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This is an edited version of the winning entry for the Royal Economics Society Young economist of the yesr competition in collaboration with the FT, written by Marc Kadir, Manchester Grammar School
Covid-19 has brought about drastic economic and social changes worldwide. Amidst news of billionaires’ wealth rises by 27.5 percent to $ 10.2 tons during the pandemic, it is reasonable to assume that economic inequality, consistent with the pattern after previous pandemics, increased. To assess the true extent and areas in which it has occurred, an analysis of its impact on generational, gender and racial inequality is needed internationally.
An important feature of the impact of the pandemic was sectoral downtime and changes in the way people work. The immediate short-term effects are among workers in the affected areas, who are paid disproportionately female, young and low. Those younger than 25 years are twice as likely to work in a closed sector than those who are older.
This implies an aggravation of generational segregation, as young people work overwhelmingly in sectors such as hospitality and retail that are closed, and bear the bulk of the reduction in income.
There was a clear increase in economic gender inequality, with women a third more likely than men to quit or lose their jobs in the UK during the pandemic. The data show that this is mainly due to the behavior of mothers, and that it has increased the gender imbalance in the income distribution.
There were also significant differences between the effects of Covid-19 on members of different socio-economic groups. People in the bottom 10 percent of earners were responsible for about 30 percent of those who lost their jobs.
These differences are reflected at different educational levels. Those with higher levels of education and income were more likely to work in the office and work from home with little disruption. Those with a degree were more than 94 percent more likely to work from home, further exacerbating the income disparities between rich and poor.
Those of Pakistani, Bangladesh or black ethnicity remain less employed, so ethnic economic inequality is further exacerbated. Although these trends are specific to the UK, similar patterns have existed elsewhere, with different groups having an out-of-proportion relationship.
It is possible that these consequences are simply the result of short-term pandemic-related fluctuations, which in the long run will be largely unimportant as sectors reopen and economic activity resumes.
In the first phase of the constraint, the income of some low-wage workers in the US actually increased as a result of stimulus measures worth about 13 percent of GDP. This reduced income inequality, suggesting that Covid-19 would not necessarily lead to a more unequal world.
However, as these income support programs are phased out and public services reduced, poorer households will be disproportionately affected by a larger decline in their household income and an increase in inequality.
Calculate the World Bank’s forecasts up to 150m extra people will fall into ‘extreme poverty’ worldwide, indicating that the measures taken to prevent an economic disaster are insufficient to alleviate poverty.
Covid-19 caused great disruption to education. Although the pandemic hampered the education of almost all children, it was significant inequality between those from wealthier families and their less affluent counterparts.
It is estimated that the loss of learning suffered during 2020 will lead to a reduction in each pupil’s income by 3 percent. But those from backward backgrounds, who do not have the support or technology to participate in distance learning, can see it reductions of up to 5 percent. It is clear that the sharp educational differences caused by the pandemic will lead to greater economic inequality between children with different backgrounds.
Covid-19 will also have a major impact on global inequality. A modest proportion of the vaccinations were in African countries. This inequality against vaccines will limit the ability of poorer countries to limit economic activity through health constraints, while richer countries will operate at normal levels. As a result, wages will remain depressed and recovery will be sluggish, exacerbating global inequalities.
Such a view is disputed by Angus Deaton, who claims that international inequality has decreased due to the pandemic, with rich countries experiencing more deaths per capita than poor countries. Nations with a higher number of deaths had a larger decline in income, so per capita income fell more in higher-income countries, leading to a decline in international income inequality.
However, such a view is not convincing. The greater speed with which richer nations can reopen, combined with the fact that the 60 million people in the poorest 74 countries in the world driven to extreme poverty, indicates that global inequality is increasing.
In general, it is clear that the legacy of coronavirus will be a more unequal world. Within nations, many existing inequalities have been significantly exacerbated, and internationally, richer nations are expected to recover relatively quickly and thoroughly.