MANILA: A public health crisis like the COVID-19 pandemic destroys economic growth and pushes millions into poverty. Without policy interventions, it will also worsen income inequality.
As of Jun 16, there have been more than 885,900 reported cases of COVID-19 and about 23,400 deaths in 33 out of the 45 economies in developing Asia.
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The pandemic is inflicting tremendous human, social and economic pain on society at large. As countries implement social distancing and lockdown measures, economic growth has stalled and unemployment has surged.
If the pandemic lasts for six months, it could reduce the regions GDP by US$2.5 trillion, destroy an equivalent of 167 million full-time jobs and push 140 million people into poverty.
Without policy intervention, the pandemic will worsen the regions income inequality as well. Reducing income inequality is a major challenge many countries in Asia Pacific face and it forms a key part of the regions sustainable development goals.
LISTEN: Entering Phase 2: What's behind rules on gatherings, dining, weddings and more?
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READ: Commentary: Obviously, we want ASEAN to collaborate better on COVID-19
WORSENING INCOME INEQUALITY
COVID-19 is likely to worsen the regions income inequality at least five ways.
First, unskilled workers will be hit harder than skilled workers.
Skilled workers are more difficult to replace and so the unskilled are more likely to lose their jobs or experience wage cuts. The possibility of working from home is also greater for high-skilled occupations than for low-skilled ones.
Second, the economic contraction caused by the pandemic affects both labour and capital, but workers, on average poorer, are likely to be hurt more severely.
It is easier for capital-intensive production, such as manufacturing, to manage containment measures than labour-intensive production like the service sector.
This is because the former involves working with machines, while the latter involves directly serving people. Firms also have the option of substituting workers with machines and technology.
A worker inspects newly made gloves at Top Glove factory in Klang, Malaysia, March 3, 2020. Picture taken March 3, 2020. Top Gloves/Anas Zakwan/Handout via REUTERS
Third, the pandemic will have a disproportionate impact on vulnerable groups such as MSMEs (micro, small and medium enterprises), women and the elderly.
MSMEs are more vulnerable to economic shocks than large firms and often provide informal employment with inadequate social protection and lower wages.
Women are more likely to work in labour-intensive industries than men and also get paid lower average wages. The elderly are the most vulnerable to the epidemic, earning less than the working age population.
Those working on the frontlines to deliver food, medicine and provide paid care services face the greatest risk of infection.
READ: Commentary: COVID-19 will bring on the Great Reset the world needs
READ: Commentary: Indonesias COVID-19 fight has deeper challenges
Fourth, the pandemic could increase regional income inequality, as poor regions often have less capacity to implement containment measures and provide adequate healthcare services.
Poor regions also face greater constraints in providing fiscal support to local economies and affected groups. When poor regions rely on remittances from migrant workers, they also become affected by job losses in rich areas.
Finally, government stimulus measures could exacerbate income inequality if they are not well-designed and insufficiently targeted at protecting the jobs and livelihoods of low-income households and vulnerable groups.
MSMEs might be unable to apply for liquidity support programs made available by the government or central bank.
LISTEN: How Singapore businesses and workers can thrive in a post-pandemic new normal
DAMPENING THE IMPACT
Historical experience shows that income inequality often falls in the aftermath of catastrophic disasters such as wars, earthquakes and stock market crises because they involve large scale wealth destruction.
But a study of five recent pandemics, including SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014) and Zika (2016) shows that health disasters increase income inequality as they involve large scale job destruction that disproportionately affects lower-income groups.
A man wearing a protective mask waits for a train in a slum, amid the coronavirus disease (COVID-19) outbreak, in Bangkok, Thailand April 27, 2020. REUTERS/Jorge Silva
Worsening income inequality can intensify social tensions and constrain consumption, and poses a risk to economic recovery. But the following policy measures can help dampen the devastating impact of COVID-19 on growth, poverty and income inequality in the Asia Pacific.
The first is to contain the outbreak as quickly as possible. This requires the effective implementation of testing, contact tracing, social distancing and lockdown measures supported by necessary social protection measures.
For those countries that have successfully reduced the number of daily infections to very low levels, vigilance is needed to prevent a second or third wave of infections. This should happen alongside investment in healthcare systems to build the capacity to treat severe cases and reduce fatRead More – Source
MANILA: A public health crisis like the COVID-19 pandemic destroys economic growth and pushes millions into poverty. Without policy interventions, it will also worsen income inequality.
