The economic recovery is still K-shaped and it’s especially bad for parents and people with student-loan debt

mom working from home while holding her child
  • A new study from Capital One highlights the pandemic's impact on Americans, including reducing work hours because of childcare or trouble paying bills.
  • Forty-four percent of lower earners felt financially unhealthy in August compared to just 5% of higher earners.
  • And while stimulus checks largely helped people pay their bills, a fourth one is unlikely anytime soon.
  • See more stories on Insider's business page.

Even more than a year after the start of the pandemic, some Americans still report that they're cutting back work hours because of childcare, are having difficulty paying bills, or are unemployed.

But the story isn't uniform for everyone. While some have lost jobs, worried about making ends meet, and relied on government assistance, others have been able to work from home and increase their savings. It's what's been called the K-shaped recovery to illustrate how the economy is getting better for those at the top, and worse for those at the bottom.

A new study from Capital One, the first to be released from the Capital One Insights Center, highlights just how different the situation has been for people in different household income brackets. The Insights Center has been running a survey of 2,000 to 10,000 Americans since the spring of 2020. The results highlight a variety of the pandemic's impact on lower earners (making under $25,000), middle earners (making between $25,000 to $100,000), and higher earners (making over $100,0000).

"The results suggest that the current reality for most Americans is heavily divided: a robust recovery for higher-income earners, a less secure footing for those in the middle, and significant financial stress for the lower earners," Capital One wrote in a press release shared with Insider.

The pandemic made financial stress worse for Americans

Margaret Donnell, the managing vice president and head of consumer intelligence at Capital One, said middle earners who make up the "bulk of the population have struggled to pay bills, reporting as high as 1 in 5 as recently as August unable to pay bills." Almost 40% of lower earners said this compared to just 20% of higher earners.

A similar share of lower earners felt "financially unhealthy" in August as in April 2020, when the US lost over 20 million jobs in a single month. The share of higher earners who said this has been cut in half since then, as seen in the following chart:

Capital One's results show that higher earners have been able to save. As Insider's Hillary Hoffower previously reported, 59% of high earners making at least $100,000 said in a MagnifyMoney survey they have increased savings during the pandemic, compared to 28% earning less than $35,000.

Student loans have exacerbated financial problems. Even though payments on student debt have been on pause during the pandemic, the report found that since the pandemic began, 28% of middle earners with student loans were more worried about paying off their debt - up six percentage points from April 2020. And even more higher earners are stressed about student debt than in an earlier wave of the survey, with 23% of those with student loans worried about making payments. That's eight percentage points higher than the results from April 2020.

Childcare issues are still a problem for some working families, particularly lower earners

Some people stopped working because of childcare-related reasons during the pandemic, such as when many schools closed and moved to virtual learning and daycare centers closed. In fact, 863,000 women left the labor force in September 2020. Although many children are back in the classroom this September, working parents are still making tough calls about their job.

"When it comes to employment, 40% of lower earners in dual-earning households reported that at least one person had lost their job or had to leave their job. That's three times the rate of higher earners," Donnell told Insider, where the share for higher earners was 14%. "We believe some of the impact there comes from childcare."

Donnell said childcare has especially been an issue for lower earners and women. For instance, 50% of lower earners, 30% of middle earners, and 18% of higher earners in August cut "back hours or had stopped working altogether because they had children at home and presumably lacked outside child care."

With the pandemic still in effect, there's no estimate on when financial challenges will be lifted and even though, as the report found, stimulus payments helped 46% of lower earners keep up with their payments in April 2021, lawmakers have yet to say if a fourth stimulus check is on the horizon.

"Lower earners seem to have struggled the most. Perhaps that's not a surprising conclusion to draw, but some of the data points that sit behind it I think really do kind of paint a picture of what's happened over the course of the pandemic," Donnell said. "They have been much more reliant on stimulus and other government assistance."

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