The First 100 Days and Beyond

The COVID-19 pandemic has caused unprecedented health and economic consequences. Existing structural barriers in the U.S., made worse by the current crisis, have created profound racial inequalities — straining families’ economic mobility and restricting the U.S. economy.  As decision-makers continue to develop policies and programs that support households and small businesses facing economic hardship and work toward an equitable recovery, we highlight research from JPMorgan Chase Institute and the work of the JPMorgan Chase PolicyCenter to describe data-driven recovery policies to provide immediate support to those most impacted, as well as longer-term policies to increase the financial health and stability of households and small businesses.

Support continued economic relief to address the immediate impacts of COVID-19 on households, small businesses, and communities. 

As policymakers are currently considering the ongoing impact of the pandemic and additional relief measures, including the appropriate level and calibration, they should incorporate the following solutions in the relief package:

• Policymakers should continue to extend and supplement unemployment benefits in order to support financial stability among jobless workers. JPMorgan Chase Institute research found unemployment benefits played an important role in maintaining household spending and wider macroeconomic stability and found little evidence that elevated levels of unemployment benefits discouraged jobless workers from returning to work.
• Policymakers should consider flexible small business programs to address diminished expenditures on non-payroll expenses. The Institute found that Paycheck Protection Program proceeds were typically enough to cover 3.8 weeks of typical expenses.  While these efforts provided much-needed support to small businesses, expenses across the sector remained materially lower in September 2020 than they were a year prior, suggesting that small businesses may be deferring payments to maintain cash liquidity and may be less well positioned for a recovery than financial health measures may indicate. Additional small business aid may be necessary to support businesses disproportionately impacted by COVID-19 that have deferred expenses but face looming challenges as payments come due.    
•  Depending on the pace of recovery, policymakers should consider additional rental assistance funding to stabilize families facing continued economic hardship. Institute research has found that even after accounting for government income supports in the form of expanded unemployment insurance (UI) and stimulus checks, almost one in four renters experienced a greater than 10 percent drop in total income, larger than the fraction experiencing a drop of this magnitude pre-COVID. Mortgage holders had similar likelihood to experience such a drop but had mortgage forbearance as an additional safety net.

Support longer-term household and small business financial health and resilience and ensure an equitable economic recovery.

• Policies and programs that support increasing cash buffers to withstand financial volatility can improve families’ overall financial health and resilience.  Families need roughly six weeks of take-home income in liquid assets to weather a simultaneous income dip and expenditure spike. Sixty-five percent of families across age and income groups didn’t have enough in their checking or savings accounts pre-pandemic to weather such an event.
• Policies and programs that reform Unemployment Insurance programs, expand benefits for workers, and strengthen wages are necessary to support changing economic conditions and an evolving labor market.  Institute research finds that in normal times, UI mitigates the drop in spending families exhibit when they experience job loss, especially those with limited liquid assets prior to job loss.  However, growth in the Online Platform Economy and contingent work more broadly underscores the importance of expanded unemployment insurance during the pandemic and on a go-forward basis.
• Policies and programs that boost income and liquid assets and address the underlying challenges Black and Latinx families face within the labor market can help close racial gaps in financial outcomes.  For every dollar the median White family earns, the median Black family earns just 71 cents, and the median Latinx family earns 74 cents, and racial gaps in liquid assets are twice as large. The Institute estimates that a liquid asset buffer of roughly $5,000 to $6,000, considerably more than the $1,000 to $1,500 than the median Black and Latinx family has, might enable Black and Latinx families to sustain their typical consumption levels through a job loss or major cash-flow event.
• Policies and programs that promote equitable labor and financial outcomes can help close the gender wealth gap.  Compared to White men, Black and Latinx women earn just 58 and 59 cents on the dollar, respectively. For every dollar held by White men in liquid assets, Black women have just 26 cents and Latinx women have 37 cents.  Additionally, women-owned businesses represent only 18 percent of small businesses that rely substantially on external financing.  
• Policies and programs that expand access to affordable housing and homeownership for underserved communities and provide necessary support to weather economic uncertainty provide important supports for cost-burdened households of color.  Institute research has found that renters were more likely than homeowners to have experienced job loss during the COVID-19 pandemic. Also, homeowners in forbearance not only had lower labor income and much lower levels of liquid assets than those not in forbearance but had also experienced larger drops in their income and were more likely to have received jobless benefits. 
• Policies and programs that target relief efforts at those most burdened by student loan debt remain a critical component of continued student loan policy solutions.  One in four families is obligated to pay 7 percent of more of their take-home income on student loans, more than what families typically spend on key categories of necessities, like out-of-pocket healthcare expenses and fuel.  Compared to White and Latinx student loan borrowers, Black borrowers are less likely to be making progress on their loans and more likely to face a student debt “trap,” exhibiting larger payment shortfalls and an increase in their loan balances over time.
• Policies and programs that boost cash liquidity and support small businesses in developing and maintaining a cash buffer will allow businesses to better weather financial shocks.  Prior to the pandemic, half of small businesses had enough cash liquidity to cover roughly two or fewer weeks of expenses in the case of a disruption to inflows and many had irregular cash flows.