Continuing with our effort to cover the COVID-19 pandemic and related policy issues, Sarah Edwards (MPP ’20) speaks with Ellora Derenoncourt, who will join the Goldman Faculty in the fall. Tune in to the conversation unpacking the issues of racial inequality in health and economics and learn from Ellora’s historic economics perspective.

For more on Ellora’s work, visit her website.

Check out the “Campus Conversations” that was mentioned in the episode 

For more in this series, check out Sarah’s conversation with Rashawn Ray. 

Transcript

Sarah: [00:00:08] Hi, everyone. Hope you're staying safe in this crazy time. At Talk Policy To Me, we're working to cover the COVID-19 crisis as best as we can. We're doing these shorter episodes speaking with experts on key issues related to the crisis. To continue our series on COVID-19 and racial inequities, I spoke with Ellora Derenoncourt, who will join the Goldman faculty this fall.

Sarah: [00:00:31] I'm Sarah Edwards and this is Talk Policy To Me. Today on the podcast, talking COVID-19, racial inequity, and economic impacts. Let's go straight to my conversation with Ellora. So first thing first, we want to make sure we have your name and your title.

Ellora: [00:01:08] So my name is Ellora Derenoncourt and my title, I'll give you my Berkeley title, I'm incoming Assistant Professor of Economics and Public Policy.

Sarah: [00:01:19] Well, so to kind of jump in, your normally Talk Policy To Me does like longer more research and stitched together episodes. But we're working to put out some sort of quick response episodes specifically around COVID-19. I think it's particularly important to look at the issues of inequity right now, and even more so as we're seeing kind of the racial inequity as it comes both to who's getting COVID and who's dying from it. I spoke last week to sociologist and Brookings fellow Rashawn Ray talking about this from sort of the sociological perspective. And I'm really excited to talk to you about the economic perspective this week. So first up in the campus conversations that you did a few weeks ago, you had a phrase that you used in the context of the situation that we're seeing where you said it's inequality as a co-morbidity. Can you explain a little bit more about what you mean by that and how it's playing out on the ground?

Ellora: [00:02:26] Absolutely. So I would address that in talking about three particular issues. This is both a health and economic crisis. So the ways that any inequality is conditioning, how the crisis is playing out for different communities, basically there are multiple, multiple ways it's doing so. First on, let's just start with the health aspect, since this is fundamentally a health crisis, a global health crisis. What we know is in the U.S. communities where people are more likely to have underlying conditions that exacerbate the impacts of COVID-19 are disproportionately affected, and individuals there are dying at higher rates. So one of the early statistics coming out of New York City was that black and Latino Americans were dying at twice the rate of white Americans in the city. And we also know that black communities, there are higher rates of asthma, and in fact, exposure to air pollutants is correlated with segregation. And so racially segregated communities that are disproportionately African-American are more exposed to air pollutants and you see higher rates of childhood asthma in those communities. So that's some research based on work that Janet Curry and Diane Alexander have done. So that's the first piece we have is disproportionate health impact on certain communities. The second piece is on the economic side. And low wage workers are those, especially in the service sectors, are more exposed to the risk of contracting the virus and falling ill or dying from the virus. And we know that only 30% of Americans are able to work from home. And that is even less the case for black and brown workers. So less than 20% of black and Latino workers are able to work from home. Those workers are concentrated in the service sector where they are customer facing or in essential industries like grocery stores. And so they are differentially exposed. And the other economic piece of this is that reductions in the social safety net that might stem from, say, cuts to state budgets are also going to kind of exacerbate the economic effects of the coronavirus crisis. And then the last piece I wanted to bring up is wealth. This is a shock unlike anything we've seen since basically the Great Depression. And the US economy has basically shut down and the basically millions and millions of Americans are having to kind of wait out the crisis, stay at home. Millions and millions have filed for unemployment and weathering this kind of crisis relies on having some stock of savings to get you through this moment if government assistance isn't quick enough for reaching those who need it. And I just wanted to mention that wealth gaps, if you look once again at racial inequality, the biggest reduction in the racial wealth gap was most likely the period of reconstruction after the Civil War. And we've seen shocking stability in the racial wealth gap since then. It worsened in the Great Recession, so black families have just a fraction of the wealth of white families on average. And at a time like this, when people need to dip into their reserves. You know, there are large swaths of Americans who don't have any reserves to dip into.

