With nearly 25 million Americans still receiving unemployment benefits, the coronavirus is pulling the country into a protracted recession. Earlier this year, economists speculated whether the recovery would be V-shaped, with a quick decline and a quick recovery; U-shaped, with a steep decline and elongated recovery; or perhaps a W-shape, with a short resurgence followed by a steep drop and back up again.
It’s becoming clear, however, that Peter Atwater’s K-shaped analogy is most apt.
Unlike the other shapes, the K-shaped model illustrates two diverging trends. Those benefiting from the pandemic and with economic means are experiencing a quicker bounceback and accelerated upward mobility. Others are facing a slower and more difficult recovery that drags on their economic opportunity. In particular, workers in the service sector and those who have jobs that have been dis-intermediated by technological progress—jobs that skew female and minority—are being hit the hardest.
Making matters worse, this K shaped also threatens the children of those on the bottom slope. Steep drops in state revenue are forcing school boards to cut costs, and this tends to harm students in poorer and largely minority schools the most. California, for example, is facing something close to a $22 billion gap next year which could result in about $3,400 less per student.
During normal times, that kind of lost revenue can undermine the ability to deliver necessary programs and services to students. During a pandemic, when educators are reinventing their profession through remote learning, tackling months of lost learning that has fallen hardest on poor and at-risk students, and absorbing the costs related to new health and personal protection measures—the implications could be crippling.
We don’t need to go far in the past to witness the harm. Looking back at the 2008 recession, we know that school budget cuts had the effect of widening achievement gaps for both low-income students and students of color. A decade later, the average Black or Hispanic student remains roughly two years behind their white peers, and low-income students are underrepresented among top performers.
And the harm runs deeper than just academic performance. The combination of inequitable economic hardship and deep school budget cuts threatens to cement the intergenerational inequalities that have been developing over the last 40 years. Those on the upward trend enjoy compounding opportunities while those on the downward trend are prone to intergenerational struggles with poverty, drugs, incarceration, and the struggles that follow. Professor Robert Putnam of Harvard University has spent his career depicting these trends with “scissor” graphs that illustrate the inequities caused by the diverging trends.
Source: Robert D. Putnam: Hearing on the State of Social Capital in America
But as pernicious as these trends are, they are also avoidable. The scissor graph, like the K-shape recovery, isn’t a foregone conclusion. It’s a product, in large part, of policy and investment decisions, and that is why the next stimulus—when Congress finally does pass it—is so important.
Stimulus packages often get absorbed as backfill for disappearing revenue. While understandable, that’s the least creative use of those funds. It’s a short-term budget response, not a strategy to invest in families and communities.
The current Congressional delay on the next stimulus package isn’t good news, but it does provide us with more time to carefully plan how to use the funding. From a perspective of a policy wonk, that means highlighting policies and practices that are already on the books and clarifying how they can inform budget and program decisions to best serve those families facing serious economic challenges. It also means shining more light on places like Jefferson County Public Schools in Kentucky, where school officials have been exploring performance-based investment strategies since the Great Recession nearly a decade ago.
From an investors’ perspective, it means supporting and investing in organizations that not only help students succeed in school, but also engage families and their communities in this effort. Technology platforms and tools that are affordable, scalable and based on sound efficacy should win the day. Those that reinforce core skills such as reading, writing and math in an engaging and adaptive manner for students are critical to narrowing learning gaps. Now more than ever, investors in the sector cannot just focus on financial success but must ensure the businesses they support are committed to achieving maximum impact for both students and teachers.
When the severity of the pandemic became clear this spring, we witnessed reactive responses from government officials, companies, and families. It was survival mode. Now, it’s clear that the pandemic is on course to cause generational damage. A short-term response will not do. There aren’t easy answers, of course, but if we are right about the coupling of the K shaped recovery with the downward slope of the scissor charts, then an urgent and deliberate response is necessary.