of the rebound.

“The single most important thing we can do here is to support a strong labor market,” Mr. Powell said in late August remarks. “That is more of an all-governmental society project,” and “to wait to the eighth and ninth year of the cycle to get those results — we can do better than that with other policies.”

To be sure, it is easy to overstate how strong conditions were before the pandemic struck.

About 83 percent of adults in their prime working years were in the labor force at the start of 2020, which was a marked improvement but still down from an 84.6 percent high in the late 1990s. Inequality prevailed. Wage growth had picked up from the expansion’s early years, but it remained shy of historical records.

But there is no doubt that the prepandemic job market was robust. Unemployment had declined to 3.5 percent, its lowest level in half a century. Prime-age workers who had dropped out of the labor market were surprising economists by applying for jobs. Unemployment for Black and Hispanic workers hit record lows, and pay was picking up for those who earned the least.

Now, the pandemic recession has thrown millions out of work, hitting disadvantaged groups especially hard. Black unemployment stood at 13 percent in August, for instance, compared to 7.3 percent for white workers.

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Credit…Stefani Reynolds for The New York Times

Mr. Trump is already taking a victory lap as the job market begins to heal, calling the rebound “the fastest labor market recovery from an economic crisis in history” during a Sunday news conference. But about half of the people who have lost jobs since February remain unemployed. Economists have warned that the return to full strength could become a grinding process, and Mr. Powell has said that some workers may struggle to return to jobs.

Understanding the policy mix that helped make the labor market so strong in 2019 will be critical to putting the United States back on track for another robust period of growth.

Some of the policies pushed through by Mr. Trump and lawmakers did help to bolster economic growth, which can drive hiring, economists said. The government was spending more freely, and the administration’s signature tax cuts, passed in late 2017, seem to have delivered a fleeting jolt to the economy.

Economists at the University of Pennsylvania’s Penn Wharton Budget Model say that the Tax Cuts and Jobs Act helped growth to jump to about 3 percent for 2018, but the effect faded as growth returned to 2.2 percent in 2019.

“We don’t project any material impact on growth from T.C.J.A. in 2019 or going forward,” said Alexander Arnon, a senior analyst at the Penn Wharton Budget Model, a research center that analyzes and predicts the effects of tax and other policy changes on the federal budget.

Data make it clear that the administration’s policies were not the whole story.

A chart of employment gains over the expansion show that they continued with remarkable consistency, month over month and year after year, starting from around 2010. The jobless rate slowly and steadily dropped. And people gradually trickled back from the labor market’s sidelines.

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Much of the improvement seems to have been driven by a long, steady economic expansion, creating a self-sustaining cycle in which workers got hired, spent more and fueled demand that created more jobs.

Fed policy helped to enable the progress. Starting under Mr. Powell’s predecessor Janet L. Yellen, the central bank chose to lift interest rates at a historically slow pace, treading carefully to avoid crashing the expansion while also trying to avoid runaway inflation.

Mr. Powell, who assumed the Fed chair in February 2018, raised rates four times during his first year — still a much slower pace than in prior business cycles — before pausing in early 2019 as markets gyrated. Under his watch, the central bank allowed the unemployment rate to fall to recent lows without trying to offset that change, and even lowered interest rates in the second half of 2019 to help sustain the expansion amid Mr. Trump’s trade war, which included steep tariffs on Chinese goods.

Mr. Trump himself was publicly pushing for rate cuts, viewing that as a way to make the economy take off like a “rocket.” He regularly criticized Mr. Powell for the 2018 rate increases and then the slow pace of 2019 rate cuts. The president implied that Mr. Powell was an “enemy” and called the Fed chair and his colleagues “boneheads” for not pursuing easier monetary policy sooner.

But the Fed sets rates independently of the White House and consistently ignored his advice. When it did move, it neither did so at the speed the president sought, nor by using the emergency monetary tools that he wanted.

The good news for the post-crisis recovery and rebound is that the Fed is likely to again let unemployment fall sharply.

In an update to its long-run framework in late August, the Fed officially signaled that it will no longer raise interest rates because of a low unemployment rate alone, effectively codifying the practice adopted last year.

The bad news is that the central bank is low on ammunition to prod the economy. It was able to cut interest rates by only 1.5 percentage points when the pandemic started, compared to cuts that totaled about 5 percent during the prior two recessions. Relying too much on low rates could make for another very gradual recovery — one like the last long expansion, which took nearly a decade to really pull workers in from the sidelines.

“We really need it to be broader than just the Fed,” Mr. Powell said of post-pandemic labor market policies, speaking at the Kansas City Fed’s conference in late August.

Mr. Trump and his allies are correct in arguing that leadership from the White House could matter enormously. Government taxing and spending will be paramount to the strength of the coming business cycle.

“President Trump and a President Biden would pursue different fiscal policy paths,” said Michael Strain, who studies economic policy at the American Enterprise Institute. “There might also be differences in how they pursue the public health situation.”

Most economists argue that more government spending will be important to keeping America on a path toward full recovery. There is less agreement over shutdown versus reopening: Some stress the primacy of controlling the virus, while others argue that the costs to business and jobs are too steep.

“There are a lot of unknowns,” Mr. Strain said.

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A Gen-X Adviser to Biden Argues Equality Is Good for Growth

Heather Boushey, who is unofficially one of the top economic advisers to Joseph R. Biden Jr., does not play to type. When the progressive economist and I arranged to meet last December in a Midtown Manhattan coffee shop, I was expecting someone buttoned up, and I couldn’t find her in the room. Then she texted and waved from just a few feet away. She was wearing a Stephen Malkmus and the Jicks T-shirt — a niche band featuring the lead singer of the beloved 1990s indie group Pavement.

When Dr. Boushey and I met again, on a bright July morning in Washington, where she runs the Washington Center for Equitable Growth, it was impossible to miss her. She was masked, on her stoop, and had set out a table and chairs. In the intervening seven months, the coronavirus had killed more than 100,000 Americans and set off a recession with unemployment rates not seen since the Great Depression. Dr. Boushey had seen the pain coming.

She hadn’t predicted the virus, of course, but she had spent much of her career studying the financial fissures underlying the American economy. “Countries that have this deep inequality like we do are much more prone to financial crises,” she said, “in no small part because high wealth inequality leads to more debt, which just makes your economy more fragile.”

Dr. Boushey (pronounced boo-SHAY) has a strict policy of not commenting on her work for Mr. Biden, who also takes economic advice from Jared Bernstein and Ben Harris, both veterans of the Obama administration; Janet L. Yellen, the former Federal Reserve chair; and others. In this inner circle, Dr. Boushey is among those arguing against the persistent assumption in Washington that programs that benefit the poor and middle class are bad for the economy. In two volumes of data-studded analysis published in the last four years, she has laid out a platform for what she describes as “strong, stable and broad-based economic growth” — basically, Washington-ese for a fight against plutocracy.