Sarah: [00:06:27] Definitely, it's like all of these kind of all of these layers of challenges that people are facing. You know, even if individuals are not experiencing COVID 19, like their physical health is secure, there's still this these deep layers of economic vulnerability.

Ellora: [00:06:42] You know, even individuals who may not themselves be at risk. And there does seem to be a pattern of, you know, risk of transmission through your community that depends on the quality of housing and how many families are sharing space. And this, once again, kind of skews to towards disproportionate effects on black and brown communities.

Sarah: [00:07:08] So you've touched on this a little bit already, and I know that kind of your area of study is historical economies. And so I know there's like these interesting parallels that have been drawn between the current COVID crisis and World War II or the current COVID crisis and the Great Depression and the policy needs at those times and what the reactions were. I would love to hear a little bit about how we can learn from those periods of history and use those lessons and the current situation to move forward in a way that leads us to greater economic equality.

Ellora: [00:07:45] Yeah, I'd love to speak to this. I'll focus, I think, primarily on World War II, because I think the analogies have been made quite often to the Great Recession or the Great Depression and World War Two, maybe less so because people think, well, that's very different. That was a war. And the reason that I think it's worth bringing up is that similarly to today, there was kind of this external force that required shutting down large parts of the traditional economy so as to rise to the economic challenges of the war and paying for war production. The government, governments across the U.S. and Europe were focused on the fact that production for civilian consumption had to be wound down to almost like a subsistence level or a minimum, a minimal amount. And then that dictated what was left over was what you could devote to the war effort. And I'd like to kind of bring in the perspective of the famous economist, British economist John Maynard Keynes, who wrote about how governments should respond and rise to this challenge. And he said something that really struck me. He said that a free society is set apart by its overwhelming concern for how the now fixed pie is distributed. So in a totalitarian or tyrannical state, there's no constraint on the government. They can devote everything to the war effort and, you know, they're not bound to what's going to happen with their population or with levels of inequality. But what characterizes a free and democratic states is precisely their overwhelming concern for how the pie is distributed and that sacrifices aren't borne disproportionately by those who can least afford to sacrifice. And so what appears happens during the war is that tax rates on the wealthy and high earners went way up, and the government basically used some of that money to pay for the war effort, but also kind of institute redistribution that had lasting effects after the war and they were able to stimulate saving in the civilian economy so that people held on to their income rather than trying to buy goods that weren't being produced and thus driving up the prices of whatever was being produced. So if you try to take lessons from that today and of course, people were employed in the war production effort. So that's another key piece. And you know, today we have unemployment headed towards 25, 30%. And during the war there was a vast increase in jobs for the war effort. But you could imagine, you know, what if we took the coronavirus pandemic, as you know, if we looked at it as a war effort in which I think many people have made that analogy and we put people to work in that effort and the government sort of created or basically provided through government contracts much similarly to how it was done in World War II, the production towards containing the health crisis that combined with active government policy to keep to make workers whole and would basically lessen the very deep kind of negative economic downturn that we're headed towards because we don't have that kind of massive government investment with an eye towards redistribution.

Sarah: [00:11:37] When I think about this, too, you know, I feel like there are so many things to be learned from this situation. Obviously, we came into the COVID 19 crisis with incredibly high levels of income inequality, particularly by race. And I'm trying to think about, you know, are there ways we can learn from this and think about policies that we need to implement to make sure we don't have this level of inequality again, because we know it's terrible in the everyday, but particularly in the time of a crisis. It's just like, are we as a country should not be doing this, you know, So either from those historic lessons or other thoughts that you have, you know, what policies should we be thinking about to build a new direction?

