From 2000 to 2019, median incomes in poorer nations rose faster than in wealthy ones, and the number of people living in extreme poverty fell from more than one in four to less than one in 10.
Then came Covid-19, threatening to undo that progress. At the start, it seemed obvious that the economic costs — job loss, erosion of wealth, even loss of life — would fall disproportionately on the poor and leave them worse off. The rich, while unable to insulate themselves from illness and mortality, would be safeguarded by an abundance of resources.
Depending on where you were, however, Covid also unleashed trends and sparked reactions that challenged this foregone conclusion. Inequality didn't rise everywhere. Some governments cushioned the blow for their citizens. Workers everywhere hustled — many risked their lives — to keep their families fed, housed and otherwise provided for.
Data on inequality can be patchy and slow to arrive at the best of times. Economists are still arguing over exactly what happened in 2020 and 2021 — never mind how new crises, like war and inflation, might impact wealth and income disparities going forward.
Still, it's important to draw some early conclusions. In order to recover from the economic damage of the pandemic, we need to understand who is still struggling. Policymakers need to know where to target aid and how broader economic policies — on taxes, trade, infrastructure spending, and efforts to fight inflation — might affect people's economic well-being.
The fourth season of Bloomberg's podcast The Pay Check, which begins Thursday, examines how these inequality trends played out locally, diving into the varied economic impacts of a virus that reached every corner of the world.
Overall, one thing seems clear: Nearly everyone lost money at the beginning of 2020, and wealthier nations, and wealthier people, bounced back far more quickly.
In rich countries, governments could afford to protect their populations from the economic fallout if they chose to do so. In many poor countries, large aid packages simply weren't an affordable option.
These dollars made a difference. Spain, for example, allocated an additional 8.4% of GDP to pandemic support. According to a study last year, inequality in the country would have increased by almost 30% in one virus-laden month alone, absent government intervention.
The US poured trillions of dollars into its economy — more than anywhere else — and relief went to a wide swath of society. That included generous bailouts for businesses as well as stimulus checks, enhanced unemployment benefits and tax credits for the poor and middle classes. After incomes plunged in early 2020, the extra dollars helped households up and down the income spectrum recover.
China also managed to keep inequality broadly in check, though for another reason: After the virus was first discovered in Wuhan, the government implemented a swift, severe and largely effective set of Covid containment policies. Without the disruptions of major outbreaks, the rebound was swift.
But gauging the true picture of inequality in the world's second-biggest economy isn't easy. By one popular measure, the divide hasn't budged in the past several years. The top 20% of households still earns 10 times what the bottom 20% does. The urban-rural divide is also deep as city dwellers earn 2.5 times what their counterparts in the countryside do.
The economy's quick reopening helped reduce the gap between rural and urban incomes, a cornerstone of President Xi Jinping's long campaign to alleviate rural poverty. Meanwhile, the combined fortunes of China's wealthiest people have fallen more than $700 billion since their peak early last year, according to the Bloomberg Billionaires Index. The chasm between China's super-wealthy and everyone else is narrowing, for now.
Globally, the recovery was especially swift for the people at the very top of the economic spectrum. Despite some initial losses, the world's 500 richest people gained $1.7 trillion in 2020 and another $810 billion in 2021, according to the Bloomberg Billionaires Index. Those who made their fortunes in technology companies, particularly the ones who flourished in the extended lockdowns and social distancing periods, led the gains.
In countries harder hit by the economic fallout, there's some good news: Remittances — money sent home by migrant workers overseas — fell less than economists feared in 2020 and then surged in 2021.
Job cuts and reduced working hours common early in the pandemic prompted many overseas workers to return to their countries of origin. Nearly 4 million Indian nationals and some 400,000 Filipinos returned from jobs abroad in 2020. With fewer workers overseas, there was less money to send home, but overall global remittances declined just 2.3% in the first year of the pandemic, according to the Asian Development Bank.
Money was flowing again by the next year. Workers who stayed overseas benefitted from governments' fiscal stimulus measures. The ADB estimated global remittances grew by $34 billion in 2021, more than making up for the previous year's loss. Traditionally, migrant workers have been key to post-crisis recoveries in both their host and home countries, and the ADB estimates that 2022 remittances will rise another $31 billion.
The pandemic was also particularly hard on women and girls, who were more likely than their male counterparts to drop out of school or the workforce in order to assume care-taking roles. A dark corollary: A report by the United Nations confirmed that Covid triggered a "shadow pandemic" of violence against women.
On the jobs front, women both lost more and lagged the recovery. Men lost 57 million jobs in 2020, more than the 46 million lost by women, but in percentage terms, the damage was more extensive for women, 3.6% compared with 2.9% for men, according to the International Labor Organization. And when employment recovered, women's jobs returned more slowly. In 2021, women were still missing roughly 19 million jobs compared with 2019. The deficit for men was 10.2 million.
Data shows that woman-owned businesses were more likely to have closed temporarily and stayed shut longer compared with those run by men. They also suffered a bigger decrease in demand, were more likely to cut workers and suffer financial distress.
This snapshot is far from complete, and Covid hasn't finished wreaking havoc on the global economy. In China, for example, efforts to reduce inequality have taken a back seat to Covid controls, pushing unemployment to 5.8% in March, the highest level since May 2020. Authorities have provided little direct financial support to households. Beijing suspended planned trials of a nationwide property tax, which was seen as part of an effort to reduce wealth inequality when it was announced last year.
Everywhere else, politicians and other officials have begun to warn that yet another coronavirus surge is likely in the fall. The pandemic isn't over, and further waves of infections pose a direct threat to front-line workers and poorer countries whose vaccination rates still lag.
Then there's the return of inflation. One of the clear effects of the pandemic is rapidly rising prices, eroding income gains after years of slow growth in wages. The price surges reflect ongoing supply disruptions as shipping and other logistics remain out of whack due to the pandemic and the massive government support that has left consumers cashed up.
The pandemic demonstrated how emergency public spending can limit the scale of economic damage. Unlike the years after the global financial crisis when austerity ruled, the pandemic recovery is happening faster because governments put a floor under their sliding economies. But now, global growth is slowing again, raising questions about the capacity of governments, rich or poor, to respond to the next crisis with the same kind of fiscal and monetary firepower.
— With assistance by Ditas B Lopez, Tom Hancock, Jack Witzig, and James Mayger
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.