How Covid and Inequality Feed Off Each Other: Launching the 2020 Commitment to Reduce Inequality Index

October 8, 2020

     By Duncan Green     

Max Lawson and Matthew Martin launch the new index, published by Oxfam and Development Finance International.

Are more equal countries better able to cope with crises like Covid-19? When we look at humanitarian crises like famines or droughts, there is a fair amount of evidence that more equal countries are more resilient, that the impacts are more evenly spread, and that more equal countries find it easier to bounce back.  In more unequal countries, risk is a bit like the opposite of wealth – the further down the income spectrum, the more risk faced by people.  Countries that distribute risk more fairly fare better

Why is this? Partly because the kinds of policies more equal countries tend to have in place in normal times make them a lot more able to cope with shocks too.  Policies like sick pay and labour protections in the case of economic crises, and spending on public services like health and social protection.

Covid-19 is of course at once a health crisis and an economic one.  So far just over a million people have died.  UN WIDER projects that as many as half a billion people could be pushed into poverty, setting back the fight against poverty decades in some regions. It is difficult to exaggerate the size of this crisis, certainly the biggest in all our lifetimes.

To confront such a crisis, countries need to be prepared on both fronts as the two crises are linked. If countries don’t have sick pay and unemployment benefit in place, people are forced to continue working and more likely to catch Covid. Equally, if people don’t have adequate wages and governments don’t offer free health services, they will not get tested or treated for Covid.

Top and bottom countries in the CRI ranking

So how prepared were countries when Coronavirus hit?  This week we publish our Commitment to Reducing Inequality index (CRI 2020).  It is the third edition of our index of which measures governments are taking in three areas proven to be essential if a country is going to reduce the gap between rich and poor.  These are pro-poor public services (on education, health and social protection); the progressivity of the tax system and finally the extent to which labour rights and minimum wages are in place.  Concrete progressive policies in these three areas are taken as a proxy for a government’s commitment to reducing inequality.

The database for the CRI 2020 is based on data up to 2019, so does not capture the immediate responses to Covid-19 by governments- although there is a full chapter in the report on those responses, some laudable and many more lamentable.  What it does instead is provide a snapshot of the preparedness of countries when the crisis hit.

The CRI 2020 shows that only 26 of the 158 countries surveyed, or one in six, were spending enough on health when the crisis hit.  In 103 out of 158 countries, at least one in three workers had no labour protections such as sick pay, because they were in non-contract jobs or unemployed. So most countries were woefully unprepared.

India, which has witnessed economic chaos and a huge number of corona cases, was the fourth lowest spender on health in the world when the pandemic started.  Far lower than many far poorer nations. Over 70% of its workers had no labour protections. Despite an already disastrous track record on workers’ rights, several state governments in India have used COVID-19 as a pretext to increase daily working hours from 8 to 12 hours a day and suspend minimum pay legislation, devastating the livelihoods of millions of poor workers now battling hunger.

In contrast, other nations were faring much better going into the crisis.  South Korea boosted the minimum wage, Botswana, Costa Rica and Thailand increased health spending and New Zealand launched a ‘well-being’ budget to tackle issues like child poverty and inequality.

Whilst poor countries do not have the deep pockets of rich nations to help them cope, at every level of national income the CRI shows big variations.

The United States ranks last out of the wealthy G7 countries and trails 17 low-income countries like Sierra Leone and Liberiaon labour legislation, due to anti-union policies and a very low minimum wage.

Togo and Namibia, which were already taking strides to tackle inequality before the pandemic, have provided monthly cash grants to informal workers who lost their jobs because of lockdown measures. Ukraine, which has one of the lowest rates of inequality in the world despite its relatively low GDP, has increased frontline healthcare workers’ pay by up to 300 percent.

Kenya, which had ranked highly (9th) on progressive tax policies in the CRI, has inexplicably responded to the crisis with tax cuts for the wealthiest and big business.  Nearly two million Kenyans have lost their job and tens of thousands of people living in Nairobi’s slums and in the countryside have received almost no help from the government and are struggling to feed themselves.

Other nations, who have low CRI scores, have found new impetus in response to the crisis. Since the pandemic, Bangladesh, which ranks just 113th on the index, has stepped up by spending $11 million on bonus payments for frontline healthcare workers, most of whom are women. Both Myanmar and Bangladesh have added more than 20 million people to their social protection schemes.

Women, who generally earn less, save less and hold insecure jobs, have been particularly hard hit by the lockdowns introduced in response to the pandemic while unpaid care work and gender-based violence have increased dramatically. The CRI shows that nearly half of the world’s countries do not have adequate legislation on sexual assault and 10 countries, including Singapore and Sierra Leone, have no laws on equal pay or gender discrimination.

These are just some of the stories from the CRI database and the accompanying report.  It is also full of positive recommendations to help ensure governments do better in future, and the international community supports them with debt relief and new money. It is well worth taking the time to explore it.

Lots more info on the CRI website, including an interactive map with country-by-country details and the 66 page report. And here’s the video explainer

October 8, 2020
Duncan Green