Income inequality, and coronavirus' economic fallout

Paying the price: Income inequality and coronavirus
Paying the price: Income inequality and coron... 08:04

Before the coronavirus pandemic struck, the Caldwell family of Kansas City was just making ends meet. Derrick was working as an electrician; Tiana was training office workers; and A.J. was looking forward to playing football after school.

CBS News business analyst Jill Schlesinger asked Derrick, "If you go back to end of February, beginning of March, were you busy? Was it slow? What was going on for you?"

"I was busy – and then it was just, like, everything just stopped," he replied.

You might say COVID-19 infected the family's finances. Their jobs dried up, exposing a stark reality: they had no safety net.

Tiana Caldwell said they had not been able to save money before the pandemic hit. "So, just paycheck to paycheck, right?" Schlesinger asked.

"Yeah," Tiana said.

Even before the coronavirus, nearly 4 out of 10 American adults said they would have difficulty covering a $400 unexpected expense.

Derrick said they've gotten help from family and friends. The Caldwells also got help from KC Tenants, a Kansas City housing rights organization.

"The pandemic has only laid bare inequities that have existed in our country for a long time," said the group's founding director, Tara Raghuveer.

It's nothing new:  Last year the Census Bureau found income inequality was at its highest level in 50 years.

Consider this: two-thirds of the total wealth in this country is owned by the richest 5%. At the same time, more than 38 million Americans are living in poverty, and it's projected that up to 54 million people might not have enough to eat this year.

Economic inequality is the subject of a new documentary, "Capital In the Twenty-First Century," based on the surprise bestseller by French economist Thomas Piketty. He has surveyed centuries of economic upheaval.

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Belknap Press

"The pandemic illustrates, you know, I think, the need to change the economic system and to get in the direction of the more equal and more equitable and more sustainable model of economic development," Piketty said.

More than 29 million people are now collecting unemployment benefits, while at the top end of the economic ladder, during the first three months of the pandemic, the net worth of the more than 600 billionaires in the U.S. grew by about 20%.

Jeff Bezos, the owner of Amazon, saw his net worth increase by $43.8 billion in the first months of the pandemic.

"Those who have the least advantages, the least economic opportunities, are going to bear the largest burden of any kind of downturn, whether it be an economic downturn, or whether it be a public health crisis," said Valerie Wilson, director of the liberal Economic Policy Institute.

Wilson sees not only an economic divide, but a racial divide: "COVID-19 has magnified these racial disparities that we have known about for decades. Because of the persistence of many of these disparities, we can almost predict how any crisis is going to go."

For example, Black households have just 10% of the net worth of white households; for Hispanic households, the figure is just 12%.

Wilson said, "The combination of COVID-19, and it being such a universal problem – not only in this country but around the world – has really challenged us to sort of question the idea of whether or not we really are all in this together."

But not everyone sees income and wealth disparity as negative trends.  

"At the end of the day, capitalism is just trying to maximize, optimize, grow everything as fast as it possibly can – that's how people get rich," said Edward Conard, a former partner at Bain Capital and a scholar at the conservative American Enterprise Institute. He has written about "The Upside of Inequality."

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Portfolio

Conard argues for giving entrepreneurs incentives to create the next Google or Apple or Amazon, looking toward free markets to help boost incomes for lower-wage workers.

"The more prosperous the economy, the richer the bottom 20%," Conard said. "And they are depending almost exclusively on government redistribution for their income. And where do we get that income from? We get it from increasing the overall prosperity of the economy. And the best measure of that is not Jeff Bezos' salary."

Valerie Wilson isn't buying it: "In this country we have this idea about the American dream, and about the virtues of capitalism, that if you work hard, put in your time, you get an education, you take risk, then you're able to climb the economic ladder. But I think it's clear that when we get this billionaire super class, that those opportunities are not so evenly distributed, and in fact the economic gains that we all contribute to are increasingly being shared by only a few."

So, will the coronavirus change our economic path?  Thomas Piketty believes it could go either way.

Schlesinger asked, "Do you believe that the pandemic presents an opportunity here?"

"What we see from history is that crises like pandemics are sometimes necessary, unfortunately, in a way, to deliver big political change or ideological change," Piketty replied. "But we should not just count on crises to get very bad so that after crises, you know, things got better. Because in practice, crises can also deliver political monsters, as we've seen, after World War I in Europe."

As COVID-19 continues to rage across the country, the initial $2.2 trillion in government stimulus money has run out, and Congress and the White House don't appear close to agreeing on a more substantial deal. Also of concern to Tara Raghuveer:  the patchwork of federal and state moratoriums on evictions won't be enough to keep renters from sliding into homelessness.

"Many people got sick and died because of insecure housing situations," Raghuveer said. "That number will only grow over time as people face evictions. And it's inexcusable. We live in the richest country in the history of the world. And we can, and we must, guarantee that everyone has a home."

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Joe Cavaretta, South Florida Sun-Sentinel/AP Photos

"I know it won't happen overnight, but where can we go from here?" asked Schlesinger.

"The thing is, it could happen overnight," Raghuveer said. "And that's what we've seen with what the government has done around the stimulus. When we need to print $1 trillion and get it out to people in their bank accounts, we can do it. And so, that's actually given me a lot of hope."

Tiana Caldwell also has hope – that some day, when we say we're all in this together, we'll mean it.

"We should be helping each other, right?" she said. " If one of us is not okay, none of us are okay."

To watch a trailer for the film 'Capital in the Twenty-First Century" click on the player below: 

Capital in the Twenty-First Century – Official U.S. Trailer by kinolorber on YouTube

      
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Story produced by Alan Golds. Editor: Ed Givnish.