PART 2: LOCKDOWNS AND QUARANTINES

‘Disproportionate Impact and Uneven Recovery’: wealth disparity and the impact of Covid-19

Nadia Johnson (PR U6)

The effects of the pandemic have been hard on all of us. Transitioning into this new reality driven by screens and the internet, learning to adapt to different working spaces, coping with losing things we used to take for granted. For we students, there’s been a significant amount of stress caused by the uncertainty over exams and our futures. These psychological effects are all too real; this article isn’t meant to discredit that. But, it’s also no lie that the majority of the student and teaching population at this school are very privileged to be where they are. In other parts of the world, and among less fortunate socio-economic groups, the post-pandemic world has been significantly harder to adapt to. There are people who have had to make compromises because they don’t have any other option. There are people who are relying on lockdown lifting and the pandemic’s effects lessening so they can get back on their feet.

In this article I will be exploring wealth disparity and the differing impacts of the Covid-19 pandemic, including lockdown, on different socio-economic groups.

1. THE POOR ARE BECOMING POORER

‘The poor are getting poorer with close to 90 million people expected to fall into extreme deprivation this year.’ Gita Gopinath, Chief Economist at the IMF, 13th October 2020

According to the International Labour Organization (ILO), about 600 million people work in sectors such as hospitality and retail, which are among the hardest-hit sectors globally by the pandemic. These sectors tend to pay poorly, as well as contain high proportions of women, ethnic minorities, migrants, the young, and the lesser-skilled. OECD labour economist Sebastian Königs reported that ‘more vulnerable labour market groups — notably the low-skilled and workers in non-standard jobs — have been most strongly affected by job and earnings losses so far’, which could ‘further increase existing wealth inequalities’.1

The informal economy, i.e., economic activities/jobs/workers not protected by the state2, has been especially hard hit. Many of the world’s most vulnerable workers are employed in the informal economy sector, which includes around two billion people worldwide with limited access to social protection or benefits. The loss of income from workers in the informal economy is one of the biggest factors behind the World Bank’s forecast that up to 150 million more people will be pushed into extreme poverty by 2022 as a result of the pandemic.

In the US, it was reported in an article written in December 2020 that the wealthy, white and highly educated were the least likely to lose their jobs early, and if they did were more likely to recover quickly. On the other hand, lower earners, people of colour, women and the less-educated were still struggling nearly a year after the start of the pandemic.3 The latter group were more likely to have been working in sectors directly impacted by Covid-19, and less likely to experience the benefits of homeownership and recent market highs.4 ‘Those least able to withstand the downturn have been affected most,’ said Federal Reserve chair Jerome Powell during a Senate Banking Committee hearing last year.

On the positive side, according to Troy Frerichs, vice president of investment services at Country Financial, Americans are developing better spending habits as a side effect of the pandemic. ‘People are cutting back on discretionary spending and paying down debt,’ he said; ‘there seem to be some good financial habits taking place.’5

On the other hand, workers better off financially have avoided the worst of the pandemic’s economic impact. For example, many office workers have been able to shift to working from home – including up to 40% of the ILO’s top income bracket. This is more than double the proportion among the lowest earners. Additionally, for those working from home, lockdown has the benefit of lowering spending on transport and leisure. Household saving rates have ‘soared’ in many countries, whereas lower income people have had to use savings to pay their bills.

‘The COVID-19 crisis is hitting young people faster and harder: Urgent action is necessary to prevent the risk of a “lockdown generation” ’. ILO Monitor: ‘COVID-19 and the world of work’, 27 May 2020

Another area in which the pandemic is creating an increasing divide is in the gap between generations. It’s true that older communities have been more vulnerable to serious health side effects of Covid-19, but it’s young people who are ‘bearing the brunt of the economic damage.’6 Unemployment among people aged 15–24 increased by 7.5 percentage points from the beginning of the pandemic (early 2020), whereas among those 25 and older it increased by 3.2 percentage points.

According to research by Hannes Schwandt, assistant professor of economics at Northwestern University, these pandemic-induced job losses have potentially long-lasting consequences: ‘people who start their career during a recession experience lower earnings for a decade after graduation and report lower self-esteem, commit more crimes, and distrust the government more.’7

In the fourth edition of the ILO Monitor ‘COVID-19 and the world of work’, published late May 2020, concerns were raised regarding the younger generations and fear of a ‘lockdown generation’.

