The coronavirus pandemic is getting worse global economic inequality in different ways, both geographically and socially.
As the first vaccines are deployed, the spread of the virus is expected to decrease in the coming months – but its economic impact is expected to persist, economists warn.
In a recent interview, Nobel Laureate Angus Deaton said rising inequality “has a lot to do with jobs”; restrictions on activities introduced to combat the pandemic hit the poorest workers particularly hard, resulting in the largest loss of global production in modern history.
As a result, the IMF estimates that income inequality increased more sharply in 2020 than in previous economic and financial crises.
Because the pandemic has increased inequality between nations, as well as between households, a decade of progress in reducing inequality has been wiped out in developing economies, according to the IMF.
1) The working poor are getting poorer and poorer
Around 600 million people work globally in hard-hit industries such as hospitality and retail, according to the International Labor Organization.
These sectors contain particularly high proportions of women, ethnic minorities, migrants, low-skilled people and young people; they also tend to pay badly.
Sebastian Königs, labor economist at the OECD, said that “the most vulnerable groups in the labor market – especially low-skilled workers and workers in non-standard jobs – have been hit hardest by job losses and of income so far “, which could wealth inequalities”.
In addition, the informal economy has been hit hard – and this is where some of the world’s most vulnerable workers are employed. Around 2 billion people around the world work informally, with limited access to social protection or benefits.
Their loss of income is one of the determining factors of the World Bank forecast that the pandemic will push up to 150 million more people into extreme poverty by 2022.
2) Inequalities between countries are increasing
Inequalities between nations have also increased. Poorer countries have entered the pandemic with less well-equipped health systems and many have been affected by the loss of tourism income, the decline in remittances from citizens working abroad, the collapse of exports and the increase in public debt.
Rich countries have been better able to protect their economies from the effects of the pandemic by increasing public spending, leaving developing economies struggling without the kind of coordinated global action which was triggered by the financial crisis over ten years ago.
As a result, economist Joseph Stiglitz recently warned that the pandemic “has exposed and exacerbated inequalities between countries, just as it has done within countries.”
In addition, the pandemic escalating pace of technology adoption Around the world “risks widening the gap between rich countries and poor countries by shifting more investment to advanced economies where automation is already established”, according to Cristian Alonso, economist at the IMF.
And in the coming year, differences in access to vaccines are expected to widen the gap.
3) The generation gap is widening
The elderly have been much more vulnerable to the health effects of the coronavirus – but in most countries, young people bear the brunt of the economic damage.
At the height of the pandemic-induced spike in unemployment, unemployment among people aged 15 to 24 in OECD countries was 7.5 percentage points higher than at the start of this year, while among people aged 25 and over, it increased by 3.2 percentage points.
Job losses induced by a pandemic have potentially lasting consequences: people who start their careers during a recession have lower incomes for a decade after graduation and report lower self-esteem, commit more crimes and are more wary of government, according to a study by Hannes Schwandt. , Assistant Professor of Economics at Northwestern University in the United States.
The ILO has warned that “the exclusion of young people from the labor market” is “one of the greatest dangers to society in the current situation” because of “the lasting effects”.
4) Well-off workers stay at ease
Relatively privileged workers around the world have avoided the worst of the economic effects of the pandemic. For example, many office workers were able to switch to working from home, and for them the lockdown meant reduced spending on transportation and recreation while their incomes remained relatively stable.
Up to 40 percent of people in the top income bracket of the ILO were able to work from home during the pandemic, more than double the proportion among the lowest incomes.
And in many countries, as jobs in low-skilled occupations have been cut, the number of professional jobs has increased.
As a result, household savings rates have skyrocketed in many countries; there is research to indicate that the increase was driven by higher incomes. Meanwhile, low-income people had to use their savings to pay their bills.
“The poor are getting poorer and poorer,” said Gita Gopinath, chief economist at the IMF.
She called on governments to do more to help workers re-qualify and move to growing sectors, to prevent the pandemic from leaving a lasting legacy in the form of entrenched global inequalities.
5) the rich get richer
The world’s 10 richest billionaires increased their wealth by $ 319 billion in 2020, with tech billionaires accounting for the vast majority of the earnings, according to a Bloomberg study. This is largely due to rising asset prices; the MSCI world stock index is up 12 percent year-to-date.
This has been fueled in part by the success of companies that have seen increased demand as a result of the pandemic, but also because efforts by central banks to cushion the unprecedented slowdown in activity by injecting massive waves of stimulus in the global economy have helped drive up asset prices.
Chuck Collins, Institute for Policy Studies, said that the wealth of billionaires is “growing” and that “many of them are benefiting from our growing reliance on cloud technologies, online retail, research on drugs, telemedicine, videoconferencing – services which have become essential services during the pandemic ”.
For example, the combined wealth of Amazon’s Jeff Bezos, Tesla’s Elon Musk and vaccine producer Zhong Shanshan has grown by more than $ 275 billion since the start of the year, according to Bloomberg.
Although some sectors of the economy such as retail and hospitality have been damaged by the pandemic and rich people have suffered – Spanish retail magnate Amancio Ortega has lost $ 10 billion according to Bloomberg – the overall effect on the assets of billionaires has been limited.