The Deeper Dig is a biweekly podcast from the VTDigger newsroom, hosted and produced by Sam Gale Rosen. Listen below, and subscribe on Apple Podcasts, Google Play, Spotify or anywhere you listen to podcasts.
As more sectors of Vermont’s economy reopen for business, the downturn caused by Covid-19 is already having an outsized impact on low-wage workers. And while state and federal lawmakers have advanced some short-term relief measures, experts wonder whether the pandemic could trigger a broader conversation about income inequality.
Federal data shows high-contact occupations, where workers are at higher risk of infection, are among the lowest paid. Mass layoffs due to Covid-19 shutdown measures have disproportionately struck restaurants, child care centers, salons, gyms, and retail stores — sectors that traditionally pay little.
Vermont has faced a growing income gap for the last 30 to 40 years, said Stephanie Yu, deputy director of the Public Assets Institute, a Montpelier think tank. Yu said the federal response — adding $600 per week to state unemployment benefits — only highlights the fact that wages were too low to begin with: “It’s a big acknowledgement that a lot of what we were paying people before this wasn’t sufficient.”
Vermont House lawmakers are now considering a Senate proposal to create a state grant program that would compensate some front-line workers with $1,000 a month. But Yu says additional efforts to close the pay gap should follow.
**Podcast transcript**
This week: as more sectors of the economy reopen for business, the downturn caused by Covid-19 is already having an outsized impact on low-wage workers. And while state and federal lawmakers have advanced some short-term relief measures, analysts wonder whether the pandemic could trigger a long overdue conversation about inequality.
Bram Kleppner: Hi, this is Bram.
This is Bram Kleppner. He’s the CEO of Danforth in Middlebury, a company that manufactures pewter gifts.
Bram Kleppner: We make every piece by hand in our Middlebury workshop, and we have five retail stores in Vermont and five outside of Vermont.
Got it. So you’re kind of seeing this from a couple different sides, both the manufacturing side and the retail side.
Bram Kleppner: Yes, and very different experiences as well. In some ways different, and in some ways the same, on the different sides of our business.
Bram said the company shut down all nine of its retail stores on March 16, about a week before the governor issued his stay-home order.
Bram Kleppner: That pretty clearly kicked us straight into crisis mode because more than 40% of our sales come through our retail stores. So overnight, we had a 40% drop in revenue.
So they started making cuts.
Bram Kleppner: We ended up laying off all of the people who worked in our retail stores, and about half of our office staff, including two members of the leadership team, and cut all the other salaried people’s pay to 70%. And the hourly people who work in our workshop, we cut to three days a week.
Bram said the fallout from all this has made clear that some of his workers are getting hit harder than others.
Bram Kleppner: There’s some of us for whom it is merely an inconvenience, right? We’ve got pleasant homes and stable family situations and no concerns about running out of food, and so forth. And then there are certainly others of us in the Danforth crew who are at the other end of the economic spectrum and who are living in unstable situations who are in, you know, substandard housing, of very limited size, often with other people who are not particularly functional.
For those employees, federal assistance has been key. And when that assistance goes away, it’s hard to tell what happens next.
Bram Kleppner: In general, I give Congress a lot of credit for getting the programs put together and launched quickly and in many cases, quickly getting cash into the hands of people who needed it most. Many, I’d say most, of the people that we laid off either entirely or partially have been getting $600 a week checks. For some of them, it means they are making more not working at all, or working three days a week, than they were working five days a week.
I think, in general, like, that’s great, right? I mean, these are absolutely people who — it is very rare that anything works in their favor, and they have a program that finally works in their favor and over six or seven weeks, puts $4,000 into their personal finances. That probably has never happened before and will never happen again. But it is also true that there have been some people who have been pretty clear about, you know, “I’d rather you call me back to work last, because this is working for me.”
Anne Wallace Allen: It’s very clear that the kind of people who have jobs that could be done remotely are more likely to be better paid, maybe white collar workers who can go home and work in the comfort of their homes. And that people who work in restaurants, in child cares, in service jobs like salons, tattoo operations — they lost their jobs very swiftly. They had to wait a long time, as self-employed people, for the unemployment department to get their new program for the self-employed up and running. And these people have been — a lot of them have been left high and dry. I mean, there’s still people who haven’t gotten paid by unemployment yet at all. And we’re two months into this. So it has disproportionately hit restaurant and resort workers and people in lower paid jobs. And studies are starting to show that too. It’s just a quirk of how this has played out.
Our business reporter Anne Wallace Allen has been looking into the effects of the Covid-19 crisis on Vermont’s workforce.
