To get a better grasp of how the coronavirus pandemic is upending lives and livelihoods, we teamed up with Cornell University to carry out an online survey to measure the economic impacts of the pandemic on households in seventeen countries in Latin America and the Caribbean. We found that the impacts were staggering, are closely linked to the composition of the region’s labor markets and will have big implications for economic inequality in the region.
Between March 27, 2020 and April 30, 2020 more than 200,000 participants took part in the online survey. They were recruited through social media, which gave us a broad geographic and demographic reach. Responses came from households of all socio-economic backgrounds and from almost every sub-national region. The questionnaire was standardized across countries to allow the researchers to pool the data across the entire region. The aim was to provide information for the region’s policymakers and help guide our own operations.
Labor Market Impacts are Devastating and Will Exacerbate Inequality
Across all seventeen countries, nearly 45 percent of respondents report that a household member lost a job during the pandemic. Among respondents of households that operate small businesses, 57 percent report business closures. These devastating results are consistent with recent IDB estimates of macroeconomic impacts of the pandemic. In the case of closures of small businesses, the impacts are larger to those of small businesses in the US and highlight the vulnerability of small businesses in the region.
There are substantial differences in labor market impacts across income levels within countries. Rates of job loss and business closure are particularly devastating for the poor, which will deepen inequality. Households in the lowest income group before the pandemic (with total household income below the national minimum wage) experienced the highest rates of job losses (68 percent), over 40 percentage points higher than that of highest-income households (see Figure 1). A similar, though less dramatic, pattern is observed in the case of business closures.
Lower income households are more likely to lose jobs and close small businesses during the pandemic.
Figure 1. The Unequal Burden of the Pandemic
Source: IDB Coronavirus Survey.
One reason for these effects could be that working from home is a luxury that many lower income households do not have (see Figure 2). Among lower income workers who managed to keep their jobs, teleworking does not seem to be an option. This phenomenon may be a consequence of segmented labor markets in which lower-income workers are more likely to perform activities that cannot be conducted remotely.
Lower income households are less likely to work from home during the pandemic.
Figure 2. The Luxury of Working from Home
Source: IDB Coronavirus Survey.
There are also substantial differences in the severity of these labor market impacts across countries that could exacerbate inequality across countries. Differences in labor market informality may be one reason that the rates of job loss and business closure vary across countries. Comparing across countries, informality (proxied by the share of self-employed workers in each country) is linked to higher rates of job losses and business closures (see Figure 3). Informal workers have limited access to labor-market protection and to unemployment-insurance benefits (in the few Latin American and Caribbean countries that have) to help them smooth the impacts of the pandemic and informal business, typically small and family-operated, tend to be concentrated in sectors such as retail and services that are especially vulnerable to the pandemic.
The rates of job losses and business closures during the pandemic are larger in countries with larger shares of self-employment.
Figure 3A. Job Loss and Self-Employment
Figure 3B. Business Closure and Self-Employment
Source: IDB Coronavirus Survey and World Development Indicators (The World Bank).
Because countries with higher levels of informality tend to have lower GDP per capita prior to the pandemic (see Figure 4), the unequal labor market impacts could also exacerbate economic inequality across countries.
The smaller shares of self-employment are associated with higher GDP per capita.
Figure 4. Informality and GDP
Source: World Development Indicators (The World Bank).
Unequal Impacts on Income and Food Security
These unequal labor market impacts have immediate consequences for income inequality within countries. Thirty percent of the survey respondents report that their total monthly household income in January 2020 fell below the national minimum monthly wage. In comparison, 50 percent of the respondents expected their incomes in April 2020 to fall below the national minimum wage.
The coronavirus pandemic is also having disproportionate impacts on the food security of lower-income households, which are more likely to experience hunger and to report that their diets have become less healthy. These impacts could be caused by changes in household budgets, but there are also clues that the shopping situation has changed dramatically for this demographic. Lower-income households are also more likely to report that prices have risen and that they were unable to purchase all the items on their shopping lists. They experience longer wait times when shopping and visit more stores to find the items they need. These disproportionate impacts on the health and well-being of lower income households in Latin America and the Caribbean could carry long-term consequences and suggest another reason that government intervention is needed.
How Are Household Dealing with the Crisis?
Households cooperate to weather the pandemic together. We find that lower income households are more likely to receive gifts and loans and higher income households are more likely to extend gifts or loans. Seventy percent of respondents with January 2020 income below the minimum wage report receiving loans or transfers from relatives or friends during the prior week. Among higher-income households, 47 percent reported providing monetary assistance to other households (compared to 30 percent of lower-income households). This suggests that private arrangements are widespread and focused on helping the most vulnerable households. But there are limitations to this type of arrangement. For instance, only 40 percent of respondents that regularly receive remittances from abroad report receiving remittances during the prior week. Households’ ability to help each other out is limited because the pandemic hits all households in one way or another, implying that government assistance is key. Indeed, new social assistance programs have been implemented and our results suggest that they increased coverage among the most vulnerable.
Beyond Cash: Unequal Information Gaps
We also see differences in knowledge across income levels. Lower income respondents are less likely to have heard of social distancing. They are also less likely to know the symptoms of the coronavirus or how it is transmitted (see Figure 5). The pandemic policy response needs to be more comprehensive than cash transfers alone. Information campaigns that are rolled out quickly across diverse media sources could play an important role in equalizing information and knowledge, which are key to slowing the spread.
Figure 5. Knowledge Gaps about COVID-19 symptoms and spread
Source: IDB Coronavirus Survey.
Note: We asked respondents to select what they thought were the same symptoms and the ways in which the coronavirus spread. We then used information from the World Health Organization to assess the number of correct responses and elaborated scores for each household (from 0 to 100).
Stronger Together, but for How Long?
Public support for policies to fight the pandemic is high. Overall, 77 percent of households agree that the pandemic should be the government’s top priority and 54 percent think that non-essential businesses should be closed for another month. But support for these policies is substantially lower among households that lost a job or closed a business. Support for these policies is also declining over time, with a steeper drop among households that lost a job or closed a business. This indicates that increasingly dire economic circumstances may be eroding support for the closure of non-essential businesses
The results paint a grim picture of the current economic circumstances of households, but at the same time, they demonstrate cooperation and resolve. Households are supportive of policies to slow the spread of the coronavirus and cooperate to help the most vulnerable mitigate the most devastating economic impacts. Governments have a key role in expanding cash transfer programs and designing information campaigns to counter the unequal labor market impacts and information gaps that will otherwise exacerbate inequality.
[Editorial note: We would like to thank Sebastián Espinoza and María Paula Medina for superb research assistance. We would like to thank Julián Cristia for his encouragement and advice with the project. We would like to thank Ana María Ibañez, Eric Parrado, Michael Lovenheim, and the team of researchers in the IDB Research Department for valuable support and feedback in different parts of the project.
We also want to thank Tom Sarrazin, Sebastián Oliva, and Pablo Bachelet for their tremendous support in the dissemination of the survey. We would also like to thank the IDB country offices, country representatives, and country economists for their invaluable input in customizing the questionnaires for each country. In particular, we want to thank Marta Ruiz Aranz and Diether Beuermann for their support in the rollout of the surveys in Central America and the Caribbean.
Citation: Bottan, N., Hoffmann, B. and Vera-Cossio, D. 2020. “The Unequal Burden of the Coronavirus Pandemic: Evidence from Latin America and the Caribbean.” Mimeo.]