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Credit…Cheriss May/NurPhoto, via Getty Images

In “Finding Time: The Economics of Work-Life Conflict,” released in 2016, she charted the changing structure of the American family since World War II. Promoting policies like universal access to paid sick days and affordable child care, Dr. Boushey contended that addressing suffering and inequality didn’t have to come at the expense of economic dynamism; such remedies, she says, can actually promote growth.

In “Unbound: How Inequality Constricts Our Economy and What We Can Do About It,” published in October, she took the line of thinking further, laying out the ways that extreme inequality threatens democracy and the market itself.

“We need to recognize how economic power translates into political and social power,” she wrote, “and reject old theories that treat the economy as a system governed by natural laws separate from society’s.”

Dr. Boushey’s work offers a bird’s-eye view of policies that might have been — she was tapped to be the chief economist of Hillary Clinton’s transition team, had the 2016 election gone the other way — and that could find favor if Mr. Biden wins in November. As the federal government deploys trillions of dollars in a once-in-a-century economic emergency, Dr. Boushey is at the forefront of a rising generation of economists rethinking age-old conundrums, like unemployment, competition and the very nature of economic growth.

In “Finding Time,” Dr. Boushey, who was born in 1970, recounts a childhood in a middle-class neighborhood north of Seattle. Her father worked as a crane operator at the Boeing plant, and her mother took on a full-time job as a bank teller to make ends meet. Her parents were part of a trend. In the context of rising inflation and unemployment, many working-class families were feeling the same squeeze.

In the early 1980s, Dr. Boushey’s father was laid off. Her mother said some after-school activities might be put on hold. “That was the moment that I realized that actually economics — whether or not my parents have a job — affects whether or not I get to do the things that matter to me in my life,” Dr. Boushey said.

For decades, economists have often sought to frame their discipline as being at an arm’s length from politics. But Dr. Boushey and her peers, many of them Generation X, have embraced the field’s social and political roots. Informed by mistakes made during the 2008 recession, members of this cohort — including academics like Emmanuel Saez and Raj Chetty, and Jason Furman on the policy side — have turned their attention to the structural consequences of deepening inequality. They have eagerly addressed topics that challenge neoclassical economic theory, such as climate change, generational wealth and opportunity disparities.

In an essay published by the journal Democracy last summer, Dr. Boushey described the group as “a nascent generation of scholars who are steeped in the new data and methods of modern economics, and who argue that the field should — indeed, must — change.”

“If anything, economics is reckoning with its political past,” said Mehrsa Baradaran, a professor of law at the University of California, Irvine, who has written extensively about the racial wealth gap and serves on the Washington Center for Equitable Growth’s board of directors.

“Heather is really in the forefront of this,” Professor Baradaran added. “She’s talking to a different audience than I think a lot of other academic economists. She’s actually trying to collect effective policy and make economic changes by looking at the data we measure.”

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Credit…Ting Shen for The New York Times

In addition to awarding grants for academic work, Dr. Boushey’s think tank publishes legislation-minded policy proposals. In “Recession Ready,” a collection of essays produced in 2019 with the Hamilton Project, a division of the centrist Brookings Institution, Dr. Boushey and her co-authors advocated what are known as automatic stabilizers — safety-net programs like enhanced unemployment and food stamp benefits that would be triggered without congressional debate if the economy slowed down. This year, Equitable Growth published “Vision 2020,” a set of 21 proposals by a range of scholars that included arguments for more affordable early childhood care and the rebuilding of U.S. labor market wage standards.

Many free-market economists remain skeptical of aspects of Dr. Boushey’s framework.

“I cannot question somebody on economic grounds who says, ‘You know what, I want to give up some efficiency for some more equity, fairness, compassion,’” said Casey B. Mulligan, a professor of economics at the University of Chicago, who has argued that some progressive policies could in fact impede recovery. “What I can question and criticize is that there wouldn’t be a trade-off.”

Michael R. Strain, who runs the economic policy program at the American Enterprise Institute and has appeared on Dr. Boushey’s podcast, has said some concern about inequality might be misplaced.

“In terms of the gap between the top and the bottom, I don’t see a lot of good evidence as to what exactly the problem with that gap is,” he said. “And I think there are lots of problems in terms of what’s happening with the bottom 20 or 30 percent, but I don’t know that you solve many of those problems by shrinking the income gap.”

Acknowledging the contested nature of her discipline, Dr. Boushey argues that no matter how one figures it, federal policy has not kept up with the changing structure of society — especially now, as Covid-19 craters the economy.

“In the face of a government that could not provide protective gear, could not protect people, hasn’t been paying attention to supply chains, all of these issues,” she said, “you’re going to have a demand — an ongoing demand — for some sort of active policy. So I think the question is then what that is.”

As we chatted on her stoop in July, Dr. Boushey gestured at our masks. “You’re doing this to protect me, I’m doing this to protect you,” she said. “We’re doing this for each other because we care.”

It was as good a summary as any of her holistic vision of prosperity. In her analysis, paid sick leave will translate into a more productive work force. Addressing inequality will reduce market distortions that ultimately inhibit growth.

On July 21, the Biden campaign released its “21st Century Caregiving and Education Workforce” plan, a 10-year, $775 billion proposal. Advocating subsidies and tax credits for child care and early childhood education, and an expansion of elder care programs, the plan would put into practice many of the policies Dr. Boushey has long endorsed. It would in theory encourage a progressive recovery, boosting the earning and bargaining power of care industry workers, who are disproportionately women of color.

The next week, on July 30, Dr. Boushey testified by video before the congressional Joint Economic Committee. Important components of the $2 trillion federal stimulus known as the CARES Act were set to expire, and Dr. Boushey pushed for extending a $600-a-week federal unemployment payment, a major point of contention in negotiations between the White House and congressional Democrats.

“If you want to be creating more jobs,” she said, “you have to sustain that consumer demand, you have to keep people paying their rent, you have to keep them spending in their communities — until we contain the virus.”

Back on her stoop, Dr. Boushey had mused on the policy ferment of the moment.

“How is it that ideas change?” she said. “You read about that in books, and if you get to live long enough and you get to be a part of these communities, you can sort of see how that happens. And I think that is sort of the only good thing about this particular moment in time.”

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America’s Retirement Race Gap, and Ideas for Closing It

The protest movement across the United States this summer has prompted a national conversation about ways to correct the acute economic inequities facing Black and other Americans of color. Those inequities don’t end when people retire.

Racial gaps in retirement security were large before the coronavirus struck, and the economic disruptions caused by the pandemic could worsen the problem.

Solutions will depend, in part, on addressing the structural racism in American society — but policymakers also have proposed ideas for shrinking the gap more quickly.

