Vastia Sylvester told her teenage daughter weeks ago: no Christmas gifts this year.
“My credit cards are maxed out. We’re behind on rent, and they’re about to lift the freeze on evictions,” said Sylvester, who shares a two-bedroom apartment with her daughter, mother and two brothers. “How can we think about Christmas when we don’t know how we’re going to survive?”
It’s a common refrain this year, especially among low-wage earners who’ve been disproportionately affected by job losses during the coronavirus recession, with 1 in 8 households — or 1 in 6 with children — reporting they don’t have enough to eat. Nearly 12 percent of the country is living in poverty, up 2.4 percentage points since June and the biggest spike in six decades, according researchers at the University of Chicago and the University of Notre Dame. Poverty rates — the U.S. federal poverty level is $26,200 a year for a family of four — have risen the most among Black families, children and those with a high school education or less.
Yet many at the other end of the income scale are actually better off financially than they were before. The pandemic has forced them to cut back on travel, dining out and other discretionary spending. Savings rates have jumped to record highs, leaving more cash to spend for the holidays.
The coronavirus crisis has not only inflamed long-simmering inequities, economists say, it has resulted in the most unequal holiday season in decades.
The National Retail Federation is betting that middle- and upper-class consumers will spend more this year. The trade group forecast a robust 3.6 to 5.2 percent increase in holiday sales, outpacing the five-year average of 3.5 percent. It said the season could generate as much as $767 billion in revenue, with the average shopper dropping $998 on gifts, food, decorations and other seasonal purchases.
But lost in that forecast, economists say, is a sobering reality: The gulf between the wealthiest Americans and the most vulnerable is larger than it has been in decades. More than 12 million people are poised to lose unemployment benefits Dec. 26, when key parts of the Cares Act will expire unless Congress intervenes. A number of state and federal programs are slated to run out by the end of the year, leaving millions on the edge of hunger and homelessness.
Meanwhile, many families — particularly those with white-collar jobs that can be done remotely — have seen their net worth rise during the pandemic. The stock market soared to new heights, home values are booming and Americans have stashed more than $1 trillion in savings since the pandemic began. At the very highest reaches of that trend, the nation’s 651 billionaires have amassed an additional $1 trillion in wealth, according to a recent analysis by Americans for Tax Fairness.
“Recessions always exacerbate inequities, but this one is far, far worse than anything we’ve seen,” said Heidi Shierholz, senior economist at the Economic Policy Institute. “There are 25.7 million people who have lost their jobs and have even bigger devastation on the horizon. … The level of anxiety they’re feeling — for people who celebrate Christmas and know their benefits run out the next day — is just cruelly symbolic.”
Even positive economic trends hint at mounting inequities, economists say. Wall Street’s torrid rise partially stems from major corporations benefiting from the widespread closures of small businesses. Average income is rising month over month because so many lower-paid workers continue to lose their jobs during the pandemic, said Kate Bahn, an economist and director of labor market policy at the Washington Center for Equitable Growth.
“It’s a worsening of a trend we’ve seen for a long time: Economic growth goes to the very wealthy, while lower-income workers lose their jobs, lose their health insurance and drop into poverty,” she said. “Women, service workers, Latinx and Black workers. It’s just a layering of crises for these groups.”
Sylvester, who grew up in homeless shelters and public housing, had worked hard to give her daughter a more stable childhood than she had. Things had just begun falling into place, giving her a tenuous foothold into the American middle class. She made about $80,000 last year, working briefly at a hospital, selling self-published books of poetry and taking on modeling and acting gigs that sometimes brought in as much as $5,000 a day. In February, Sylvester enrolled in an online master’s degree program to study industrial organizational psychology.
Then came the pandemic, and by mid-March all her bookings had disappeared. She canceled a birthday trip to Italy and pulled out of school because she could no longer afford it.
It’s been tough, she says, particularly on her eighth-grader, who is learning to navigate virtual school from their cramped apartment. If their food stamps arrive in time, she says, she’ll splurge on a Christmas dinner of crab legs, mashed potatoes and salad, though she wishes she could do more.
“My daughter sent me her wish list — sneakers, anklets, AirPods — and I told her, ‘I don’t know why you’re sending this to me,’ ” she said. “We can’t afford anything this year. We’re struggling. I don’t want to pretend we’re not.”
More disposable income for some
For many people who’ve held on to their jobs during the pandemic — particularly those with children or who can work from home — there’s more disposable income, economists say. Fixed costs for commuting and child care — which in many states accounts for 20 percent of the median family income — are down or nonexistent, as are leisure and entertainment expenses.
