A household survey of 230,540 respondents conducted by the Inter American Development Bank (IDB) in 17 developing countries (T&T included) documented that the negative economic impacts of the COVID-19 pandemic have been concentrated among those with lower incomes prior to the pandemic.
The IDB contended that this finding is important from both social and economic perspectives, noting that inequality is an important social outcome in itself and also has important economic implications.
It argued, “Although further research is needed, several studies have found that current inequality is negatively correlated with future economic growth, and in particular, inequality driven by the lower tail of the income distribution stunts economic growth.”
The findings of the survey implied that the unequal economic impacts of this short-term public health pandemic could have long-term implications for economic growth.
In addition, the IDB’s analysis of the survey indicates that country-level rates of informality in labour markets are linked to stronger negative impacts and low resilience, suggesting that prompt policy responses are needed to protect informal workers.
The study also found that the relationship between job loss and business closure is always decreasing and never increasing with income prior to the pandemic, which worsens and deepens existing inequality.
These unequal labour market impacts, according to the IDB, lead to unequal impacts beyond income, including food security and nutrition. It added that Cross-country comparisons suggest that the impacts of the pandemic are stronger in countries with higher rates of informality.
The IDB disclosed, “Not only are households from high-informality countries losing their livelihoods at higher rates, but they are also less resilient to those negative shocks.”
The study reported that in order to slow the spread of COVID-19, governments have implemented regulations that require social distancing, close non-essential businesses, restrict travel, and in many cases require residents to remain in their homes.
The IBD authors noted that the human interactions that drive the economy, such as working together in enclosed areas and enjoying entertainment activities, have been discouraged, restricted, or banned.
The report added that residents are complying with the restrictive measures, report strong support for these regulations and actively seek out information. It continued to note that although these measures are necessary for public health, recent evidence from developed countries suggests that they have negative economic impacts in the short run, and that they can potentially deepen pre-existing gaps.
Furthermore, the study argued that labour market impacts affect policy preferences, as support for policies to contain the coronavirus is weaker among those experiencing job loss or business closure.
The IDB noted that its results are among the first and only estimates of the economic impacts of the coronavirus pandemic on households outside of developed nations. It also stated that it found “impacts that are larger than those reported in developed countries.”