Since the pandemic hit, unemployment rates for older Black and Latino workers have been much higher than for their white counterparts, and evidence is mounting that millions of older workers will retire prematurely. That will mean sharp reductions in Social Security income, savings and costly disruptions in employer-provided health care that will hit nonwhite workers especially hard.

But the gaps in resources for retirement were large before the pandemic. In 2016, the typical Black household approaching retirement had 46 percent of the retirement wealth of the typical white household, while the typical Hispanic household had 49 percent, according to a study by the Center for Retirement Research at Boston College.

The result: At a time when many seniors struggle to make ends meet, Black and Latino retirees are especially likely to lack sufficient resources. Two-thirds of single Black retirees — and three-quarters of single Latinos — have incomes below the Elder Index, a data set from the University of Massachusetts Boston that aims to measure the capacity of older people to cover basic living expenses. By contrast, half of white seniors have resources below the index.

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Credit…The Urban Institute

The disparities stem from racism in the labor market, says Kilolo Kijakazi, a fellow at the Urban Institute who has written extensively on income, wealth and race. “We have a history of discrimination in hiring, pay, promotions and benefits. Discrimination in hiring also contributes to occupational segregation,” she said.

Labor inequities began with the enslavement of Black people, she adds. “White people dealt in human trafficking of people of African descent in order to create wealth for white people, but Black people did not benefit from the wealth of their labor. After Emancipation, we had laws and regulations designed to maintain that effect and even strip Black people of wealth they were able to create for themselves in the face of these odds.”

Policies served as barriers to wealth accumulation by Black people. The Jim Crow-era Black Codes restricted opportunity in many Southern states; racially restrictive covenants barred them from buying homes in white neighborhoods; and redlining practices made mortgages hard or impossible to obtain. The inequities have compounded over time, as families were unable to transfer wealth to subsequent generations.

“The way that wealth is generally created for most Americans is, wealth begets more wealth,” says Darrick Hamilton, an economist and executive director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University. “Having access to a capital foundation that puts you into assets that will passively appreciate over your life — that’s how most Americans generate wealth.”

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Credit…Ty Wright for The New York Times

Social Security helps to level racial inequity in retirement. That’s due in part to the program’s progressive benefit formula — it returns a higher percentage of pre-retirement income to lower-income than higher-income workers. And unlike private pensions and homeownership, nearly all Americans participate in Social Security.

“The universal nature of Social Security is a big factor,” says Geoffrey Sanzenbacher, a research fellow at the Center for Retirement Research and co-author of the study.

The center measured all retirement wealth, including income from Social Security, employer-sponsored retirement plans, other financial assets and home equity. When Social Security is excluded, Black Americans have just 14 percent the wealth of whites, and Latinos have just 20 percent.

Several ideas have surfaced for changing Social Security that could close the gap further — but the most important might fall into the category of “do no harm.”

Some policymakers have pushed to raise Social Security’s full retirement age — when you can receive 100 percent of your earned benefit — as part of the solution to the program’s long-term financial shortfall. But workers of color earn less, have lower life expectancy and tend to work in physically demanding occupations that become more difficult to continue at older ages. For example, 50 percent of Black workers ages 55 to 62 reported in 2014 that they have jobs requiring “lots of physical effort,” compared with just 32 percent of whites.

Under the current system, filing at the earliest age, 62, gets you 75 percent of your annual full benefit; every 12 months of delay past your full retirement age (currently around 66, depending on your year of birth) gets you an additional 8 percentage points until you turn 70.

Retirement ages already are rising gradually to 67 from 65 under changes enacted in 1983. The Boston College researchers note that any further increase in full retirement ages would increase retirement wealth inequity and have a disproportionate impact on minority households.

What’s more, the average longevity of Black Americans is shorter — in 2014, their average life expectancy from age 65 was 18.1 years, compared with 19.3 years for whites, according to the Centers for Disease Control and Prevention. And the expectancy for Black men was even shorter, at 16.1 years.

“When you lengthen the retirement age to get the full benefit, you’re putting a cut on the people who are going to die younger,” says William E. Spriggs, chief economist for the A.F.L.-C.I.O. and a professor at Howard University. “Instead, we should be raising the tax on the higher-income people, who are going to live longer, and stop playing with the retirement age.”

One leading progressive organization would like to do more to address that issue. The group, Social Security Works, has proposed updating the current early retirement reductions, which have not been revised since 1956.

The percent of full benefit a worker could receive at age 62 would increase to 85 percent, gradually rising to 100 percent at full retirement age.

This change could be especially helpful to people of color if early retirement accelerates because of the pandemic.

Another Social Security change that Ms. Kijakazi and other experts think could help is to establish a more effective basic minimum benefit that ensures seniors don’t live in poverty. Currently, Social Security has a special minimum benefit, but its value has evaporated relative to standard benefits because its value is pegged to consumer inflation rather than indexed to wage growth, which generally rises more quickly. Several Social Security proposals from Democrats have called for a new minimum benefit that would provide a supplement using a sliding scale starting at full retirement age.

Increasing benefits for workers who enter and leave the labor force more frequently also could help. The current Social Security benefit formula is based on a worker’s highest 35 years of earnings; reducing that to 30 or even 25 would have the effect of increasing the adequacy of benefits for people who leave the work force to provide care or because of job loss.

A caregiver credit could be created that permits workers to earn Social Security credits for time devoted to that work. The idea has been embraced by some advocates and legislators, and included in bills introduced by Representative Nita Lowey, Democrat of New York, and Senator Chris Murphy, Democrat of Connecticut.

Professor Hamilton has proposed creating a federal program of “baby bonds,” which would provide every child with a government-funded trust account at birth, starting with a $1,000 contribution; those born into lower-wealth families would receive more contributions over time, and the accounts would benefit from compound interest growth.

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Credit…Kathryn Gamble for The New York Times

Baby bonds were a plank in the presidential campaign platform of Senator Cory Booker, Democrat of New Jersey. Senator Booker and Representative Ayanna Pressley, a Democrat from Massachusetts, have sponsored bills in the Senate and House that would fund accounts guaranteed to accumulate to $46,531 at age 18 for children born into the lowest-income families, according to a press officer for Mr. Booker. The accounts would be managed by the Treasury and grow with a guaranteed interest rate and inflation protection, probably invested in special Treasury securities.

Use of the funds would be restricted to what Professor Hamilton calls “asset-enhancing endeavors,” such as buying a home, receiving a debt-free education or starting a business.

“The idea here is to ensure that access to capital is not limited to those that receive a trust fund because of the family that they’re born into,” he said. “And what we do to help younger people will have a dramatic impact on how they finish.”

Professor Hamilton’s version of the baby bond also would allow account owners to convert their funds into Individual Retirement Accounts. “If they don’t want to use the money earlier, they can use it when they are ready or let it go all the way to retirement.”

The idea for baby bonds was included among policy recommendations written jointly by allies of Joseph R. Biden Jr., the former vice president, and Senator Bernie Sanders of Vermont, which were delivered to Mr. Biden last month.