The report states: ‘exclusion of young people from the labour market, given the long-lasting impacts, is one of the greatest dangers for society in the current situation. In the long run, the combined educational and labour market crisis threatens not only to impair the quality and quantity of jobs but also to exacerbate existing inequalities across and within countries.’8

It also listed challenges the Covid-19 pandemic had created for young people globally, including the following:

• Disruption to education and training could potentially reduce future employment opportunities • Current job losses and ‘collapse of businesses’ are reducing employment and earnings • Greater obstacles to find work, re-enter the labour market, transition to better jobs

3. INEQUALITY BETWEEN COUNTRIES

‘COVID-19 has exposed and exacerbated inequalities between countries just as it has within countries.’ Joseph Stiglitz, American economist and public policy analyst September 2020

The wealth gap is also increasing between countries. While rich countries have been better equipped to protect their economies by boosting public spending, poorer countries have suffered from a deficiency of resources, which has led to a much more severe economic impact. Examples of countries with a negative annual GDP change in 2020 are Tajikistan, Pakistan, and Honduras.9

Battered Honduras

‘I’ve worked so hard to give my children a better future and now we risk losing it all.’ Edil Mendez, firefighter-turned-entrepreneur who lives in Roatán.

Take, for instance, the situation in Honduras. The Central American country has been ‘battered’ by economic damage caused by the pandemic and devastated even further by hurricanes in November 2020. Along with poverty, gang violence, and rising crime rates, it has been reported that desperation to emigrate from the country is soaring.10

28-year-old Edil Mendez runs a business dependent on tourism.11 He lives in Roatán, a holiday island off the northern coast of Honduras. ‘I could lose years of work in a matter of months,’ Mr Mendez said, speaking to The Financial Times newspaper in July 2020: ‘I’m giving it until November. If things don’t get better by then, I’ll have to make some difficult decisions.’ The earnings from his business had previously enabled him to support his four children, four siblings and his mother. For Mendez, the pandemic and declining tourism industry threatened to take that stability away.

It doesn’t help that corruption is commonplace there.12 Roatán, where Mendez lives, is less threatened by the gang violence that plagues other areas of Honduras. It is, however, a holiday island – with an economy ‘wholly dependent on tourism.’ As a result of the pandemic, many have lost their jobs, leading to dire consequences. ‘There are armed robberies in broad daylight,’ Mendez said. ‘ . . . I’ve never seen so much crime.’

Ghana’s partial lockdown

Deborah Dofernyo is a housekeeper, receptionist and saleswoman in Ghana. At 27 years old, her salary supports her mother, grandmother (both of whom are infirm), and five younger cousins. She works in Accra, the capital of Ghana. Before partial lockdown, she had been selling underwear door-to-door along with her job, a business which often doubled her weekly salary of 100 cedi, or $17.30. She had been saving up to go to pharmacy school. Most of the clothing she was selling had been imported – so when the ports closed, the markets dried up too. Although they later reopened, Ms Dofernyo had used up her savings to survive during lockdown. ‘Since the lockdown the small profit I have made, and even my capital, I have used everything,’ Ms Dofernyo said in July last year. Her uncle sent her family some money to help, however subsequently lost his job too.

Despite this, Dofernyo is still looking on the bright side. She believes that the lockdown ‘was the right thing to do because once there is light, there is hope. […] If we are safe from the virus we can continue our businesses...so even though it has affected me badly, it was for our own good,’ she said. ‘Now I will have to wait some time to get some small money to start again. I don’t know how long it will take but by God’s grace, I will surely start again.’ Her positive attitude is definitely something to be inspired by.

These are two examples of countries that have been particularly battered economically, but of course there are many more I haven’t mentioned here.

