ottobre 27, 2020

COVID, Inequality and Social Protection

The COVID-19 pandemic is an unequalizing crisis. Either because of their inability to work from home, or because their income has been more disrupted, or because they cannot access affordable healthcare, the poor and vulnerable are bearing a disproportionate burden of the COVID-19 shock. This shock will lead to the first increase in global poverty for decades and is likely to push between 88 million and 115 million additional people into extreme poverty in 2020 (1). World Bank experts estimated that this would be the worst reversal for global poverty reduction for the last three decades. At the same time, some billionaires increased their wealth during this period by more than 40%.

Since before the COVID-19 shock, rising extreme inequality was a defining issue of our time. Moreover, the pandemic has exacerbated pre-existing inequalities in income, wealth, and opportunity. Some of the channels through which coronavirus is deepening global inequality are by the changes it has produced in the labor market and education.

-The pandemic has increased inequality between low and high-income workers and between big and small businesses. A source of socioeconomic inequality is the ability of workers to perform activities remotely. Working from home (WFH) became of great importance because it minimizes the risk of exposure to the virus and it is an alternative to remain employed. However, working from home is not an option for many. In particular, vulnerable workers make up a disproportionate share of workers employed in industries categorized as “essential” (2). Globally, only one of every five jobs can be performed from home, and in low-income countries, the share is even smaller: only one of every 26 jobs can be done from home (3). An increase in the opportunity to work from home would benefit male, older, and highly-educated workers (4). In contrast, young, poorly-educated, and workers on temporary contracts are least likely to be able to work from home and are more vulnerable to unemployment (5). In addition, many of the employment support policies in response to COVID-19 do not reach informal, migrant, and unbanked workers. As a result, job losses from the pandemic in the U.S. overwhelmingly affected low-wage and minority workers. Furthermore, the recovery is also spread unequally. According to the Washington Post, “the coronavirus recession is […] redefining the dividing line between the haves and have-nots in the United States” as jobs remain scarce for workers earning less than $20 an hour and jobs for the 25% highest wage earners are fully recovered (6).

-The effects of COVID-19 on educational inequality, while still not fully known, are expected to run deep and long. The pandemic has caused the largest education disruption in history with more than a billion students affected. According to UNESCO, 11 million girls from pre-primary to tertiary education are at risk of not returning to school due to COVID-19’s disruption (7). Students’ learning loss over the summer is another example of how coronavirus will likely exacerbate learning outcomes between rich and poor students. During the summer, at-risk students don’t usually have educational resources such as camps and educational activities. Thus, they experience a higher summer learning loss than their better-off peers. While the literature is not conclusive on the magnitude of summer learning loss, Alexander et al. (2007) found that this gap widens over time. By ninth grade accumulated summer reading losses account for two-thirds of the reading achievement gap between disadvantaged and middle-income students (8). In support of the differences in access to resources that students are facing, studies have found that after the COVID disruption internet searches for online educational resources in higher-income regions were twice as high compared to lower-income regions (9). Finally, the available evidence on the impact of online learning on educational outcomes shows that underprivileged students with relatively low grades experience the largest negative effects of taking a course online (10). Taken together, these results suggest that the period of confinement will increase gaps by the socio-economic status of students.

While it is true that COVID-19 threatens and has affected everyone in some way, we are not all equally in this storm together. An example of this is that while the majority of the population is experiencing economic uncertainty, the world’s richest people are now a combined $813 billion richer than they were at the beginning of the year, according to the newest report on billionaires wealth from UBS and PwC (11). In particular, billionaires in the tech and healthcare sectors increased their fortunes by 43% and 50%. The report lauds the philanthropic efforts of the billionaires during the emergency: “our research suggests this is the greatest amount billionaires have given in a short space of time ever”. However, philanthropy is not a solution to growing inequality when fortunes are systematically built based on tax deductions and by increasing prices of essential products during the pandemic by as much as 1,000% over the expected price</. These charity funds would have a better use if they were collected as taxes and used to fund adequate social assistance responses.