Professor Hamilton said he thought of baby bonds as a bit different from reparations for slavery, since they would be paid — at some level — to all Americans and the benefit is prospective, rather than retroactive.

“But I do describe baby bonds as anti-racist,” he said. “Wealth disparity probably is the most cumulative indicator of our intergenerational racist society.”

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Overcrowded Housing Invites Covid-19, Even in Silicon Valley

It was not surprising when three-quarters of the house tested positive. There were 12 people in three bedrooms, with a bathroom whose door frequently required a knock and a kitchen where dinnertime shifts extended from 5 p.m. well into the evening.

Karla Lorenzo, a Guatemalan immigrant who cleaned houses in San Francisco and Silicon Valley, lived in the big room along the driveway. Big is a relative term when a room has five people in it. She and her partner, Abel, slept in a queen-size bed along the wall. There was a crib for the baby at the foot, with the older children’s bunk bed next to that. The other housemates had similar layouts.

Living among many people, as Ms. Lorenzo put it in Spanish, you cannot really avoid your housemates. The sounds, the smells, the moods — everyone is pressed against all of it, and they understood that if one of them got the coronavirus, the rest probably would.

That happened in April, and now the house is returning to health. Abel, referred to by his first name because his immigration status is uncertain, is home after three weeks in the hospital, where Ms. Lorenzo feared he would die alone gasping for air. And she is no longer squirreled in the closet where she spent days to avoid giving the virus to the children.

Now comes a second struggle: figuring out how to pay rent. Abel is back at work at a home supply store, but Ms. Lorenzo’s housecleaning jobs dried up and one of the other families moved out — increasing the monthly bill by $850. “We don’t know how we are going to do it,” she said.

From the early outbreaks to the economic destruction that has come after, the coronavirus pandemic has mapped itself onto America’s longstanding affordable housing problem and the gaping inequality that underlies it. To offset rising rents in a nation where one in four tenant households spend more than half of their pretax income on shelter, a multitude of low-wage service workers have piled into ever more crowded homes.

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Credit…Brian L. Frank for The New York Times
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Credit…Jim McAuley for The New York Times

Living in overstuffed units subdivided by hinged partitions and tacked-up sheets, these households — many of them retail and service workers who are unable to do their jobs from home — were acutely susceptible to the virus’s spread. With double-digit unemployment projected to persist through next year, the same families face losing the crowded homes that make it so easy to get sick in the first place.

To combat the virus, Americans of every income are being encouraged to wear masks and keep their distance. But for low-income families who crowd together to stretch their budgets, home has its own risks.

For these families, a good amount of the response has included triaging a decades-old shortage of affordable housing. Cities and states are renting hotel rooms for people who normally sleep on the streets. There are trailers to quarantine those whose apartments are too crowded for isolation. Fearing a wave of homelessness, governments have followed up with rental aid and moratoriums on evictions.

Combined with federal stimulus funds, and $600 a week in supplemental unemployment benefits that have just lapsed, these measures have prevented the dire predictions of mass displacement. Congress is working on another emergency package, and property owners and affordable-housing advocates have pressed for direct rental assistance.

But evictions are already ramping back up, and the longer the economic malaise continues, the more housing insecurity there will be. Some of the evicted will become homeless, but if the past is a guide, most are likely to find somewhere else to go, and that somewhere is likely to be overcrowded — compounding the conditions that make it so easy to spread the virus.

“We have clients struggling to choose between living in an overcrowded home or facing eviction for not being able to make rent,” said Nazanin Salehi, a lawyer with the nonprofit group Community Legal Services in East Palo Alto. “No matter what they decide, the risk is more exposure to this virus.”



Residential overcrowding

Share of housing units within each census tract with more than one person per room

0

3

8

13

22

30

45%

Danville

Oakland

San

Francisco

San Leandro

Pleasanton

San Bruno

Hayward

Hillsborough

San Mateo

Redwood

City

East Palo

Alto

Half Moon

Bay

Fremont

Palo Alto

Milpitas

Menlo

Park

Mountain

View

Santa

Clara

San

Jose

Cupertino

Highways

Los Gatos

Residential

overcrowding

Danville

Oakland

San

Francisco

Share of housing units within each census tract with more than one person per room

San Leandro

Daly City

Pleasanton

45

%

Hayward

San Bruno

Millbrae

Hillsborough

San Mateo

Redwood

City

30

Half

Moon

Bay

East Palo

Alto

Fremont

Palo Alto

Milpitas

Menlo

Park

22

Mountain

View

Sunnyvale

Santa

Clara

San

Jose

13

Cupertino

8

Highways

3

0

Los Gatos


Source: Census Bureau

By Karl Russell

Visitors to Silicon Valley may take a wrong turn or freeway exit on the way to this or that office park and find themselves in an area like the North Central neighborhood of San Mateo, Calif. That is where Ms. Lorenzo lives on a block of faded homes on small lots, with packed driveways and cars parked liberally on the sidewalk. The scene is one side of the tech economy.

For much of the peninsula stretching south from San Francisco, there is a rough economic split. Cities and neighborhoods to the east, places like East Palo Alto, North Fair Oaks and the Belle Haven section of Menlo Park, are more overcrowded and have a larger share of low-income and Black and Latino residents, many of whom have been disproportionately affected by the virus. Towns and neighborhoods to the west, places like Hillsborough and Palo Alto, are whiter and rich.

This geography is as fundamental to how the place operates as the invention of the microchip. Every day, throngs of clerks, landscapers and elder-care workers wake up on the eastern parts and travel to homes on the western parts or to the corporate campuses of tech companies to do subcontracting work. And every night, they return to overcrowded homes.

Ms. Lorenzo was one of them. She immigrated to the United States six years ago from Guatemala with her two children, fleeing a broken relationship and looking for a new start. Now she is a green-card holder with a new partner and a 2-year-old. Until the pandemic hit, she made about $16 an hour mopping floors and vacuuming carpets in homes on the other side of the peninsula.

For a while, her wages and Abel’s were enough for their own small place — a $1,600-a-month studio that had a bed for them and a shared mattress for the children. Then the rent jumped to $2,100. And then to $2,650.

The couple went looking for cheaper housing and roommates, a quest that has become a Bay Area ritual. Since the Great Recession, a growing share of Bay Area movers, from all but the most well-off households, have gone to homes with four or more adults from ones with one or two adults, according to a study by researchers at Stanford University and the Federal Reserve Bank of San Francisco.

The high-end version is dressed up with a description like “co-living” or explained as a culturally in-tune couple sacrificing an extra bedroom in the suburbs for a life of less driving closer to the city. The low-end version is poverty. Whatever it is called, the economic calculus is the same.

Wages are higher in coastal California than in inland areas, where housing is cheaper, so all but the very rich have to make a trade-off between a commute and space. It is just that the choices for poorer workers are more extreme, like a three-hour commute from cities like Stockton or huddling together in homes where nearly every space is the site of someone’s bed.

