'Struggling so severely': Coronavirus exposes the gulf between the haves and have-nots

Denise Rankin, a makeup artist in Chapel Hill, N.C., already had a hard time making ends meet before she was furloughed at the end of March for an indefinite period. Now, she’s teetering on financial disaster.

“This crushes my life, this is absolutely devastating to me,” said Rankin, 58, who also has an auto-immune disorder. “I don’t have a plan because right now I'm struggling so severely that I can't be scared anymore. I have to stay logical.”

Rankin is among the scores of lower earners bearing the economic brunt of the coronavirus pandemic and the ensuing shutdowns. The gulf between those making the least and those earning the most has grown starker in the last six weeks as work from home, paid sick leave, emergency savings, and housing stability become necessities.

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“The income gap is going to lead to a health gap,” said Andy Collado, assistant director of national programs at The Financial Clinic, a nonprofit that helps low-income individuals with financial coaching. “People with more income will be healthier because they can self-quarantine and keep themselves away and do distance, whereas poor communities may not have that option.”

‘Every paycheck of my life is never enough’

About 81% of the millions of Americans who have been laid off or furloughed in March worked in low-wage industries, according to an analysis by Indeed.

“The unprecedented shock to the U.S. labor market has hit employment hardest in low-wage industries,” said Nick Bunker, economic research director at Indeed. “Low-wage workers are often hardest hit by a weakening labor market, but this time they are also getting hit first.”

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Rankin is an hourly employee who worked for the same company for eight years. Before the furlough, her hours had been cut in December, so her finances were already insecure before the outbreak started.

“Every paycheck of my life is never enough,” Rankin said. “I need at least $500 more to pay my rent on time.”

Rankin has had little access to relief and benefits provided during these difficult times. She hasn’t received a stimulus payment, because she doesn’t usually file taxes and has to take extra steps to register for it online. She has no access to WiFi — just mobile internet — and has had difficulties providing the IRS with her information.

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“It won’t let me get past stage two,” Rankin said. “Every morning from 9 a.m. to 5 p.m., I’m on my phone, trying to make things happen.”

She received about $300 in unemployment benefits for just one week, even though she’s been out of work for six. She also finds it difficult to sign up for the weekly claims.

More than half of lower-income households can’t pay all their bills in April, according to data from the Pew Research Center. This is also the case for Rankin. Every small hit on her finances has a ripple effect on the bills she has to pay. For instance, she paid a $40 late fee for her rent because she didn’t manage to pay it on time in April.

“During this crisis, you may have some landlords that are sympathetic and can understand the situation and not take them to court,” Collado said. “But the fact of the matter is that if they don't pay rent, then they can be evicted.”

‘Longer waits to be seen’

Taking sick days is also not an option for many hourly workers. More than 1 in 4 private industry workers don’t have access to paid sick leave, including more than half in the bottom 25% of the wage distribution, according to the U.S. Department of Labor.

Low earners are most likely to rely on Medicaid insurance, too, if they have insurance at all. More than half of the Financial Clinic’s clients have Medicaid, while 1in 6 are uninsured.

But even those with Medicaid — like Rankin — have to deal with problems people from higher income brackets don’t need to worry about.

“They're going to typically be the kind of people who have much longer waits to be seen,” Collado said. “The delay in getting served can be very dangerous.”

Lower-income individuals also don’t have the option to see a private doctor, another opportunity those who make more can afford in the current situation.

“The availability of doctors, the ability to pay co-pays, the ability to pay any medicine for prescriptions are going to be necessary,” Collado said. “That's going to be a gap that's going to be widened.”

While COVID-19 testing is free because Congress passed legislation covering the cost of the test, but any additional bills for treatment when someone tests positive aren’t covered.

“Higher-income people will be in a situation where they could come up with the money that they have to pay out-of-pocket costs, whereas low-income people won’t,” Dean Baker, senior economist at the Center for Economic and Policy Research said. “That could mean in many cases, they would decide, even if the test is true, they're not going to take it, because they don't want the result.”

‘Least likely to have any reserves’

Like many Americans, Rankin has no savings. It was hard for her to stock up for the isolation, because her last paycheck was only half of its usual amount.

At the Financial Clinic, 4 in 5 of the 50,000 people it serves receive some kind of government benefits like food and housing assistance. Many of them have little room for error, and others are already running a negative budget.

“These are the people that can't go and run and just immediately stock up on all these goods,” Collado said. “They’re going to be the most susceptible. They’re going to be at a serious deficit for supplies.”

Even before the pandemic, 2 in 5 Americans couldn’t cover a $400 emergency without borrowing money or selling items for cash, according to the Federal Reserve.

Lower-income adults are more than three times less likely to have "rainy day" funds to cover expenses for three months compared with upper-income ones, the Pew found.

“Low-income people are the least likely to have any reserves,” Baker said. “Higher-income people likely have some money in the bank. They have a credit card they can borrow against.”

‘The wealth gap is going to be increasing’

Rankin doesn’t know when she’ll return to work, but her own health may mean she has to stay home longer even after the furlough ends. That would only increase her financial vulnerability because she can’t work from home, like many higher-earning workers in banking, media, and other industries.

“If you have people who stopped working, while other people are working from home or still gaining income, then the wealth gap is going to be increasing,” Collado said.

While losses in the stock market has reduced the wealth of many high-income households, lower earners remain at the greatest risk, Baker said. As the economy weakens, those at the bottom are more likely to lose their jobs and see a drop in pay.

“The rich are less rich today,” Baker said. “But income is a much more meaningful measure when we're talking about people's well-being and this is likely to exacerbate the problems.”

Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.

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