The COVID-19 pandemic has caused not just an enduring health crisis, but also an economic one. The global economic crisis caused by continued supply chain disruptions and bottlenecks shows no sign of abating. Though countries are slowly starting to return to business-as-usual as the pandemic starts to die down, many are warning of long-term financial consequences, particularly in inequality.
Income Inequality Increasing as a Result of COVID Pandemic
The International Monetary Fund has warned that income inequality has been exacerbated by the pandemic, with 100 million people falling below the poverty line at the same time as global billionaire wealth grew by USD 4.4 trillion. Deloitte similarly warns that health outcomes between the “haves and have nots” are noticeably different, and economic pressures are likely to be different as well. Specifically, those working in occupations conducive to remote work have faced substantially less downward financial stress compared to low-skilled laborers, who are disproportionately employed in jobs that require interpersonal contact and faced massive layoffs.
It appears that these inequalities are going to translate into greater gender and racial disparities in many countries, as low-skill and low-income jobs are hit harder, which could translate into long-term political instability and social unrest unless strong policy measures are undertaken to ameliorate these effects and ensure social mobility continues to be a plausible goal for many.
COVID Increasing Income Inequality Between and Within Countries
The World Bank has supported this analysis, adding that the pandemic has worsened inequalities within countries and between countries. While some have argued that the immediate GDP impact has favored poorer countries less afflicted by COVID, overall, the trend seems to be that the pandemic will worsen global income inequality in the long term. The World Bank has claimed that the sluggish recovery prevalent in emerging markets will partially reverse the decline in between-country inequality of the past two decades. Developing countries, already indebted to international financial institutions, will not have the same access to capital or established infrastructure as developing countries. This will lead to a prolonged and sluggish recovery that makes reducing global inequality an even more challenging prospect than analysts feared pre-COVID.
The rise in both within-country and between-countries inequality will likely cause destabilizing knock-off effects, ranging from a decrease in multilateral cooperation and a corresponding increase in international instability to disruptive social unrest in countries struggling with recovery. As a result, the World Economic Forum has encouraged governments to increase their welfare, social, and infrastructure spending in the coming period to reverse the rise in inequality before it spirals out of control. Only time will tell how effective these efforts prove to be.