Image

Credit…Jim McAuley for The New York Times
Image

Credit…Jim McAuley for The New York Times

Researchers define extreme overcrowding as any home that is occupied by more than one person for every room without a toilet. By this measurement, overcrowding has increased nationwide since the mid-2000s, and the problem is particularly acute in California. About 13.4 percent of rental units — more than double the national average — were considered overcrowded in 2018, according to the Census Bureau. San Mateo and Santa Clara Counties, which roughly outline Silicon Valley, have one of the world’s densest concentrations of billionaires as well as some of the country’s most overcrowded homes.

After the studio, Ms. Lorenzo found a $1,250-a-month room in her current home, a blue stucco house at the back of a two-unit lot, with chalk drawings on the driveway and a dirt yard in the back. There were 11 occupants after Ms. Lorenzo moved in, 12 after her younger child was born.

Dividing the rent had benefits, like allowing Ms. Lorenzo to save money and buy her first television. The children’s shared mattress from the studio was replaced with a new bunk bed. “More clothes, more shoes for the children,” she said, “because we were limited in many things.”

The catch was living with personalities, rules and understandings. Cooking privileges were on a first-come basis, which meant that the last family to use the kitchen might not eat until 9:30 p.m. There was no official time limit on the bathroom, but people knew to be fast. If anyone got a cold, everyone was exposed.

Crowded homes have been a concern practically as long as public health has been a field. Living with a pile of roommates has long been associated with faster-spreading infections, inescapable stress, irregular sleep and the effects that follow, including higher blood pressure and weakened immune systems.

But those take years to develop. The coronavirus spreads in days. By moving so fast and furiously, the virus has exposed in weeks something doctors have been worried about for generations, said Dr. Margot Kushel, an internist and director of the Benioff Homelessness and Housing Initiative at the University of California, San Francisco. “Covid has really become a story of essential workers living in crowded housing,” she said.

Image
Credit…Brian L. Frank for The New York Times

The sickness began, as it does, with worry.

In mid-April, after schools shut down and the children were sent home with worksheets, Abel returned from his job with a report that two of his co-workers had been out sick. He showered with the garden hose and slept in the car that night. But it was too late.

His symptoms were initially mild, before escalating to a 104-degree fever and a shortness of breath that prompted Ms. Lorenzo to take him to the hospital. The county health department, worried that a crowded home would accelerate the spread of what was confirmed to be the coronavirus, dispatched a case worker to test everyone in the house, Ms. Lorenzo said. Eight — all except her children — were also positive.

Ms. Lorenzo never got more than a headache and a sore throat, which in normal times would not have even prevented her from going to work. Suddenly she had to isolate herself in a house where everything was shared.

She settled on the closet, running a phone charger under the door and sitting there for six to eight hours a day, playing word games on her phone, calling relatives in Guatemala, sometimes just napping. Her 10-year-old son took over cooking meals and changing diapers. All the while, Abel was in the hospital. Improving or worsening, alive or dead, Ms. Lorenzo had no idea.

“There was no communication with him, so my head was spinning,” she said.

Image

Credit…Brian L. Frank for The New York Times

Ms. Lorenzo sprayed down the bathroom whenever she or the children used it. She avoided the kitchen and had her sister, who lives more than a half-hour away in Oakland, deliver food through the bedroom window. One time, the sister brought a thermos of hot coffee that Ms. Lorenzo said might as well have been hot water; the virus had so ruined her sense of taste that she could not tell the difference.

Still, the house got tense. One of the housemates accused Abel of infecting them. She told Ms. Lorenzo that if anyone in her family died, she would figure out a way to sue her. After that came the silent treatment — “no hablaba” — and as house relations plummeted, Ms. Lorenzo feared she would be evicted with nowhere to go.

After two weeks, a county health worker returned to test the house again. Ms. Lorenzo’s children were still negative, which seemed so unlikely, given the crowding, that the county retested them several times. All negative, she said. Worried that this luck would soon run out, the county moved her and the children to an emergency trailer.

They lived there for nine days, leaving only to collect stale salad and sandwiches left on an outdoor table. When they finally went home, Abel was back from the hospital.

Days of deep cleaning ensued. Ms. Lorenzo, back to health, is wondering when the world will return to some semblance of normality. Yet she feels lucky that things are not worse, because she thought her partner was going to die. “We are trying to cope with it,” she said. “Trying to leave everything in the past.”

Image

Credit…Brian Snyder/Reuters

Early in the outbreak, Gov. Andrew M. Cuomo of New York and some commentators blamed dense housing and public transit for the spread of the virus. The proof seemed as intuitive as New York’s status as an early epicenter. The recent surge of cases in the more sprawling metropolitan areas of the South and the West has undercut that thesis, and a number of new studies suggest that density, the number of housing units per acre, is less important than crowding, the number of people per bedroom.

One widely cited report was from New York University’s Furman Center, which found that infections were much more intense in Queens neighborhoods with high rates of overcrowding than in Manhattan neighborhoods with higher density but fewer people per unit. The link between crowding and transmission has since shown up in suburbs, rural America and Native American reservations. There is even some evidence that dense metropolitan counties, while suffering higher raw numbers of infections, have a lower death rate because it is easier to get to a hospital.

San Mateo County has been a bright spot, with a rate of about 700 coronavirus cases per 100,000, about half the rate of the state. Still, the county’s cases have been concentrated in low-income households, with most coming lately from front-line workers who “live in crowded multigenerational conditions,” according to the county health officer.

In Chelsea, Mass., which had one of the nation’s worst outbreaks, there is a compelling suggestion that less-crowded quarters can help control the spread. Sleeved into the same blocks where buildings were overrun with infection are 375 subsidized apartments owned by The Neighborhood Developers, a housing nonprofit. The 968 tenants are mostly nonwhite, have the same mix of low-paid service jobs as their neighbors, and live in multistory buildings. But their units are subsidized and less crowded — and so far, healthier.

The Neighborhood Developers has had eight reported cases of the coronavirus in Chelsea, or 826 per 100,000 people, about a tenth the rate of the surrounding community. “It’s not how many people you run into on the street but how many people you see when you come home,” said Rafael Mares, executive director of The Neighborhood Developers.

The story is tempered by its rarity. The United States has a deficit of seven million apartments available to the lowest-income households, or an average of 36 available affordable units for every 100 extremely low-income family in search of one, according to the National Low Income Housing Coalition.

In April of last year, The Neighborhood Developers opened a five-story building with 34 apartments for homeless and low-income families. It received 3,598 applications.

Image

Credit…Brian L. Frank for The New York Times

Stacked against a wall in Ms. Lorenzo’s living room are three red-and-white coolers that her sister used to fill with ice cream to sell on the street. They are furloughed because of the lack of demand and have become just another obstacle that her cooped-up children have to dodge while zipping around the house.