4. THE RICH GET RICHER

‘A group of “pandemic profiteers” have seen their wealth surge to unimaginable heights during a time of misfortune for most of their neighbors.’ Chuck Collins, Institute for Policy Studies

According to Business Insider, while 40 million Americans filed for unemployment in 2020, billionaires saw their net worth increase by half a trillion dollars.13 From March to June, Jeff Bezos’s net worth increased by 48 billion; the founder of Zoom’s increased by 2.5 billion.14 According to The Financial Times, the 10 richest billionaires in the world increased their wealth by $319 billion in 2020, predominantly made up by technology billionaires.15 In an article for the newspaper, Valentina Romei accredited part of this surge to rising asset prices due to the effort of central banks.16 Chuck Collins, from the Institute for Policy Studies, said of billionaires’ gain during the pandemic that ‘many of them are profiting from our increasing dependence on cloud-based technologies, online retail, drug research, telemedicine, video conferencing — services that have become essential’.17

According to an article in The Guardian, published in October 2020, billionaires’ wealth had increased up to $10.2 trillion18 .

It is shocking to hear numbers like this – so large they are difficult to visualise – in comparison with the rest of the world, in which many people are struggling to stay afloat economically. Of course, you cannot fix the wage inequality by simply throwing money around, but it does raise larger questions about how exactly the system has failed people so badly, and if there’s a way to mend it.

Circling back to my title, it’s clear that the economic impact of the Covid-19 pandemic has spread disproportionately across society, with those at the top suffering far less, and those at the middle and lower ends struggling far more to get by. One person’s suffering doesn’t invalidate another’s – the fact that somebody out there has it worse than you doesn’t make your own trials insignificant, or worthless. But I do think it’s important to remember, sometimes, that those of us at this school are lucky to be where we are.

Notes: 1 Romei, Valentina. How the Pandemic Is Worsening Inequality. | Financial Times, Financial Times, 31 Dec. 2020, www.ft.com/content/cd075d91fafa-47c8-a295-85bbd7a36b50. 2 Wiego, et al. Informal Economy. WIEGO, Women in Informal Employment: Globalizing and Organizing. www.wiego.org/informaleconomy. 3 Dickler, Jessica. ‘42% Of People Falling behind as Covid-19 Widens the Wealth Gap, Report Finds.’ CNBC, CNBC, 2 Dec. 2020, www.cnbc. com/2020/12/02/pandemic-widens-the-gap-between-the-haves-and-have-nots-report-finds.html. 4 Dickler, Jessica. ‘42% Of People Falling behind as Covid-19 Widens the Wealth Gap, Report Finds.’ CNBC, CNBC, 2 Dec. 2020, www.cnbc. com/2020/12/02/pandemic-widens-the-gap-between-the-haves-and-have-nots-report-finds.html. 5 Dickler, Jessica. ‘42% Of People Falling behind as Covid-19 Widens the Wealth Gap, Report Finds.’ CNBC, CNBC, 2 Dec. 2020, www.cnbc. com/2020/12/02/pandemic-widens-the-gap-between-the-haves-and-have-nots-report-finds.html. 6 Romei, Valentina. ‘How the Pandemic Is Worsening Inequality.’ | Financial Times, Financial Times, 31 Dec. 2020, www.ft.com/content/cd075d91fafa-47c8-a295-85bbd7a36b50. 7 Romei, Valentina. ‘How the Pandemic Is Worsening Inequality.’ | Financial Times, Financial Times, 31 Dec. 2020, www.ft.com/content/cd075d91fafa-47c8-a295-85bbd7a36b50. 8 International Labour Organization, ILO Monitor: ‘Covid-19 and the world of work’. Fourth edition: Updated estimates and analysis, 27 May 2020 https://www.ft.com/content/cd075d91-fafa-47c8-a295-85bbd7a36b50 9 Al Jazeera. ‘In Pictures: Desperation to Migrate Grows in Battered Honduras.’ Latin America News | Al Jazeera, Al Jazeera, 15 Feb. 2021, www. aljazeera.com/gallery/2021/2/15/in-pictures-desperation-grows-in-battered-honduras. 10 Seddon, Max. ‘We Risk Losing It All’: Voices from the World’s Poorest Countries on the Pandemic.’ | Financial Times, Financial Times, 5 July 2020, www.ft.com/content/f45afb9a-aaa3-4434-8d3b-b56e24f0cb37. 11 Seddon, Max. ‘‘We Risk Losing It All’: Voices from the World’s Poorest Countries on the Pandemic.’ | Financial Times, Financial Times, 5 July 2020, www.ft.com/content/f45afb9a-aaa3-4434-8d3b-b56e24f0cb37. 12 Seddon, Max. ‘‘We Risk Losing It All’: Voices from the World’s Poorest Countries on the Pandemic.’ | Financial Times, Financial Times, 5 July 2020, www.ft.com/content/f45afb9a-aaa3-4434-8d3b-b56e24f0cb37. 13 https://www.businessinsider.com/billionaires-net-worth-increases-coronavirus-pandemic-2020-7 14 https://www.businessinsider.com/billionaires-net-worth-increases-coronavirus-pandemic-2020-7 15 https://www.ft.com/content/cd075d91-fafa-47c8-a295-85bbd7a36b50 16 https://www.ft.com/content/cd075d91-fafa-47c8-a295-85bbd7a36b50 17 https://www.ft.com/content/cd075d91-fafa-47c8-a295-85bbd7a36b50 18 https://www.theguardian.com/business/2020/oct/07/covid-19-crisis-boosts-the-fortunes-of-worlds-billionaires