As of Jun 16, there have been more than 885,900 reported cases of COVID-19 and about 23,400 deaths in 33 out of the 45 economies in developing Asia.
Advertisement
Advertisement
The pandemic is inflicting tremendous human, social and economic pain on society at large. As countries implement social distancing and lockdown measures, economic growth has stalled and unemployment has surged.
If the pandemic lasts for six months, it could reduce the regions GDP by US$2.5 trillion, destroy an equivalent of 167 million full-time jobs and push 140 million people into poverty.
Without policy intervention, the pandemic will worsen the regions income inequality as well. Reducing income inequality is a major challenge many countries in Asia Pacific face and it forms a key part of the regions sustainable development goals.
LISTEN: Entering Phase 2: What's behind rules on gatherings, dining, weddings and more?
Advertisement
Advertisement
READ: Commentary: Obviously, we want ASEAN to collaborate better on COVID-19
WORSENING INCOME INEQUALITY
COVID-19 is likely to worsen the regions income inequality at least five ways.
First, unskilled workers will be hit harder than skilled workers.
Skilled workers are more difficult to replace and so the unskilled are more likely to lose their jobs or experience wage cuts. The possibility of working from home is also greater for high-skilled occupations than for low-skilled ones.
Second, the economic contraction caused by the pandemic affects both labour and capital, but workers, on average poorer, are likely to be hurt more severely.
It is easier for capital-intensive production, such as manufacturing, to manage containment measures than labour-intensive production like the service sector.
This is because the former involves working with machines, while the latter involves directly serving people. Firms also have the option of substituting workers with machines and technology.
A worker inspects newly made gloves at Top Glove factory in Klang, Malaysia, March 3, 2020. Picture taken March 3, 2020. Top Gloves/Anas Zakwan/Handout via REUTERS
Third, the pandemic will have a disproportionate impact on vulnerable groups such as MSMEs (micro, small and medium enterprises), women and the elderly.
MSMEs are more vulnerable to economic shocks than large firms and often provide informal employment with inadequate social protection and lower wages.
Women are more likely to work in labour-intensive industries than men and also get paid lower average wages. The elderly are the most vulnerable to the epidemic, earning less than the working age population.
Those working on the frontlines to deliver food, medicine and provide paid care services face the greatest risk of infection.
READ: Commentary: COVID-19 will bring on the Great Reset the world needs
READ: Commentary: Indonesias COVID-19 fight has deeper challenges
Fourth, the pandemic could increase regional income inequality, as poor regions often have less capacity to implement containment measures and provide adequate healthcare services.
Poor regions also face greater constraints in providing fiscal support to local economies and affected groups. When poor regions rely on remittances from migrant workers, they also become affected by job losses in rich areas.
Finally, government stimulus measures could exacerbate income inequality if they are not well-designed and insufficiently targeted at protecting the jobs and livelihoods of low-income households and vulnerable groups.
MSMEs might be unable to apply for liquidity support programs made available by the government or central bank.
LISTEN: How Singapore businesses and workers can thrive in a post-pandemic new normal
DAMPENING THE IMPACT
Historical experience shows that income inequality often falls in the aftermath of catastrophic disasters such as wars, earthquakes and stock market crises because they involve large scale wealth destruction.
But a study of five recent pandemics, including SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014) and Zika (2016) shows that health disasters increase income inequality as they involve large scale job destruction that disproportionately affects lower-income groups.
A man wearing a protective mask waits for a train in a slum, amid the coronavirus disease (COVID-19) outbreak, in Bangkok, Thailand April 27, 2020. REUTERS/Jorge Silva
Worsening income inequality can intensify social tensions and constrain consumption, and poses a risk to economic recovery. But the following policy measures can help dampen the devastating impact of COVID-19 on growth, poverty and income inequality in the Asia Pacific.
The first is to contain the outbreak as quickly as possible. This requires the effective implementation of testing, contact tracing, social distancing and lockdown measures supported by necessary social protection measures.
For those countries that have successfully reduced the number of daily infections to very low levels, vigilance is needed to prevent a second or third wave of infections. This should happen alongside investment in healthcare systems to build the capacity to treat severe cases and reduce fatRead More – Source