Anne Wallace Allen: We have been hearing questions about equity since this crisis began. A lot of measures were taken really, really quickly, as we know. Closing down the restaurants on March 17 — suddenly, restaurant owners were saying, “I don’t know how to help my employees, they’re suddenly out of work. The unemployment system isn’t up and running yet. I’m making meals for people.”
And then, just about a week ago, I was talking to a manufacturer in Rochester who owns a company called Advanced Illumination. And he was talking to me about how one of the problems he had sensed in his own company is that a lot of the administrative workers and the engineers had been able to go home, and the people who work on the floor hadn’t. And he said there was really a sense that the workers felt that that was unfair, that they had to keep coming to work and possibly exposing themselves to Covid-19. And that that was an inequity he wanted to address, because he really sensed it was causing them some pain. He also knew that a lot of them could leave, go on unemployment and make more money on unemployment than they could working for him, and he wanted to keep his company intact.
So he decided to raise the pay of the workers on the floor by 30% for the duration of this crisis. He’s not raising the pay for the people who are at home. He’s really raising the pay for the people on the floor as an acknowledgement of the risk that they’re putting themselves in front of. He said he really thinks that they appreciate that, and it made a difference to them to see that they were actually getting noticed and compensated for what they were doing.
On a different scale, that’s what the state is talking about doing. First, the state of Vermont has raised the pay for state workers who still are putting themselves in harm’s way by going out in the public. And also, state lawmakers are working on a bill that the Senate has passed that would give bonuses to people who work for essential companies, and whose work brings them in front of the public: people like home health care providers, and grocery store workers. These grants would go to people who make $25 an hour or less, and there’d be some other limitations on who gets them. But the lawmakers who came up with this idea also wanted to address what they saw as a basic unfairness in the way that this thing has played out.
Because the way it is right now, there’s no mandate. It’s up to employers to decide how they want to approach that — or even whether they consider that to be an unfairness in the first place?
Anne Wallace Allen: Right. And I’ve gotten a lot of emails from people who are asking me not to share their name, their story or their employer saying, my employer really hasn’t taken that many steps to keep us safe. “We’re all still working in the office.” “We’re all still working together on the floor. There’s no way that we could do the six foot physical distancing.” There’s definitely a lot of people in the economy right now who are working in a way that puts them in harm’s way.
And there have been some steps to rectify some of that. It seems like now, we’re in this new phase where we’re starting to reopen many of these sectors of the economy — how are things changing, and how are they not?
Anne Wallace Allen: That’s a really good question. There’s so many strange complicating factors that have warped the normal reasons or influences on why people do things. One of them is the $600 a week that the federal government added to state unemployment payments, which is like the equivalent of a $15 an hour job. And this is something that the Legislature has mentioned when the lawmakers have put together this grants bill to compensate people who choose to stay at their grocery store job instead of leaving to go on unemployment and earn much more. They’re saying we want to address that too, by paying them a little bit of a bonus to thank them.
But Vermont was already struggling, and people in resort and restaurant jobs were already not doing very well. They already didn’t have very good access to health care. There’s a housing shortage that makes it difficult to find affordable housing. And unfortunately, it just seems as though the fallout from the economic remedies, the closures, are hurting those people. The ones that were hurting before — they’re hitting them harder.
A lot of these equity issues are really just exaggerated versions of what we’ve seen in the past.
Anne Wallace Allen: Exactly. These are already problems, structural problems, and now it’s just that they’re getting worse and people are feeling the impact more.
[break]
Anne, who else have you talked to to get a sense of how these structural problems have been aggravated by this crisis?
Anne Wallace Allen: Well, I also talked to Stephanie Yu, who’s the deputy director of the Public Assets Institute, which is an economic think tank in Montpelier. One of the questions I asked her was about income inequality, which Vermont has been working on for a couple years: closing the income gap between the really high earners and the large number of people who don’t even make enough money to meet their basic needs.
She said a couple interesting things. One of them was that the fact that Congress added $600 to the base unemployment payment, she said, shows that policymakers know that a basic wage or a minimum wage job is not enough for a person or a family to survive on. She said that’s just proof. She’s hoping that this will translate into some sort of action that will level the playing field for low wage workers.
Stephanie Yu: It’s a big acknowledgement that a lot of what we were paying people before this wasn’t sufficient. And so people who have lost their jobs are getting additional relief and you know, enough, enough funds to support their families, but the people who are still working are in a different situation.
Anne Wallace Allen: Another thing is, I asked her how economic inequality affects people — not just the people who are making too little to live on, but everybody. And she said, the costs of having a society where there’s a very large wage gap are borne by everybody in society. For example, the people in that large number who don’t make enough money to survive, they don’t access health care in a timely manner. So they are less healthy. And also, their health costs are higher. And those are costs that everybody pays.