One of the main obstacles to building fairer and more progressive tax systems and consequently, increasing investment in social protection, is the generalized perception between policymakers and citizens that welfare makes people lazy. This narrative has been widely used by politicians to advocate for budget-cutting for direct aid programs for the poor. Reagan’s creation of the “welfare queen” myth during the presidential campaign in 1976 is one of the clearest examples of how the stereotyped image of welfare recipients was used to rally support for the reform of the welfare system. The stereotype of lazy welfare recipients is so prevalent that Banerjee et al. (2016) show that there is a negative relationship between national spending on social assistance as a fraction of GDP and the share of the population who believes that poverty is due to laziness and lack of willpower (as opposed to because of an unfair society) (12).

Amid this crisis, we have the opportunity to strengthen social protection systems. We are living in an unusual moment where everyone feels vulnerable to some extent dealing with new threats and where economic insecurity could have changed citizens’ belief that they are likely to need government assistance in the future. This collective shock is a reminder that people receiving public assistance are not “undeserving”, but that social protection systems are designed to help the poor and vulnerable cope with adversity. Furthermore, the failure of governments to respond effectively to the COVID pandemic has exposed the importance of policies to mitigate its effects and the erosion of institutional capacities when vital public services like healthcare are underfunded. By realizing that we need a better social safety net and learning about the value of a responsive government, we have the opportunity of leveraging changes in citizens’ demand for redistribution and political engagement to strengthen democratic institutions and their ability to tackle coronavirus and widening inequality.

(1) Lakner et al. (2020). “Updated estimates of the impact of COVID-19 on global poverty: The effect of new data”. World Bank Blogs. https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty-effect-new-data
(2) Rho et al. (2020). A Basic Demographic Profile of Workers in Frontline Industries. Center for Economic and Policy Research. https://cepr.net/a-basic-demographic-profile-of-workers-in-frontline-industries/
(3) Garrote et al. (2020). “Who on Earth Can Work from Home?” Policy Research working paper; no. WPS 9347; COVID-19 (Coronavirus) Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/225881596202941026/Who-on-Earth-Can-Work-from-Home
(4) Bonacini et al. (2020). “Working from home and income inequality: risks of a ‘new normal’ with COVID-19”. Journal of Population Economics. https://doi.org/10.1007/s00148-020-00800-7
(5) Garrote et al. (2020). “Who on Earth Can Work from Home?”. Policy Research working paper no. WPS 9347, World Bank Group. http://documents.worldbank.org/curated/en/225881596202941026/Who-on-Earth-Can-Work-from-Home
(6) Long et al. (2020, September 30). The covid-19 recession is the most unequal in modern U.S. history. The Washington Post. https://www.washingtonpost.com/graphics/2020/business/coronavirus-recession-equality/?itid=hp-banner-low
(7) UNESCO (2020). COVID-19: UNESCO and partners in education launch global campaign to keep girls in the picture. Retrieved from: https://en.unesco.org/news/covid-19-unesco-and-partners-education-launch-global-campaign-keep-girls-picture
(8) Alexander et al. (2007). “Lasting Consequences of the Summer Learning Gap”. American Sociological Review, 72(2): 167–180. https://doi.org/10.1177/000312240707200202
(9) Bacher-Hicks, Goodman, and Mulhern (2020). “Inequality in Household Adaptation to Schooling Shocks: Covid-Induced Online Learning Engagement in Real Time”. NBER Working Paper 27555.
(10) Bettinger et al. (2017). “Virtual Classrooms: How Online College Courses Affect Student Success”. American Economic Review, 107 (9): 2855-75. Figlio et al. (2013). “Is It Live or Is It Internet? Experimental Estimates of the Effects of Online Instruction on Student Learning”. Journal of Labor Economics, 31 (4).
(11) UBS and PwC (2020). “Riding the storm: Market turbulence accelerates diverging fortunes”. https://www.pwc.ch/en/publications/2020/UBS-PwC-Billionaires-Report-2020.pdf
(12) Banerjee, A. V., Hanna, R., Kreindler, G. E., & Olken, B. A. (2017). Debunking the stereotype of the lazy welfare recipient: Evidence from cash transfer programs. The World Bank Research Observer, 32(2), 155-184.

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About Isabel Fontanot

Isabel Fontanot

Isabel Mejía Fontanot is an MPP student at Harvard University’s Kennedy School of Government. She has experience in program design and evaluation and strongly believes in the power of high-quality research to inform public policy and drive social change.

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