Ellora: [00:12:23] So I think a lot of policies have been discussed or are being implemented in other countries. That would make a lot of sense here. Many European countries have chosen to keep workers attached to their current employers and have the government provide their paycheck or a portion. A large portion of their paycheck. This would reduce the, you know, frictions of worker to employer match that we're headed towards in the U.S. with millions of people having filed unemployment claims and potentially severing their ties with their employers. Other policies include some form of UBI or income payments to help people tide over, not just the shock of losing your job and whatever delay you might have in getting your unemployment claim processed. But potential increases in health costs, especially for those directly affected by the coronavirus. Health wise and all of- I think the overriding thinking going into this is that we should do what we can to invest in people now, because that allows us to come out of this crisis standing as opposed to kind of completely knocked out. And I think we you know, again, to take inspiration from Keynes, you know, this crisis is a moment to rectify and to go further than we would have done in, quote unquote, peacetime in reducing inequality. And that in itself should be thought of as a form of insurance against future crises that are of this depth and seriousness. If people have a buffer, if we reduce the wealth gap and people have savings to dip into in a moment when you have to shut the economy down, that's going to make everything a lot easier and especially make it easier to come out of the crisis on the other end.

Sarah: [00:14:34] So the last question that I really wanted us to cover was, you know, given your study of history, is there anything either about the COVID-19 situation or the government response that surprised you?

Ellora: [00:14:48] I guess I wish I could say that there was something that surprised me in a positive way. But I really have to just admit that I've been surprised or shocked at how not far enough the government response has gone. And I think we can see once again comparing the U.S. to other countries Canada, the U.K., Germany, in terms of the aggressiveness of their response and policies directed towards workers here were basically lacking this. And I think I just couldn't have imagined that this would be a moment in time where we're seeing even greater transfers up the wealth and income distribution, as opposed to finally saying, hmm, maybe we need to have universal social benefits that don't rely on your employment status. Maybe we need to have less inequality in health and wealth and income going into potential shocks because then we'll come out better on the other side. So I would say I've just actually been surprised by how slow and limited the response has been, and I hope that that changes.

Sarah: [00:16:02] Yeah, me too. Me too. The question that I always like to ask, as is ask, is the absolute last thing is, is there anything really important that you think that we missed?

Ellora: [00:16:13] I think I just want to reiterate this point that reducing inequality is maybe one of the best forms of insurance that we could have, and we really need to start thinking about it in that way. The more inequality we have, the more vulnerable we are to shocks like this having long lasting effects. So at the risk of sounding like a broken record. Yeah, inequality is a co-morbidity and reducing it I think should be thought of as a form of social insurance.

Sarah: [00:16:43] Definitely. I think that is something that cannot be said enough. So, thank you.

Ellora: [00:16:49] Well, thanks so much for having me.

Sarah: [00:16:51] Yeah, thank you for taking the time. I really I appreciated getting to talk a little bit about this with you. And I'm very excited for everyone who will get to get to be taking your classes and learning from you in the future.

Ellora: [00:17:04] Thanks so much, Sarah.

Sarah: [00:17:12] Thanks to all of you for listening. Stay tuned for an upcoming episode of Considering the possible Impact of COVID 19 on the 2020 election. Subscribe to make sure that you don't miss that or any of our other upcoming episodes.

Sarah: [00:17:26] Talk Policy To Me is a production of the UC Berkeley Goldman School of Public Policy and the Berkeley Institute for Young Americans. Our executive producers are Bora Lee Reed and Sarah Swanbeck. Michael Quiroz is our sound engineer. Music heard on today's episode is by Pat Mesiti-Miller and a Blue Dot sessions. I'm Sarah Edwards. Catch you next time.