That’s given some retailers reason for optimism during the crucial holiday season, which can easily account for 30 percent of their annual revenue. Sales of fine jewelry, furniture and skin-care products are on the rise, and executives at Coach and Kate Spade say shoppers are shelling out 25 percent more on handbags than they did before the pandemic.
“The consumer is in a very good place,” said Chip Bergh, chief executive of Levi Strauss & Co., which laid off 700 corporate employees early in the pandemic. “They’re feeling richer today than they have in a long, long time.”
In Lake Charles, La., Stacy Mitchell and her husband expect to spend about $2,500, or about twice as much as usual, on Christmas gifts for their four children. Mitchell lost her job at a clinical research lab in March, but her husband works in construction and is busier than ever rebuilding homes and offices after two recent hurricanes. They’re also saving $1,500 a month on child care and several hundred dollars a month on piano lessons and taekwondo classes for their older children.
The Mitchells recently bought a new truck and are redecorating their house. And though they’ve long prioritized experiences, such as family ski vacations and concerts, over other gifts, all of that has changed because of the pandemic.
“This year I just want to give them everything their little hearts could want,” said Mitchell, 34. “So many things have already been taken from them — school, their friends, ballet recitals, taekwondo — that, honestly, I just want to wake up on Christmas morning and see their eyes light up.”
Among the gifts under the tree are a Peppa Pig dollhouse, two skateboards, three cookbooks, the “Lord of the Rings” trilogy, and matching pajama sets for her daughters and their dolls. Santa is delivering board games and a year-long subscription of international snacks. In all, she says she’s spending about $500 per child.
“It’s significantly more than I would’ve spent most years because, you know, I’m trying to make up for a disaster of a year,” she said. “I’ve never felt the need to buy their happiness, but this year I do.”
Charities at ‘disaster’ levels
The pandemic’s effects have been uneven, but swift. Larry Smith, who lives outside of Chicago and works for the federal government, says he has much more disposable income now that he and his wife aren’t traveling or dining out. They’ve funneled much of those savings into home renovations, adding wainscoting to the dining room walls, redoing the kitchen backsplash and planting new trees in the yard.
His children, he said, have gotten a financial boost, too. Two of them — a daughter who works for an urgent-care clinic, and a son who works at Target — have been picking up extra hours during the pandemic. The third, who works for an oil and gas company in Houston, just bought a new house.
Smith and his wife have bought extra Christmas lights and decorations, and are planning to spend about $1,400 — about 40 percent more than usual — on gifts for their children and four grandchildren.
“If you can make somebody smile on Christmas Day on a year like this, why not?” he said. “It’s been a tough year but I’m well aware that we’re extremely fortunate.”
Food banks have been inundated in recent months, while charities like Bread for the City, a D.C.-based organization that provides meals, clothing, health care and other services to those in need, say demand has more than doubled during the pandemic. Salvation Army USA has been operating at “emergency disaster” levels since mid-March. Need for housing and food has risen 155 percent, while donations have fallen by about 50 percent.
“Eight million people have fallen into poverty during the pandemic,” said Kenneth Hodder, the national commander of the Salvation Army. “You combine that with food insecurity and a decline in available jobs, then add in lockdowns, evictions and utility problems, and it is simply a relentless tsunami.”
Last Christmas, Erin Long and her sister decorated a tree together and gave each other fuzzy socks, earmuffs and plush dog beds. Nothing extravagant, she says, but joyful.
This year, the 35-year-old will spend the holiday as she has the last three months of the pandemic: sleeping in her car, eating a cup of ramen noodles heated up in a gas station microwave. Her sister moved away, and there is no money for gifts.
“The joy is gone,” said Long, who lives in Chickasha, Okla. “I’m just trying to survive. Trying to figure out if I can eat tomorrow.”
She lost her waitressing job at a buffet-style restaurant early in the pandemic. After that, she found work at an American grill and then a fast-food joint, but was laid off from both when business slowed.
In September, after months of underpaying rent, Long was evicted from her $500-a month apartment. Now she sleeps in her 2003 Mitsubishi Outlander, under three blankets, wearing a sweatshirt, jacket, hat and mittens to keep warm. She wakes up every few hours to turn on the heater for 10 minutes, just long enough to warm up the car, she says, before crawling back under the covers.
By 6 a.m., she’s up for good, making her way through a McDonald’s drive-through for the $1 coffee she gulps down with a Nutri-Grain bar. She says she didn’t think to apply for unemployment, opting instead to spend all of her energy applying for jobs. But work has dried up in her small town, and with it, her hopes of things turning around by the holidays.
“The pandemic has been like a wrecking ball: One hit after another,” she said. “Everything has fallen apart.”
