Novel Dataset Reveals the Deepening Effects of the COVID-19 Pandemic on Inequality

The coronavirus pandemic is having unprecedented effects on the daily lives of citizens in Latin America and the Caribbean with especially dire impacts on lower income households that range from job and income losses to a lack of information on the disease itself. The situation is changing rapidly and requires prompt policy responses.

Those are the initial conclusions from an online survey created by a group of researchers from the IDB Research Department and Cornell University on the pandemic’s impacts in the region.  The survey was launched in Chile on April 3 and has been rolled out in many other Latin American and Caribbean countries since then, with more countries to be added in the next few days (visit the survey website here). The response has been tremendous. Already, more than twelve thousand people from different regions of Chile and of various socioeconomic backgrounds have taken the survey. After only a couple of days, around five thousand responses have been received from Bolivia, Panama, and Uruguay. One clear take-away from the project is that people in Latin America and the Caribbean want their voices to be heard.

The early results for Chile illustrate the substantial toll that the pandemic is taking on households’ economic situation. Almost a third of respondents reported losing their job in the last week and nearly two-thirds reported that their households’ total income fell during that time. Almost 90% of respondents said that prices for everyday household items had risen, squeezing household budgets from both sides.

The results also indicate that the coronavirus pandemic is exacerbating inequality. Respondents with lower incomes before the pandemic were more likely to report losing their job in the previous week (see figure), perhaps because those with higher incomes were more able to work from home. The pandemic has also disproportionately affected lower-income business owners who had to close their businesses due to decreased demand (see figure).

The rich, meanwhile, are better prepared as they have more food stockpiled, and they are more likely to have the financial resources to cover an unexpected financial shock.

Employment loss and business closure during past week

Source: IDB/Cornell Covid-19 Survey

The immense economic disturbances indicate that households will need assistance from the government to make ends meet. Moreover, given the disproportionate impacts on those with lower incomes, careful targeting would magnify the effects of policy assistance. Indeed, among the most vulnerable respondents—for example, lower-income individuals who lost their job—only 40% reported being beneficiaries of pre-pandemic cash-assistance programs.

There are other factors to take into account as well. Higher-income respondents report relying on television and newspapers for information related to COVID-19 more than lower income respondents, who report greater reliance on social media. These different sources could generate disparities in knowledge. Indeed, lower income respondents are less likely to know how the coronavirus is transmitted or to have heard of social distancing. This means that the policy response needs to be more comprehensive than cash transfers alone. Information campaigns that are rolled out quickly across diverse sources could play an important role in ensuring that everyone is accurately informed, in the process helping to slow the disease’s spread.

The scenario in Chile appears grim, and it is possible that the effects are even more devastating in other countries of the region. Early responses from other countries suggest even larger employment losses and business closures. But if policymakers ensure they have ample data, listen to the voices of their people, and react rapidly they can at least blunt some of the severe health and economic consequences of this rapidly-spreading and dangerous virus.