Bibliography: ILO Monitor: ‘ COVID-19 and the world of work’. Seventh edition Updated estimates and analysis, 25 January 2021, https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/wcms_767028.pdf ILO Monitor: ‘COVID-19 and the world of work’. Fourth edition Updated estimates and analysis, May 27 2020, https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/wcms_745963.pdf Al Jazeera. “In Pictures: Desperation to Migrate Grows in Battered Honduras.” Latin America News | Al Jazeera, Al Jazeera, 15 Feb. 2021, www. aljazeera.com/gallery/2021/2/15/in-pictures-desperation-grows-in-battered-honduras. Dickler, Jessica. “42% Of People Falling behind as Covid-19 Widens the Wealth Gap, Report Finds.” CNBC, CNBC, 2 Dec. 2020, www.cnbc. com/2020/12/02/pandemic-widens-the-gap-between-the-haves-and-have-nots-report-finds.html. Gita , Gopinath. “A Long, Uneven and Uncertain Ascent.” IMF Blog, 16 Nov. 2020, blogs.imf.org/2020/10/13/a-long-uneven-and-uncertain-ascent/. Ng, Kelly. Businesstimes.com.sg, Business Times, 26 Oct. 2020, 5:50pm, www.businesstimes.com.sg/government-economy/how-has-covid-19-hitsingapores-less-well-off. Palomino, Juan C, et al. ‘Wage Inequality and Poverty Effects of Lockdown and Social Distancing in Europe.’ European Economic Review, Elsevier B.V., Oct. 2020, www.ncbi.nlm.nih.gov/pmc/articles/PMC7417923/. Romei, Valentina. ‘How the Pandemic Is Worsening Inequality.’ Subscribe to Read | Financial Times, Financial Times, 31 Dec. 2020, www.ft.com/ content/cd075d91-fafa-47c8-a295-85bbd7a36b50. Seddon, Max. ‘We Risk Losing It All’: Voices from the World’s Poorest Countries on the Pandemic.’ Subscribe to Read | Financial Times, Financial Times, 5 July 2020, www.ft.com/content/f45afb9a-aaa3-4434-8d3b-b56e24f0cb37. Stiglitz, Joseph. ‘COVID-19 and Global Inequality – CONQUERING THE GREAT DIVIDE.’ Finance & Development, International Monetary Fund, www.imf.org/external/pubs/ft/fandd/2020/09/COVID19-and-global-inequality-joseph-stiglitz.htm#:~:text=International%20 dimensions,as%20it%20has%20within%20countries.&text=Without%20it%2C%20the%20global%20pandemic,there%20will%20be%20global%20 divergence. Wiego, et al. ‘Informal Economy.’ WIEGO, www.wiego.org/informal-economy. https://ips-dc.org/u-s-billionaires-wealth-surges-931-billion-since-beginning-of-pandemic/ https://www.imf.org/external/pubs/ft/fandd/2020/12/pdf/infographic-of-pandemic-impact-on-youth.pdf