Abel still gets headaches and a tremor in his left arm, but the virus is gone and he is well enough to work. Ms. Lorenzo has not cleaned a house since March but recently got a new job cleaning offices. The family has also been relying on nonprofit organizations and Christian charities for staples.

Once a week Ms. Lorenzo joins the procession of cars that roll through a parking-lot food bank set up by Samaritan House, a San Mateo-based organization that has seen demand for food double and is spending $200,000 a week on rental assistance. Since April 1, 4,000 families have applied for some $8 million in assistance on rent and utilities “and it hasn’t even really hit yet,” said Bart Charlow, Samaritan House’s chief executive.

Ms. Lorenzo’s name could soon be on the list. In June, the departure of the angry housemates opened up an extra bedroom, and her family spread out, with the older children moving across the hall — the sort of arrangement that the San Mateo County Health Department has been recommending for years, except that it is financially unsustainable.

After taking the extra bedroom, Ms. Lorenzo’s family’s share of the rent jumped to $2,100 from $1,250. Their savings got them through July. Now that money is gone, and August is here.

Liliana Michelena and Ben Casselman contributed reporting.

Posted on

Coronavirus Threatens the Luster of Superstar Cities

Cities are remarkably resilient. They have risen from the ashes after being carpet-bombed and hit with nuclear weapons. “If you think about pandemics in the past,” noted the Princeton economist Esteban Rossi-Hansberg, “they didn’t destroy cities.”

That’s because cities are valuable. The New York metropolitan area generates more economic output than Australia or Spain. The San Francisco region produced nearly one of five patents registered in the United States in 2015. Altogether, 10 cities, home to under a quarter of the country’s population, account for almost half of its patents and a third of its economic production.

So even as the Covid-19 death toll rises in the nation’s most dense urban cores, economists still mostly expect them to bounce back, once there is a vaccine, a treatment or a successful strategy to contain the virus’s spread. “I end up being optimistic,” said the Harvard economist Edward Glaeser. “Because the downside of a nonurban world is so terrible that we are going to spend whatever it takes to prevent that.”

And yet there is a lingering sense that this time might be different.

The pandemic threatens the assets that make America’s most successful cities so dynamic — not only their bars, museums and theaters, but also their dense networks of innovative businesses and highly skilled workers, jumping among employers, bumping into one another, sharing ideas, powering innovation and lifting productivity.

Image
Credit…Ruth Fremson/The New York Times

Compelled by the imperative of social distancing, the cutting-edge businesses that flocked to cities to exploit their bundles of talent have been experimenting with technologies that allow them to replicate their social interactions even if everybody is working from home.

As Mr. Rossi-Hansberg put it, “There’s a little bit of a realization that we can still do things,” even when we all stay home.

Covid-19 is not the deadliest disease to have ravaged cities through the ages. But it is showing us that they might not be as essential as they once were. “Cities are more in danger than in the 19th century even though this plague is less severe,” Mr. Glaeser said, “because we are rich enough to imagine a deurbanized world.”

Mark Zuckerberg, Facebook’s chief executive, has said he wants to reconfigure the company so half of its employees could work from home within the next decade. Twitter has said it will allow employees to work from home indefinitely. Jonathan Dingel and Brent Neiman of the University of Chicago estimate that almost 40 percent of the nation’s jobs can be done from home. If this model catches on, it could reconfigure the geography of America’s tech industries.

A survey by the market research firm Reach Advisors found that companies facing high real estate and labor costs were the most interested in pursuing remote work into the future. “The biggest shift away from density will likely be in markets such as the Bay Area and New York City,” said the company’s president, James Chung. By shifting to remote work, “they can dramatically widen their labor pool and evade the labor-wage trap that they are in.”

Paradoxically, America’s big cities are becoming more valuable, churning out an increasing share of the nation’s economic output.




Metro areas that have gained

innovation jobs

2

4

7

1

9

8

3

6

5

10

Change in jobs,

2005-2017

+75,000

+10,000

+1,000

Gained the most

In thousands

1

San Francisco

+77

6

Raleigh, N.C.

+12

7

Madison, Wis.

+12

2

Seattle

+56

3

Silicon Valley

+52

8

Denver

+10

9

Salt Lake City

+ 8

4

Boston

+26

10

Charleston, S.C.

+ 7

5

San Diego

+20

Metro areas that have gained

innovation jobs

2

4

7

1

9

8

3

6

5

10

Change in jobs,

2005-2017

Gained the most

In thousands

6

Raleigh, N.C.

+12

1

San Francisco

+77

+75,000

7

Madison, Wis.

+12

2

Seattle

+56

3

Silicon Valley

+52

8

Denver

+10

9

Salt Lake City

+ 8

4

Boston

+26

+10,000

5

San Diego

+20

10

Charleston, S.C.

+ 7

+1,000


Note: Data represent the change in jobs from 2005 to 2017 in industries where at least 45 percent of the work force has degrees in science, tech, engineering or math, and where investments in research and development amount to at least $20,000 per worker.

Source: Brookings Institution analysis of Emsi data

By Karl Russell

They have benefited from the rise of economic complexity and the explosive growth of technologies that reward the most highly educated workers. Complex industries like information technology, biotechnology and finance concentrate in large cities where they can find the most skilled employees.

These cutting-edge businesses don’t mind paying top dollar for the talent, not least because — research has found — highly skilled workers tend to be more productive and innovative when they are surrounded by others like them.

Despite the stratospheric rents, which have been pushing low-wage workers out, highly educated workers have continued to flock to the nation’s megalopolises in search of the high pay and urban amenities that have emerged to serve this affluent clientele.




INCOME PER PERSON

In thousands of 2019 dollars

San Francisco

Boston

New York

Seattle

$100

$108

80

$80

$78

$76

60

40

U.S. urban

average

20

0

1969

2018

1969

2018

1969

2018

1969

2018

EDUCATIONAL ATTAINMENT

Share of population holding a bachelor’s degree or higher

San Francisco

Boston

New York

Seattle

2010

43%

43%

36%

37%

2018

51%

49%

41%

44%

U.S. average

INCOME PER PERSON

In thousands of 2019 dollars

San Francisco

Boston

$100

$108

80

$80

60

40

U.S. urban

average

20

0

1969

2018

1969

2018

New York

Seattle

$100

80

$78

$76

60

40

20

0

1969

2018

1969

2018

EDUCATIONAL ATTAINMENT

Share of population holding a bachelor’s degree or higher

San Francisco

Boston

2010

43%

43%

2018

51%

49%

U.S. average

New York

Seattle

2010

36%

37%

2018

41%

44%

U.S. average


Sources: Bureau of Economic Analysis (income); Census Bureau (education)

By Guilbert Gates

From 1980 to 2018, the income per person in New York’s metropolitan area rose from 118 percent of the national average to 141 percent, according to government data. Boston’s rose from 109 to 144 percent, San Francisco’s from 137 to 183 percent, and Seattle’s from 120 to 137 percent.

