The risks of an uneven economic recovery in an unequal world

People wait to receive a dose of COVAXIN coronavirus disease (COVID-19) vaccine manufactured by Bharat Biotech, during a vaccination drive organised by SEEDS, an NGO which normally specialise in providing relief after floods and other natural disasters, at an under-construction flyover in New Delhi, India, August 31, 2021. REUTERS/Adnan Abidi

The COVID-19 pandemic has impacted the world’s most vulnerable populations through lost lives, health, jobs, incomes, assets, and education. The World Bank’s High-Frequency Phone Surveys (HFPS) help identify the main fault lines along which the pandemic’s unequal impacts are emerging in developing countries (country-level indicators produced with this data are shown in an interactive dashboard). The pandemic intensified inequalities between higher-income and lower-income countries, men and women, and workers from different socioeconomic groups. While the initial impacts of the pandemic reinforced preexisting inequalities, the world must now turn its attention to the risks of an uneven economic recovery and the long-term threat it poses to social mobility and inequality.

Early insights (using harmonized multicountry HFPS data) from April-June 2020 suggested extremely large impacts on incomes, jobs, food security, and children’s education, associated with the stringency of policy measures undertaken during the pandemic. On average, more than one-third of those working before COVID-19 across 52 countries stopped working; more than 60 percent of households reported income losses across 30 countries. A pattern of widening gaps between rich and poor countries emerged early on: Income losses, disruptions to children’s education, and food insecurity were much more common among households in poorer countries. In addition, emergency social transfers were inadequate to offset impacts on income in low-income countries. For example, per capita social protection spending on COVID-19-related measures was $4 on average from March 2020 to May 2021 in low-income countries, compared to nearly $850 per capita in high-income countries.

Within developing countries, the economic impacts seemed to reinforce preexisting inequality patterns. Large segments of the population who were at a disadvantage in the labor market before the shock—women, younger workers, and workers with less education—were much more likely to lose their jobs in the first three months of the pandemic (Figure 1). Income losses were also more likely among respondents with no college education and households with self-employed or casual workers. Access to learning while schools were closed was more severely limited for children in larger households and in households where the survey respondent was less educated. There were some exceptions to these patterns. For example, in some low-income countries, educated workers were more likely to stop working, as they tended to be employed in the urban service sector that was strongly affected by the pandemic.

Women, younger workers, and workers with less education were more likely to lose their jobs in the first three months of COVID-19

Men and women also experienced the pandemic with significant differences. While men were more likely to die from COVID-19, women were affected more in other dimensions of well-being. Women disproportionately suffered from mental health impacts and experienced a higher risk of dying during childbirth or having stillbirths. Women shouldered increased responsibility for additional care needs with school closures and increased illnesses among family members, which affects their ability to return to work as economies reopen. As women lost paid work at a higher rate relative to men, their unpaid work went up; and women entrepreneurs were at a greater risk of having their businesses closed than men. Evidence also suggests a steep increase in violence against women during the pandemic.

COVID-19 hit in a world where inequality was already pervasive and socioeconomic mobility was not improving. It may worsen these trends through three main channels:

  1. Lasting impacts of job and business losses, which can be particularly severe for vulnerable workers.
  2. Higher likelihood among poor households to adopt strategies to cope with income losses that reduce their productivity over time.
  3. Disruptions to schooling unequally affecting children from different socioeconomic strata.

Evidence from past crises shows that those who are most affected may take longer to recover. Our analysis of the HFPS data shows early indications of this occurring from the current pandemic.

After severe dips in April-June 2020, income and employment saw a partial rebound by September 2020 in the 17 countries in our sample where policies restricting mobility became less stringent. Encouragingly, food security and employment improved at a similar rate for countries at different income levels. However, the improvements by September did not restore employment to pre-pandemic levels and were not enough to significantly reduce the gaps in initial job losses between women and men, non-college- and college-educated, and young and older workers. For example, female employment had only recovered 30 percent of what was lost between pre-pandemic and May-June (versus 49 percent for men). Furthermore, a detailed analysis of six countries shows that male, younger, and college-educated workers in these countries were less likely to lose their jobs and more likely to find a new job if they lost one.

Particularly among poorer households, much of the recovery may also be driven by lower-quality jobs. In six countries, self-employment accounted for 83 percent of the increase in employment rates from May to September for primary-educated workers, compared to 58 percent for workers with tertiary education.  In some countries (such as Nigeria), agricultural employment increased sharply, suggesting individuals took on farm work to cope with other job losses.

While food security continued to improve, data from September 2020-January 2021 for eight countries indicates that disparities by gender and location in employment persisted even as policy stringency improved. There were warning signs about a stagnating recovery—in a sample of 14 countries, the recovery in employment appears to have stalled in the last quarter of 2020.

The pandemic has underscored the need for building an effective and equitable public health system, investing in safety nets and social insurance, and instituting fiscal policy that raises resources fairly and efficiently to finance investments. The first priority is ensuring widespread and equitable access to vaccines. Second, governments need to help children and parents transition back to school and facilitate reentry of workers most likely to remain unemployed. Older and low-educated workers might also require more support to deal with the consequences of rapid technological change. To reverse gender disparities, there must be a concerted, multisectoral effort to empower women and girls worldwide. These recommendations are a first step in what should be a coordinated global effort to prevent the growth in socioeconomic inequities and disparities across income, age, and gender that may result from the COVID-19 pandemic. Making our societies more equitable and resilient to future crises requires taking on structural inequalities today.