Stephanie Yu: Over the last 30 to 40 years, you’ve really seen this growth. We can measure it state by state. So we can specifically see that even in Vermont, even though we might not have started from a place as far apart as some other places, the growth has actually been faster in terms of the separation, right? So the top income earners have pulled away more quickly in Vermont than in some other places.
There’s a good body of academic research on the next level effects of income inequality. So looking at the fact that it actually slows down economic growth. It’s a drag on the economy in general. It also causes significant health problems — and those health problems don’t just affect people at the lower end of the income spectrum, they affect everybody, right? Because it has a real impact on our healthcare system, on capacity, on cost, on all of those things.
Anne Wallace Allen: There’s lower productivity, lower school achievement. All of the unfortunate outcomes of poverty are actually borne by a lot of people in society, and in ways that we don’t necessarily see right away.
Stephanie Yu: And it also just really reduces upward mobility, social mobility. So in terms of the likelihood of kids moving out of the economic strata into which they’re born and raised, it really limits that ability. People are stuck.
Anne Wallace Allen: In this time of Covid, how likely is it that anyone’s going to be able to make a meaningful change to wages?
Stephanie Yu: Well, I think you raised a good question in terms of looking at what employers are doing in response, and recognizing that their workers are sort of looking around and seeing the unfairness and the additional risk that they’re being asked to take on. And what is their response? Their response is going to be to raise wages. So I think there is some pressure there.
But I also think there’s a real conversation about: Does this result in a reevaluation or redefinition of who’s essential, and how we value those as essential workers? I think it’s pretty apparent that grocery store workers, childcare workers are all being seen as essential in a way that was always true, but maybe not so front and center. And so some of these jobs that we’ve traditionally undervalued, many of which are dominated by women, maybe there’ll sort of be a rethinking of that, and what that looks like.
Livable wage seems like the page one, right, that you’d like. Getting everybody to be able to afford their basic needs seems like the first step. But also, thinking about how to ensure that wage growth keeps up with productivity, is growing at a fair rate as opposed to being taken by capital.
Anne Wallace Allen: There’s also the inequity of living situations. A lot of the workers, manufacturing workers who were sent home, didn’t necessarily have a good place to spend two months of quarantine, or weren’t necessarily in a domestic situation that was amenable. Every worker who suddenly found themselves not going to the office every day — for a lot of people, that was not a great development in their lives. And I think people who are able to work at home in a comfortable place where they can do their work without interruption and without fear from other members of the household — those people are very, very lucky. I think we’re all aware that not everybody has that luxury of a great place to work every day or just to spend quarantine.
Given all of that — is there a push to, as we reopen the economy after it’s been shut down for so long, and we look towards a recovery from a really severe economic downturn, to do things differently? To somehow solve, or at least try to mitigate, some of these inequality issues?
Anne Wallace Allen: I’ve heard many people express the hope that the way that everything was tossed in the air briefly for so many will give us all an opportunity to rethink the way we do things. And I also am struck by how many people have written to praise their employers for going out of their way to help them — by continuing their health insurance when they were furloughed, for making sure their employees had meals.
But in answer to your question, the kind of structural reasons behind the pay gap are really complex. And I don’t think that the measures that we have taken in the last two months are able to address all of them.
I asked Bram Kleppner, from Danforth, whether he thinks the crisis could change the long term prospects for workers.
Bram Kleppner: For me, it has thrown into relief so many big issues. You know, inequality, minimum wage, the need for universal health care, the need for a competent federal government. There’s all these things that we would have done much better in this crisis if we had.
Also, these unintended or unexpected consequences of a virus, which is all of a sudden the air’s a lot cleaner. A lot of people, I think, are really sad about that, going, “oh my god, that just shows how much we’ve trashed it.” But I find it kind of encouraging, because it shows us how quickly the air clears when we stop burning fossil fuels. It makes me hopeful that the transition to a clean energy future may happen just the tiniest bit faster because people have now literally seen the benefits with their own eyes and probably felt it with their own lungs.
Do you have the same hopefulness on the economic side — that as we reopen and rebuild the economy, that we can resolve some of those equity issues you were talking about?
Bram Kleppner: Boy, I’m optimistic, but I think partially simply as a psychological dodge to avoid despair [laughs]. Much less optimistic, economically. It just feels as though, you look at the legislation over the past 50 years that has systematically favored the wealthy over workers, and has led to this spectacular transfer of wealth from working people to wealthy people, in terms of who gets all of the gains of the last 50 years. And all the terrible things that does to our economy and our society and our health and everything else and — that’s a tough one. It’s gonna be a long uphill battle.
Well, thanks again for taking the time to talk. I really appreciate it.
Bram Kleppner: You’re welcome. Take care.
