How COVID-19 has Impacted Inequality

By Kaushal Agarwal

London, United Kingdom

A cartoon image showing how inequalities have a smaller umbrella against the impacts of COVID-19 (The Economist)

“We’re all in this together” was a common narration of the pandemic. Online schools, lockdowns, business closures, and health risks were thought to be impacts that affected all of us—equally. After all, I too had to move to online school, my parents too had to work at home, I too faced the risk of catching the virus, and I too experienced being stuck at home with nowhere to go and socialize.

However, as we emerge from the depths of the pandemic, still in its waters, a stark realization has struck. Pandemic policies were experienced unequally, the virus impoverished unequally, the disease killed unequally, and all together COVID-19 has strikingly exposed and exacerbated current inequalities.

The following inequalities have been impacted the most: income inequality, gender inequality, regional inequality, and education inequality.

Income/wealth inequality has the most dimensions to it because it encompasses issues including employment loss, amount of savings, remote work opportunities and technology divides. In OECD countries, studies on household income per capita show a rise in incomes through the pandemic period and a reduction of income inequality measured by the GINI coefficient, which is a signal of a rise in income equality [1]. However, these statistics are remarkably misleading, since the decrease in inequality was caused by short-term interventions by governments such as stimulus and relief plans—not due to long-term shifts.

Instead, what we have seen are the tipping signs of increased income inequality for two reasons. Firstly, people in the bottom quintile of the population in OECD countries have experienced the majority of job losses [2]. This not only affects the obvious reduction in household income, but those unemployed face a depreciation of their human capital due to the time away from jobs, which makes them less employable in the future. Secondly, those in higher-income households remained employed and faced a reduction in their consumption—resulting in higher savings. Low-income households saw smaller percentage cuts in their expenditure through the pandemic and returned to pre-pandemic spending much quicker than high-income households [3]. In July 2020, spending of low-income households had returned to its 2019 level, while spending of high-income households was 13% below their baseline level. This is because low-income households are more constrained on how much they can save and spend. After all, their consumption reflects essential spending. Essentially, low-income households couldn't save as much money because a larger chunk of their incomes went to stuff they needed for sustenance whereas the wealthy could save more as the majority of their income went to non-essential items—items whose consumption did and could reduce significantly during the lockdown. The gap in percentage savings directly contributes to the growth of wealth inequality.

Graphs showcasing job loss probabilities per quintile in the US, UK and Germany (IZA [4])

The transition to remote work has also impacted income inequality. During the pandemic, the ability to work remotely, which was dependent on one’s type of job and the quality of their home environment, was unevenly spread through the distribution quintiles. Those who earned lower incomes worked in sectors that could not offer remote working opportunities, or when they did, resulted in pay cuts due to falling productivity levels. Examples include those in education, construction, and F&B, as well as accommodation. Across European countries, 74% of employees in the top 20% of wages could work remotely, compared to only 3% in the bottom quintile [5] .Those who could do remote work without pay cuts saw wage premiums due to productivity boosts. Examples of sectors include those in finance and IT. These sectors also exhibit employees who already earn substantially higher incomes, meaning the gap to the top has widened. Overall, what we see is an unequal distribution of unemployment, an increase of savings in high-income households, those in lower parts of the distribution having little access to remote work and, even when they did have access, experiencing wage cuts which reduced their income.

In addition, pre-existing income inequality snowballed into some side effects spurred by the pandemic. This included people in less wealthy households not being able to perform online activities at home due to a lack of technological equipment. Hence, those on low incomes had reduced opportunities for online learning, to maintain social relationships, and were prone to more damage to their mental health [6].

Let’s move onto gender inequalities—considering that the comparisons I make are between men and women simply because research doesn't account for other genders. I understand this is highly restrictive. Women have experienced a “she-cession” throughout the pandemic: more women than men have been laid off, experienced wage cuts and have been furloughed [7]. Women were more likely to lose their jobs in the pandemic compared to previous downturns for three reasons. One, working mothers left their jobs or reduced their productivity in order to focus on childcare as schools shut down. Two, women's work contracts involved more part-time agreements than men’s, making women easier for employers to lay off. Three, women simply have higher employment percentages in sectors worst hit by lockdowns such as education and hospitality.

