Covid-19, Poverty, and Inequality Growing inequality can worsen the pandemic’s effects

Covid-19, Poverty, and Inequality Growing inequality can worsen the pandemic’s effects

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The impacts that Covid-19 has brought about in our daily lives are very apparent. Less apparent is the immediate implications of the pandemic for global poverty. The calculation of economic losses or reductions in gross domestic product (GDP) that are currently being estimated at around 5.2 percent globally may convey only a partial picture of the social and human costs. In fact, these calculations may suffer from a similar bias that many economic impact assessments of climate change have. Absolute losses often appear larger in wealthier areas simply because there is more to be lost in economic terms. In terms on the effects on livelihoods, however, impacts are going to hit vulnerable communities the hardest. Any net loss for them represents a larger share of their already limited income and the effects will be felt well beyond shocks to their income.

It is therefore important to assess the impact of the pandemic on global poverty and how this may affect our ability to eradicate extreme poverty by 2030 in accordance with the Sustainable Development Goals. This is exactly what a team at the World Bank has done. Using a model jointly co-developed by DIE and the World Bank where we simulate global poverty up to 2030 and the role inequality changes could have in achieving that poverty goal, they estimate that roughly 70 million additional people will fall into extreme poverty worldwide because of the Covid-19 pandemic.

This is indeed worrying. Particularly considering that the income level at which a person is deemed extremely poor by global standards corresponds to the average poverty line of several of the poorest countries and is thus a very low benchmark. Indeed, having some extra 70 million living on less than around two dollars (to be precise USD 1.9 in 2011 purchasing power parity) per person per day is definitely a matter of concern. In addition to adding more that 10 percent to the roughly 600 million people already in extreme poverty, many more are also falling into the not-so-extreme poverty level above, which is still very poor.


Read the full article here.

This blog first appeared on the DIE site. 

Author: Mario Negre, Daniel Gerszon Mahler, Christoph Lakner, DIE. 

Image courtesy of Nikita Nikiforov via Flickr.

The views are those of the author and not necessarily those of ETTG.

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