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This is an edited version of the winning entry for the Royal Economics Society’s Young economist of the yearr competition organized in collaboration with the FT, written by Marc Kadir, Manchester Grammar School
The Covid-19 has brought about drastic economic and social changes on a global scale. Amid news that billionaire wealth rose 27.5% to $ 10.2 billion during the pandemic, it’s safe to assume that – consistent with the pattern after previous pandemics – economic inequality has increased. To assess the true extent and areas in which this has occurred requires an analysis of its impacts on generational, gender and racial inequalities at the international level.
A key feature of the impact of the pandemic was sector closures and changes in the way people worked. The direct short-term effects are felt among the workers employed in the affected areas, who are disproportionately women, youth and low-paid. Those under 25 are twice as likely to work in a closed sector than older people.
This implies an exacerbation of the generational divide, as young people were working en masse in sectors such as hotels and retail which were closed and suffered the brunt of declining incomes.
There has been a marked increase in economic gender inequality, with women being a third more likely than men to have quit or lost their jobs in the UK during the pandemic. Data shows that this is largely the result of the behavior of mothers and has increased the gender imbalance in income distribution.
There were also significant disparities between the effects of Covid-19 on members of different socio-economic groups. Those in the lowest 10 percent of income accounted for about 30 percent of those who lost their jobs.
These disparities are reflected at different levels of education. Those with higher education and income levels were more likely to have office jobs and be able to work from home with little disruption. Graduates were around 94% more likely to be able to work from home, further exacerbating income disparities between rich and poor.
People of Pakistani, Bangladeshi or black ethnicity were less likely to keep a job, so ethnic economic inequalities are further exacerbated. While these trends are specific to the UK, similar patterns existed elsewhere, with different groups experiencing a disproportionate impact.
It is possible that these effects are simply the result of short-term fluctuations related to the pandemic, which will be largely inconsequential in the long term as sectors reopen and economic activity picks up.
In fact, during the early stages of the lockdown, the incomes of some low-wage workers in the United States increased as a result of stimulus measures amounting to around 13% 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 are cut, poorer households will be disproportionately affected by a greater reduction in their income and increased inequality.
World Bank projections estimate that up to 150 million more people will fall into “extreme poverty” around the world, suggesting that measures taken to prevent an economic disaster are insufficient to reduce poverty.
The Covid-19 has caused great disruption in education. While the pandemic has interfered with the schooling of almost all children, there have been significant inequalities between those from richer families and their poorer peers.
It has been estimated that the loss of learning suffered in 2020 will lead to a reduction in the subsequent income of each student by 3%. Yet those from disadvantaged backgrounds, who do not have the support or technology to participate in distance education, may see reductions of up to 5%. It is clear that the differences in education marked by the pandemic will lead to greater economic inequality between children of different origins.
The Covid-19 will also have a profound impact on global inequalities. A very modest share of vaccinations has taken place in African countries. This vaccine inequality will limit the ability of poorer countries to conduct economic activity, remaining constrained by health restrictions while richer countries operate at near normal levels. As a result, wages will remain depressed and the recovery will be slow, exacerbating global inequalities.
Such a view is disputed by Angus Deaton, who argues that international inequalities have declined in the wake of the pandemic, with rich countries experiencing more deaths per capita than poor countries. Countries with higher numbers of deaths experienced larger declines in income, so per capita income fell more in higher income countries, leading to a reduction in international income inequalities.
However, such a view is not convincing. The greater speed at which the richest nations will be able to reopen, combined with the fact that the 60 million people in the world’s 74 poorest countries will be plunged into extreme poverty, suggests that global inequalities will increase.
Overall, it is clear that the legacy of the coronavirus will be a more unequal world. Within nations, many pre-existing inequalities have been dramatically exacerbated, and internationally richer nations are expected to experience a relatively rapid and complete recovery.