- As well as a public health crisis, the COVID-19 pandemic has had a devastating impact on poverty levels and inequality.
- Women, alongside the poor, elderly, disabled and migrant populations, have borne the brunt of the fallout from the pandemic.
- Minorities have been hit harder and are recovering more slowly from the downturn.
Around the world, responses to the first and second waves of the COVID-19 pandemic are understandably focused on reducing infections and fatalities. There are also redoubled efforts to avoid the negative economic consequences of the outbreak, especially in relation to jobs, productivity and growth. But the pandemic is an economic wrecking ball, with intergenerational consequences. Global growth has plummeted. Furthermore, poverty levels are increasing and inequality is accelerating between and within countries. Surging inequality is dangerous, with knock-on effects on everything from rising crime to reactionary nationalism.
There are at least four ways the COVID-19 pandemic is increasing inequality:
- First, higher-paid workers are working from home while lower-paid blue-collar workers typically do not have this option.
- Second, a higher share of low-paid workers are in essential services such as nursing, policing, teaching, cleaning, refuse removal, and store attendants where they are more likely to come into contact with people who are infected.
- Third, lower paid workers are more represented in the sectors that have suspended activities such as hotels, restaurants and tourism services.
- Fourth, the pandemic is increasing poverty and inequality between richer countries that can afford to bail out their firms and provide social safety nets, and poorer countries that do not have the capacity to do so.
A recent survey of 37 countries indicates that 3 in 4 households suffered declining income since the start of the pandemic, with 82% of poorer households affected. The impacts on different communities depends entirely on their specific circumstances. In the US, for example, over 2 million more households claim that they do not have enough to eat since the pandemic. In fact, one in five African American households says they are going hungry.
Income inequality soaring
The pandemic is a boon for the ultra-rich. The staggering rise in the stock-market is testament to this. In the US, over 44 million people lost their jobs and unemployment surged towards 15% between April and June 2020. Yet the fortunes of the top five billionaires rose by $102 billion, increasing their wealth by 26%. In fact, the combined wealth of US billionaires increased by over $637 billion to a total of $3.6 trillion, which is considerably more than the entire wealth of the 54 countries on the African continent.
Some of the biggest winners are those with high stakes in the technology sector. Digital retail vendors, conferencing platforms and social media groups have reaped the benefit from the lockdown and the shift to remote work.
The increasing concentration of in-country inequality is signalled in our latest book, Terra Incognita: 100 Maps to Survive the Next 100 Years. Between 1980 and 2020, billionaires in the US saw their wealth soar by 1,130%, increasing more than 200 faster than median wages. At the same time, the tax obligations of billionaires in the US declined by 78% between 1980 and 2018 (measured as a percentage of their wealth).
The spectacular accumulation of wealth in the hands of a small minority is ramping-up pressure to tax the rich and their heirs. Among high-income countries, for example, the US has the highest level of wealth inequality, the second highest level of income inequality, after taxes and government transfers, and one of the lowest levels of intergenerational mobility. An individual’s future is largely determined by their parents’ income. In 2020 alone, children will inherit around $764 billion and pay an average of just 2.1% on this income. By contrast for working people, the average tax rate is 15.8%, seven times more. These disparities are further skewed by race, and the racial wealth gap is even larger than it was in 1968, at the peak of the struggle for civil rights.
Gender inequality increasing
Women, alongside the poor, elderly, disabled and migrant populations, have borne the brunt of the fallout from the pandemic. In the US, women accounted for 55% of all jobs lost, even though they make up under half of the total workforce. In the UK, women were about one third more likely to be working in a sector that shut down. And when they could continue working, mothers were one-and-a-half times more likely to stop work than fathers. Their greater loss reflects the fact that women are more likely to work in the services such as catering and hospitality which were closed down. These trends are likely to set back progress in gender equality.
In previous recessions, men have borne the brunt of job losses, due to the sensitivity of sectors such as construction and manufacturing to economic cycles. By contrast, the employment of women was more stable. This time is different. The COVID-19 pandemic has hit industries that are consumer-facing hardest, including small shops, restaurants, and airlines. In the UK, for example, an estimated two-thirds of the extra 40 hours a week of caring and childcare is conducted by mothers. And mothers working at home are 50% more likely to be interrupted than men.