But if big-city businesses find that work from home doesn’t hit their productivity too hard, they might reassess the need to pay top dollar to keep employees in, say, Seattle or the Bay Area. Workers cooped up in a two-bedroom in Long Island City, Queens, might prefer moving to the suburbs or even farther away, and save on rent.

Mr. Glaeser and colleagues from Harvard and the University of Illinois studied surveys tracking companies that allowed their employees to work from home at least part of the time since March. Over one-half of large businesses and over one-third of small ones didn’t detect any productivity loss. More than one in four reported a productivity increase.

Moreover, the researchers found that about four in 10 companies expect that 40 percent of their employees who switched to remote work during the pandemic will keep doing so after the crisis, at least in part. That’s 16 percent of the work force. Most of these workers are among the more highly educated and well paid.

Will they stay in the city if they don’t need to go to the office more than a couple of times a week? Erik Hurst, an economist at the University of Chicago, argues that people will always seek the kind of social contact that cities provide. But what if their employers stop paying enough to support the urban lifestyle? Young families might flee to the suburbs sooner, especially if a more austere new urban economy can no longer support the ecosystem of restaurants and theaters that made city life attractive.

The overall economy might be less productive, having lost some of the benefits of social connection. But as long as the hit is not too severe, employers might be better off, paying lower wages and saving on office space. And workers might prefer a state of the world with somewhat lower wages and no commute.

Municipal governments in superstar cities might have a tough time doing their job as their tax base shrinks. The survival of brick-and-mortar retailers will be threatened as social distancing accelerates the shift to online shopping.

Smaller cities might benefit. If they don’t have to go into the office more than a couple of times a year, highly skilled workers in places like Seattle or Los Angeles might prefer Boulder or Vail.

“Everybody agrees on what are the key forces,” said Gilles Duranton, an economist at the Wharton School of the University of Pennsylvania. “The question is which will play out, and where are the tipping points?”

Image

Credit…Cayce Clifford for The New York Times

One of the big remaining questions is whether remote work will prove sustainable. The productivity increases captured in the surveys examined by Mr. Glaeser’s team might prove fleeting.

“In the more likely state of the world, we realize that we can carry on a project remotely for one or two days but ultimately we do need face-to-face interaction,” said Enrico Moretti, an expert in urban economics at the University of California, Berkeley. Remote education has proved inferior. In the long run, people may still need to live close to where they work.

And yet, technology continues to improve. “There are more incentives to invest in more technologies to stay at home,” Mr. Rossi-Hansberg said.

So what would the post-Covid city look like?

Mr. Rossi-Hansberg suggests that a reconfigured urban America could look a bit more like the 1980s, before technology set in motion the forces that produced the present-day superstars, leaving other places behind. “This would flatten the distribution of cities and reduce the occupational polarization of cities,” he said.

It would be a different world. But it might not be too terrible for urban living.

Consider life in a reconfigured New York City. Rents are lower, after the departure of many of its bankers and lawyers. There are fewer fancy restaurants, but probably still many cheaper ones. People with lower incomes, including the young, can again afford to live in town. City services may be reduced, but if a fifth or more of workers aren’t going to the office on any given day it will be easier to get around.

Mr. Duranton argues that the cities that will be devastated by Covid-19 are the ones that have been falling for a long time: the Rochesters and the Binghamtons, which lost their sustenance once the manufacturing industries that supported them through much of the 20th century folded or moved away.

But for a city like New York, he said, Covid-19 offers an opportunity for redemption. “New York was running into a dead end, turning into a paradise for the rich,” he said. “Culturally dead.” Moving back to a cheaper, messier, more diverse equilibrium may carry a silver lining.

Posted on

The Rich Cut Their Spending. That Has Hurt All the Workers Who Count on It.





March 1

April 1

May 1

June 1

0%

First stimulus

checks received

Half of states in

process of reopening

ZIP CODE INCOME LEVEL

–5%

Bottom 25%

Bottom middle 25%

–10%

Top middle 25%

–15%

Change in consumer spending during the pandemic

Top 25%

–20%

–25%

–30%

–35%

March 1

April 1

May 1

June 1

0%

First stimulus

checks received

Half of states in

process of reopening

ZIP CODE INCOME LEVEL

–5%

Bottom 25%

Bottom middle 25%

–10%

Top middle 25%

–15%

Change in consumer spending during the pandemic

Top 25%

–20%

–25%

–30%

–35%

March 1

April 1

May 1

June 1

0%

Half of states in

process of reopening

ZIP CODE INCOME LEVEL

–5%

Bottom 25%

Bottom middle 25%

–10%

Top middle 25%

–15%

Top 25%

–20%

Change in consumer spending during the pandemic

–25%

–30%

–35%

Change in consumer spending during the pandemic

March 1

April 1

May 1

June 1

ZIP CODE

INCOME

LEVEL

–5%

Bottom

25%

Bottom

middle

–10%

Top

middle

–15%

Top

25%

–20%

–25%

–30%

–35%

First stimulus

checks received

Half of states in

process of reopening


Note: Change calculated from seasonally adjusted January average. Income groups are based on the median income in the ZIP codes where consumers live. The data sample reflects about 10 percent of all national credit and debit card spending.·Source: Analysis of data from Affinity Solutions by Opportunity Insights

In the Manhattan restaurants around Lincoln Center, the tips often rose and fell with the changing playbill. A popular classic musical could mean more preshow diners, and more income. A more famous actress as Eliza Doolittle could do the same. The end of a big run, like “My Fair Lady,” meant the opposite: Tips would be down for a while.

“We were dependent on how well shows were doing at Lincoln Center, and we really did pay attention,” said Emma Craig, who was a server at the Atlantic Grill a block away before the coronavirus crisis. She has not returned to that job yet, or to another singing at a private supper club downtown. In both jobs, she said, “I am dependent on the trickle down.”

The recession has crushed this kind of work in particular: service jobs that depend directly on the spending — and the whims — of the well-off.

Image
Credit…Benjamin Norman for The New York Times

Economists at the Harvard-based research group Opportunity Insights estimate that the highest-earning quarter of Americans has been responsible for about half of the decline in consumption during this recession. And that has wreaked havoc on the lower-wage service workers on the other end of many of their transactions, the researchers say.

“One of the things this crisis has made salient is how interdependent our health was,” said Michael Stepner, an economist at the University of Toronto. “We’re seeing the mirror of that on the economic side.”

As income inequality has grown in America, so has inequality in consumption. That means that when the rich spend money, they drive more of the economy than they did 50 years ago. And more workers depend on them.

Put another way, this particular economic shock — one that has halted much in-person spending, even by rich people who never lost their jobs — has been devastating for an economy in which many low-wage workers count on high-income people spending money.

