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Forthcoming 2021

Hit Harder, Recover Slower? Unequal Employment Effects of the COVID-19 Shock

by Sang Yoon Lee, Minsung Park, and Yongseok Shin


The destructive economic impact of the COVID-19 pandemic was distributed unequally across the population. A worker's gender, race and ethnicity, age, education, industry, and occupation all mattered. We analyze the initial negative effect and its lingering effect through the recovery phase, across demographic and socioeconomic groups. The initial negative impact on employment was larger for women, minorities, the less educated, and the young whether or not we account for the industries and occupations they worked in. By February 2021, however, the differential effects across groups had gotten much smaller overall and had entirely vanished once the different industries and occupations they work in are taken into account. In particular, the differential effects between men and women vanished with or without the industry and occupation compositions taken into account, indicating that women's progress in the labor market over the past decades has not been wiped out by the pandemic. Across race and ethnicity, Hispanics and Asians were the worse hit but made up most of the lost ground, while the initial impact on Blacks was smaller but their recovery was slower.

Sang Yoon (Tim) Lee is a reader at Queen Mary University of London. Minsung Park is a PhD candidate at Washington University in St. Louis. Yongseok Shin is a professor of economics at Washington University in St. Louis and a research fellow at the Federal Reserve Bank of St. Louis. We thank Juan Sanchez, coeditor in chief, and an anonymous referee for several helpful suggestions. We also benefited from our conversations with Alyssa Fowers of the Washington Post. Sang Yoon (Tim) Lee gratefully acknowledges financial support from the British Academy (grant COV19\201483).

As late as February 2020, the U.S. labor market was booming. The unemployment rate stood at 3.5 percent, a record low since December 1969. COVID-19 struck out of the blue with unprecedented speed and ferocity. U.S. unemployment spiked to 14.7 percent in April 2020, although by October 2020 it had fallen to below 7 percent and has remained below that level to date. Although COVID-19's impact on the labor market has been multifaceted, it broadly materialized through two channels. The first was through the voluntary reduction in consumer and business activities, especially contact-intensive ones, out of fear of infection. The other was through government containment policies, such as various social distancing measures and lockdowns of large swaths of the economy, especially targeted toward jobs categorized as "nonessential."

Jobs differ by contact intensity and the ease with which they can be performed remotely, in addition to their essential or nonessential classification (Hensvik et al., 2020; Aum et al., 2020b, 2021). Warnings abounded that the economic toll of the pandemic would be unevenly distributed and exacerbate preexisting inequality across demographic and socioeconomic groups, because women and minorities are more likely to work in more-vulnerable jobs (Alon et al., 2020; Blundell et al., 2020). At the onset of the pandemic, near-real-time data revealed that women lost more jobs and were forced to work less, both in the United States and the United Kingdom (Cajner et al., 2020; Adams-Prassl et al., 2020a,b). It also became apparent that minorities were disadvantaged not only because of the types of jobs they held, but also because they were more likely to face employment reductions even within the same jobs as Whites (Montenovo et al., 2020; Cowan, 2020; Gezici and Ozay, 2020).

In this article, we analyze how the initial economic impact of the pandemic and the subsequent recovery differed along numerous dimensions, including gender, race and ethnicity, age, educational attainment, industry, and occupation, and state-level policies and statewide COVID-19 infection rates. The main contribution to the literature is our analysis of the recovery phase through February 2021, as many researchers have documented the early impact of the pandemic in spring 2020.

Our main findings can be summarized as follows:

  • Minorities were hit harder by the pandemic, largely due to an industry-occupation composition effect—for example, their disproportionate presence in service industries: the leisure and hospitality industry and the other services industry.
  • Many demographic and socioeconomic groups that were hit harder initially have also recovered faster, especially once industry and occupation compositions are taken into account.
  • More specifically, the pandemic's differential effects across gender, age, and education vanish by February 2021 once industry and occupation effects are controlled for.
  • The differential effects between men and women disappear even when their industry and occupation compositions are not considered, indicating that women's progress in the labor market over the past few decades has not been wiped out by the pandemic.
  • Black workers were the least affected by the initial shock among all racial groups, but their recovery has been the slowest, even when industry and occupation effects are controlled for.
  • In April 2020, local employment was hit hard in states that had high infection rates, with containment policies having no significant effect on employment. In February 2021, the severity of the epidemic had no systematic effect on employment.
  • Urban areas, especially city centers, were hit the hardest and the effects still remain.

Read the full article.