Working mothers were the worst hit. Mothers with younger children reduced their working hours four to five times more than fathers [6]. Women also saw a substantially larger decline in income than men in this same period [8]. What’s even more startling is that the pandemic has negatively impacted women’s work-life balance and, with it, their mental health. Researchers reported a significant reduction in women’s well-being due to feelings of loneliness, being overwhelmed due to extra childcare and housework, and anxiety caused by the loss of a work-life balance [9]. The pandemic certainly exacerbated mental health issues for some men as well, but mothers have been the hardest hit.We’re yet to see how women will react to the opening of the economy, schools, and employment opportunities, but we do know that the pandemic's impact on them will be longer-lasting. However, the movement of workspaces online could bring interesting opportunities for women because it may alleviate some of the impacts of maternity leave. Several jobs now have the infrastructure to sustain online work, meaning women on leave get a chance to work at home. This could reduce the impacts of maternity on productivity and “experience loss,” hence increasing promotion opportunities in the future.

Regional inequality refers to the gap we see in regions in terms of access to healthcare, infrastructure, and demographics. During the pandemic, poorer regions have experienced higher mortality rates not only due to their worse-off healthcare systems, but also, less obviously, their lack of social distancing regulations. In the United States, research has shown that mobility has decreased significantly more in wealthier counties in response to state-level measures from January 2020, meaning poorer counties experienced higher transmission of the virus [10].

Regions can also refer to city zones. Poorer areas suffered from closer proximity of inhabitants, worse pollution, and an even higher proportion of elderly residents [11]. Strikingly, BAME groups were found to be at higher risk of hospital COVID deaths partly due to deprivation compared to white people. Black people were four times more likely to die [12]. With higher mortality rates comes more damage to households in these areas who were sustained by the incomes of their dead. More so, remote working opportunities have been unevenly spread. In all OECD countries, cities and urban areas benefit from higher opportunities for such work [13]. However, what's interesting about this is that higher-income workers who have experienced productivity gains with remote working may see permanent shifts to at-home jobs. This could potentially mean a migration of these workers into suburbia which offer cheaper, bigger housing which could transmit into more affordable housing in urban areas as the market opens itself to more sales from moving residents. The longer-term impact could see marginalized communities get opportunities to move to wealthier regions to garner the benefits. So it seems a shift to remote working, catalyzed by the pandemic, could give a shot to low-income households to flatten the distribution curve.

Educational inequality tends to be related to socio-economics differences. Those who are in lower-income households have spent less time in online school and even if they had access, participated in less schoolwork. In England, for example, one in ten primary school students and one in seven secondary students relied only on a cell phone or had no digital device to access school materials online [14]. Urban areas with higher-income households and more reliable internet connections exhibited substantially larger increases in searches for online learning resources [15]. Schools in poorer regions had access to less adequate technical equipment for staff to use. This disparity in education to poorer students has long-term consequences as well. Using simulations with U.S. data, researchers found that, due to the pandemic, the share of the population with a high school degree will fall by 3.8%, and 2.7% for college degrees. Those in lower socio-economic groups will certainly face the brunt of this decrease because the loss of education, which they have faced the most of, has been linked to longer-lasting impacts on their education such as dropping out of high school and not pursuing college [16].

We can see that COVID-19 has both created new inequalities and exacerbated existing gaps. The policies we need to correct this cannot be short-term policies that merely dampen the current effect of the pandemic. We need long-term solutions to close growing inequities. Firstly, this would include providing equal opportunities to people by offering better, more accessible technology, which is currently shielded in a circle of the wealthy. Secondly, as the pandemic reshapes society, this is the perfect opportunity for labor market policies to change to appreciate online work, which would help those experiencing inequalities to benefit from a shifting job market. Thirdly, progressive taxation, social insurance and welfare access to education are crucial to reducing income disparity. Most importantly, governments must work with their citizens if we want a society that is no longer plagued with the scars of inequality. The battle is more important now than ever.


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