Mr. Stepner and the economists Raj Chetty, Nathaniel Hendren and John Friedman have collected data from credit card processors, payroll firms and other private companies tracking how and where people spend their money, and how businesses and their workers have been affected as a result. By tying debit and credit card spending back to the home ZIP codes of millions of anonymized cardholders, they estimate that households in the bottom quarter of ZIP codes by income cut their spending by about 30 percent from pre-coronavirus levels at the lowest point in late March. Now, with the help of government stimulus, low-income spending is down only about 5 percent.

For the highest-income quarter, spending has recovered much more slowly, after falling by 36 percent at the lowest point.

“It’s not just that it’s somewhat bigger in percentage terms,” Mr. Chetty said of shifts by the rich. “In absolute dollars, that’s like half of the game.”

The researchers point to several curious patterns tied to that fact: Unemployment claims have been high in rich counties that were largely immune to the last recession. And lower-income Americans living in those richer counties have been hit particularly hard. Their spending fell further than the spending of lower-income workers in poorer counties.


Small businesses in the richest neighborhoods have had the biggest drops in revenue

Change in small business revenue during the pandemic




March 1

April 1

May 1

June 1

+10%

First stimulus

checks received

Half of states in

process of reopening

0%

ZIP CODE INCOME LEVEL

Bottom 25%

–10%

Bottom middle 25%

Top middle 25%

–20%

Top 25%

–30%

–40%

–50%

March 1

April 1

May 1

June 1

+10%

First stimulus

checks received

Half of states in

process of reopening

0%

ZIP CODE INCOME LEVEL

Bottom 25%

–10%

Bottom middle 25%

Top middle 25%

–20%

Top 25%

–30%

–40%

–50%

March 1

April 1

May 1

June 1

+10%

First stimulus

checks received

Half of states in

process of reopening

0%

ZIP CODE INCOME LEVEL

Bottom 25%

–10%

Bottom middle 25%

Top middle 25%

–20%

Top 25%

–30%

–40%

–50%

March 1

April 1

May 1

June 1

+10%

ZIP CODE

INCOME

LEVEL

Bottom

25%

–10%

Bottom

middle

Top

middle

–20%

Top

25%

–30%

–40%

First stimulus

checks received

Half of states in

process of reopening


Note: Change is calculated from seasonally adjusted January average. Income groups are based on the median income in the ZIP codes where the transactions occurred.·Source: Analysis of credit card transaction data from Womply by Opportunity Insights

At the ZIP code level for small businesses, the steepest declines in revenues and hours worked have been in the highest-income neighborhoods. That’s a pattern that can’t fully be explained by differences in coronavirus cases.

In the ZIP code where Ms. Craig worked, near Lincoln Center, small-business revenue fell by 72 percent at the lowest point. It’s still down by half.

In past recessions, the service sector has been one of the most resilient parts of the economy. In down times, consumers typically cut back on big durable goods, like a new washing machine or an upgraded car. But while you can drive your car a little longer, you may not be able to stretch out your next trip to the dry cleaners for a year or two.

The restaurant industry has even been the place where laid-off workers in other parts of the economy have found work in the past.

So we have never seen anything that looks quite like this service-sector recession — one where the bartenders lost their jobs before the construction workers, where previously thriving restaurants and salons have experienced the steepest losses.


Spending on services, often steady during recessions, has fallen sharply

Personal consumption expenditures, seasonally adjusted 2012 dollars




$10 trillion

Great

Recession

$8

Services

$6

$4

Nondurable goods

$2

Durable goods

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

$10

trillion

Great

Recession

$8

Services

$6

$4

Nondurable goods

$2

Durable goods

’02

’04

’06

’08

’10

’12

’14

’16

’18

’20


Source: U.S. Bureau of Economic Analysis via FRED, Federal Reserve Bank of St. Louis

The service sector had also been expanding over time, replacing blue-collar jobs in manufacturing that were more stable and paid more. Especially in big, expensive cities, the vast service sector is now the place where the rich and the poor meet.

“What we’ve seen with rising inequality of the last few decades is that more and more modest-income individuals survive because they’re serving where the consumption has been,” said Lawrence Katz, an economist at Harvard, who has reviewed his colleagues’ findings. And that consumption, he added, has been in the hands of households at the top.

If we’d had this same kind of economic shock 50 years ago, Mr. Katz said, the magnitude of the ripple effects from the rich to the poor would have been much smaller. There simply weren’t as many links between them. (Fifty years ago, the rich also couldn’t have counted on working from home, keeping their incomes intact.)


Low-wage workers in the richest neighborhoods have had the biggest drop in employment

Change in employment of low-wage workers during the pandemic




March 1

April 1

May 1

May 24

First stimulus

checks received

Half of states in

process of reopening

–10%

–20%

–30%

ZIP CODE INCOME LEVEL

Bottom middle 25%

Bottom 25%

Top middle 25%

–40%

Top 25%

–50%

March 1

April 1

May 1

May 24

–10%

–20%

ZIP CODE

INCOME

LEVEL

Bottom

middle

–30%

Bottom

25%

Top

middle

–40%

Top 25%

–50%

First stimulus

checks received

Half of states in

process of reopening


Note: Change calculated from January average. Income groups are based on the median income in the ZIP codes where the workplaces are located. The median annual income of the workers in the data sample is approximately $25,000.·Source: Analysis of payroll data from Earnin and timecard data from Homebase by Opportunity Insights

Now, cities like Washington that were relatively unscathed by the Great Recession — thanks to their high median incomes and all their service jobs — stand to be hurt far more deeply in the coronavirus recession. Initial unemployment data bears this out.

Through April, Washington lost 10 percent of its jobs. During the Great Recession, the city increased employment by 3 percent.

San Francisco and San Mateo counties have lost 16 percent of their jobs during the pandemic, roughly in line with job losses nationwide. During the previous recession, those counties gained jobs while employment in the rest of the country fell 3 percent over all and nearly 5 percent in the poorest counties. Unemployment was even more uneven in the 2001 and 1991 recessions, with steeper job losses in poorer counties.

In other words, in good times — or even in more typical downturns — proximity to the rich affords lower-wage workers a higher degree of job security. In this peculiar coronavirus moment, that arrangement appears remarkably precarious, particularly for women and black and Hispanic workers disproportionately employed in the service sector.

“It’s completely a house of cards,” said Ai-jen Poo, the executive director of the National Domestic Workers Alliance. “So much of our essential work force that keeps us safe and literally has kept this country from collapsing are poverty-wage jobs that were completely invisible to most people before the pandemic.”

In the restaurant industry, the thread connecting the rich and the poor is clearer. Higher-income diners hand servers their primary income.

  • Frequently Asked Questions and Advice

    Updated June 16, 2020

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

    • Will protests set off a second viral wave of coronavirus?

      Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.