Financial outcomes by race during COVID-19
Introduction
As the COVID-19 pandemic progressed, it became clear that its effects were not evenly distributed. In particular, the pandemic has taken a higher toll on communities of color, as hospitalization and death rates have been significantly higher for those groups (CDC 2021). These differential impacts are thought to be the result of differential exposure—including the overrepresentation of workers of color in essential-worker positions—as well as barriers to accessing healthcare. This raises questions about differential financial impacts of the pandemic.
Previous JPMorgan Chase Institute research has demonstrated racial gaps in financial outcomes (Farrell et al. 2020). In particular, we observe large racial differences not only in income, but also in liquid assets, which play a key role during times of economic uncertainty and disruption. In particular, Black families had just 32 cents in liquid assets for every dollar held by White families, and families with fewer liquid assets exhibited larger spending cuts after job loss.
Given these factors, the COVID-19 pandemic could result in further exacerbation of racial disparities in financial outcomes. While job losses were more concentrated among Black and Latinx workers, the financial impacts may have been offset by several policies that increased public supports: the March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, the December 2020 Consolidated Appropriations Act, and the January 2021 American Rescue Plan. With our unique lens of high-frequency, family-level financial data, the JPMorgan Chase Institute is well positioned to assess the impacts of these changes and further our understanding of financial disparities by race.
We use administrative banking data paired with self-reported race information to study racial gaps in families’ income, consumption, and liquid assets, and the response of each to the COVID-19 pandemic. Our data asset matches administrative banking data with 2018 voter registration data from three states—Florida, Georgia, and Louisiana—in which Chase branches existed in 2018 and voter registration records contain self-reported race. This data asset allows us to observe self-reported race alongside other demographic attributes1 and financial outcomes. We study liquid assets via trends in checking account balances by race and income groups, assessing changes in values and distributions during the pandemic. Likewise, we leverage debit card and checking account transactions to trace income and spending over time.
Consistent with prior research on liquid balances during the COVID pandemic (see Greig et al. 2021; and JPMorgan Chase Institute 2021 for most recent data), we observe increases in account balances for all race groups. Black families have lower starting balances than Latinx or White families and see the smallest balance increases in dollar terms during the pandemic – trends that hold even after accounting for income differences. Within each race group, women have lower account balances and depleted their balance gains more quickly than men. Balance changes throughout the pandemic are due to combined changes in account inflows and outflows, and we observe that Black and Latinx families experience larger increases in both total income and rate of receiving unemployment insurance (UI), relative to White families; Latinx families drop their everyday spending the most at the onset of the pandemic, and also consistently transfer money out of their accounts more frequently than Black or White families.
In summary, this research underscores that pandemic-based financial need was not evenly distributed by race. Public data on unemployment show an immediate and much larger spike in unemployment among Black workers than White workers in April 2020 and a slower subsequent recovery in employment, a result echoed in our observations of unemployment insurance by race. We also show that pandemic-related government supports were progressive in that they delivered cash to low-liquidity families, disproportionately boosting the cash balances of Black and Latinx families. These financial supports enabled families to continue their everyday spending, particularly for Black families. Finally, Black and Latinx families’ balances depleted faster than White families’. This signals the critical, but also temporary, nature of those government supports. This may also indicate that families of color faced circumstances that made it more difficult to maintain cash buffers, underscoring the relative precarity of their financial positions should they experience more prolonged unemployment.
About Our Race DataAs noted above, the race data that we rely on for this research is sourced from voter registration records for Florida, Georgia, and Louisiana. First, a note on race categories. The voter registration forms in these states ask respondents if they identify as White, Black, Hispanic, Asian, American Indian, or other. The use of a single question where respondents select one option means that we are unable to separately analyze race and Hispanicity (e.g. we cannot distinguish Hispanic individuals who identify as White from Hispanic individuals who identify as Black). For this reason, we use the word “race” as a shorthand to describe responses to the question on the voter registration form, acknowledging that many people consider Hispanic identity an ethnic category and not a racial group. Furthermore, the voter registration data offers the choice “Hispanic”, but not “Chicana/Chicano”, “Cuban”, “Mexican”, or other choices that voters might otherwise use to self-identify. We use the term “Latinx” in this report to refer to the group of respondents who chose the “Hispanic” category, acknowledging that there is substantial variation in the way people choose to self-identify. To assess what our sample looks like relative to the general U.S. population, the Institute’s prior report on explored this question in depth. We found that our sample disproportionately represents Black and Latinx households, relative to both the nation and the population of registered voters in these three states. This overrepresentation is due in large part to the fact that Chase’s customer base within these three states is disproportionately concentrated in Florida and in urban areas, where Black and Latinx families are overrepresented. In addition, we slightly oversample female-headed households for Black and Latinx families. More broadly, we assess representativeness of our sample to understand whether it offers a reliable window into levels and differences in financial outcomes among Black, Latinx and White families. Using the 2019 Survey of Consumer Finances2 (SCF) as a benchmark, we compare our sample to the broader population of families based on two financial outcomes: income and checking account balances. See Appendix Figures A1 and A2 for results. Relative to the U.S. population at large, the families in our sample have higher income, with median 2019 total income $8,000 to $10,000 higher for our sample than the SCF, for each race group. This could be partially driven by our use of total income—not just labor earnings from employment income—as well as the overrepresentation of large urban areas in our data. Because these income differences are present for each race, the ratio of income for families of color3 relative to White families is less impacted, though still slightly higher for our sample than in the SCF: 75 percent for the Black-White income ratio (vs. 71 percent in the SCF data), and 79 percent for the Latinx-White ratio (compared with 71 percent in the SCF). So we somewhat overestimate the financial position of Black and Latinx families relative to White families, in terms of income. The checking account balances picture differs more. Median checking account balances are comparable between our sample and the SCF for Black families, but 24 percent lower for Latinx families and 40 percent lower for White families. This means that, relative to national benchmarks, we overstate the Latinx-White balance ratio (64 percent vs. 50 percent from SCF) and substantially overstate the Black-White ratio (51 percent vs. 33 percent from SCF). Therefore, race-based differences in income and cash balances in this report may represent a best-case scenario, likely understating financial differences between White families and their Black and Latinx counterparts. |
Reprinted from JP Morgan，the copyright all reserved by the original author.
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