Omicron Supply-Chain Disruptions Are Hitting Low-Income Communities the Hardest

Over the past few weeks, as the Omicron variant of the coronavirus has swept the U.S., supply chain woes have worsened.

Three things seem to be happening: the first is that so many workers are now out sick that delivery systems to grocery stores and retailers are starting to break down; in other words, the produce has been harvested, but in many instances it’s stuck in warehouses, or on ships, or in food silos because of a shortage of people to speedily deliver goods around this huge country. That, combined with a slew of tough winter storms across the U.S. in recent weeks has, retailers report, snarled truck traffic and caused delivery backups. Related to this, primary products are making it to processing facilities, but those facilities have so many workers out sick that they can’t keep up with demand to make processed foods, such as soups and cereals. The result? Empty shelves in grocery stores. Food chains are reporting they are out of as much as 15 percent of their stock at the moment, significantly higher than is usually the case.

That doesn’t mean Americans are about to go hungry as grocery stores empty out — the food distribution system in the U.S. is more resilient than that, and has an awful lot of redundancies built in — but it does mean food choice options are declining at the moment, and food prices are likely to continue their upward march at an even faster pace. This will, of course, be a burden carried disproportionately by the poor: a large-scale study by the U.S. Department of Agriculture (USDA) in 2016 found that low-income families in the U.S. spend between 28 and 42 percent of their pre-tax income on food; by contrast, wealthier families spent considerably less than 10 percent of their income on food.

The second thing is that so many retail workers are sick that stores simply don’t have the staffing resources to fully stock their shelves while also catering to their usual numbers of customers. Many, including big-name stores like Walmart, Apple and Macy’s, have responded by reducing their hours and/or cutting back on services. Some grocery stores are reporting that up to 8 percent of their workers are now out sick on any given day as the nationwide Omicron surge nears its peak.

The third contributing factor to the empty shelves being reported around the country is a more fundamental global supply-chain breakdown as the world enters the third year of the pandemic. Countries that had hoped to be far beyond lockdowns by 2022 are back to attempting to control the spread of the virus through the crude instrument of shuttering large parts of their economies and ordering people to work at home where possible. China — whose Sinopharm vaccine, including its booster shot, has been peculiarly outplayed by the Omicron variant — is locking down entire cities still, affecting tens of millions of people. As a result, key parts of the international supply chain, which is disproportionately dependent on Chinese factories, are particularly fragile at the moment. Asia analysts predict that the supply chain could come under unprecedented pressure over coming months if Omicron starts spreading in Asia at the speed that it has already spread through the U.S. and Europe, and if China continues to enforce its “zero-COVID” policy, which relies on locking down whole cities and mandating universal testing if even a single case of the virus is picked up by health authorities. Lock down enough cities simultaneously and it’s inevitable that factories will also have to temporarily cease operations.

“The same capitalist system that moved production out of the U.S. to China to make more profits thereby required long global supply chains to feed production in China and bring the products back to U.S. markets,” Richard Wolff, professor emeritus of economics at University of Massachusetts at Amherst, tells Truthout. “But long supply chains are more vulnerable to disruption than short ones.”

Because the U.S. and its corporate behemoths have so much bargaining power within the global economy, at least in the short term, that protects the country and its more affluent consumers from the worst impacts of this global squeeze. Prices will go up, but for those who can afford them, most goods continue to be available. In poorer countries, by contrast, real shortages of vital goods, and a lack of money to pay for them, are even more of an everyday reality in 2022 than they were in the recent past.

Global estimates are that in 2020 alone, as a result of the pandemic, as many as 75 million people fell into extreme poverty; and 80 million more became under-nourished because they no longer had access to sufficient supplies of food. The World Bank estimates that in 2020 alone, 97 million people globally saw their income fall below $2 per day. Since then, as the pandemic has dragged on, almost certainly that catastrophic situation has only become worse. If Omicron leads to even more disruptions, poorer countries will find their consumer power curtailed even further.

The exacerbated supply chain woes unleashed by Omicron don’t, of course, play out equally in all locations and across all income groups. The wealthier the countries and individuals, the more options they have available to them — to simply pay more to buy goods that are, at least temporarily, scarce; or, for individuals, to shop around to look for particular goods if one store doesn’t have them. By contrast, poorer countries and individuals get frozen out of tight markets.

In the U.S., the poorer one is, the more one tends to rely only on a small handful of stores. In 2017, the USDA estimated that more than 19 million Americans had only limited access to supermarkets and grocery stores. A disproportionate number of those living in the U.S.’s “food deserts” are people of color. When goods are absent or prices spike in food deserts, poorer consumers — whose incomes aren’t increasing at the same capacity as are prices — often have no choice but to do without.

According to Wolff, fixing these supply chains in a way that protects the poor would involve building up inventories that could be tapped if and when the delivery of goods starts to break down. But companies are reluctant to do that, he says, because it takes a bite out of their short-term profits. Instead, they wait for catastrophes to hit and then, if and when they do — witness the pandemic — the market response leads to increased prices.

“Supply chain disruptions threaten corporate profits,” Wolff says. “Their executives respond by allocating reduced quantities of outputs among those who demand those outputs. In doing so, they tend to raise prices and ship goods to higher-income outlets where consumers are most able to pay those higher prices. They correspondingly ship less to those outlets ‘serving’ lower-income folks less able or willing to pay higher prices.”