The pandemic has exposed and accelerated inequalities. Addressing the social gap must be part of the post-pandemic recovery.
Recent years have seen the emergence of new social rifts. Whereas some inequalities can be justified by different levels of effort and other objective factors, what we are observing are rather deep rooted structural and at times self-perpetuating inequalities, due to factors out of people’s control, for example due to gender, age, sexual orientation, race or socio-economic and migrant background. In the absence of effective and comphrehensive policy packages, these inequalities compromise people’s prospects to reach their full potential, thus holding back aggregate economic performance and further eroding the fabric of our societies – trust in each other and our institutions.
Economic inequalities across OECD countries were already high before the start of the pandemic and had been increasing over the last thirty years or so. The income gap between the richest and poorest 10% has reached almost 10 to 1, up from 7 to 1 in the 1980s. In Italy, this ratio increased from 8 to 1 to 11 to 1 just prior to the pandemic. The level of concentration of private household wealth in the OECD is even higher, with over half of total wealth accruing to the top 10% and one fifth to the top 1%. At the other end of the spectrum, households in the bottom half of the wealth distribution own little to no net wealth, leaving a large share of the population ill-equipped to cope with income shocks, particularly those caused by the COVID-19 crisis.
Covid-19 impacts on inequalities
The COVID-19 crisis has added to these trends. During 2020, labour earnings and market income inequality increased due to the shutting down of economies and mounting unemployment. OECD countries’ governments quickly put in place unprecedented measures and support packages to help households weather the economic impact of the pandemic. These measures prevented an increase in disposable income inequality in most countries and even temporarily reduced it in others, as shown by microsimulation studies as well as real-time surveys in selected OECD countries.
Nevertheless, the pandemic exposed inequalities beyond income. The crisis hit vulnerable people the hardest; in particular whether and where people work has affected their exposure to both COVID-19 and the wider impacts of the crisis. Teleworking helped to protect people and their jobs, particularly for the well-paid and highly-skilled, but was not an option for the majority of workers. Data from 11 OECD countries showed workers in the bottom earnings quartile were twice as likely to stop working, and were only about half as likely to telework, compared to those in the top quartile. Losing work means losing more than your salary: unemployed people were more than twice as likely to feel lonely and to feel left out of society compared to the employed (see Figure 1).
Figure 1 People in precarious financial and work situations, the young and those living without a partner felt loneliest in the first year of the pandemic.
Note: The OECD average includes Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Slovenia, the Slovak Republic, Spain and Sweden. Categories preceded by *** saw statistically significant (at the 5% level) changes from April-June 2020 to February-March 2021. Difficulty making ends meet is captured by the question: “A household may have different sources of income and more than one household member may contribute to it. Thinking of your household’s total monthly income: is your household able to make ends meet?”. “With difficulty” refers to respondents answering with difficulty or with great difficulty, while “easily” refers to respondents answering fairly easily, easily or very easily. Refer to Box 2.1 for methodological details on the Living, working and COVID-19 survey. Source: OECD calculations based on Eurofound (n.d.), Living, working and COVID-19 e-survey (database), http://eurofound.link/covid19data.
At a time when 1 in 5 European OECD households are struggling to make ends meet, and 1 in 7 feel “likely” to lose their jobs within 3 months, new pressures on living costs are taking hold: OECD average house prices grew by almost 5% in 2020, and rental prices by nearly 2%, while energy costs are also on the rise.
In general, average well-being outcomes differed by race and ethnicity, gender, as well as across different household types, during the pandemic. In most countries, excess deaths have been higher for men than for women, yet women are more likely to experience long COVID, saw larger falls in mental health, and felt lonelier. At the same time, women have often been on the frontline of pandemic care, whether in their jobs or doing unpaid care work at home. Life satisfaction fell particularly for couples living with children during 2020, while single parents and those living alone were almost twice as likely to feel lonely, compared to the population as a whole.
When it comes to age, older people have been much more likely to suffer severe outcomes or death due to COVID-19 infection, making reduced social contact an especially important precaution for them. At the same time, younger adults have experienced some of the largest declines in mental health, social connectedness and subjective well-being in 2020 and 2021, as well as facing job disruption and insecurity.
Looking towards 2022 and the recovery, which may still run alongside new waves of the pandemic, it is crucial to align short-term rebuilding attempts with mid- and long-term ambitions, most notably the transition to a low-carbon economy. Our recent work demonstrates that a people-centred recovery and green transition, where people’s needs, well-being and future opportunities are at the heart of all policy, are necessary. For example, when thinking about the green transition, our recent work shows that vulnerable households are both disproportionately affected by environmental degradation and by green transition measures, thus their needs in the transition (e.g. upskilling, reskilling, relocation, social protection and possible compensatory measures for energy and carbon price hikes) should be treated with priority.
Perceptions matter for the implementation of far-reaching reforms
Both the pandemic and the green imperative will require bold reforms. For them to be successful, strong buy-in from citizens is needed. A new OECD report, Does Inequality Matter? How People Perceive Economic Disparities and Social Mobility, finds that while there is increasing consensus across the population that inequality is a problem, there are also increasing divisions about its extent and what to do about it.
Even prior to the pandemic, a large majority of OECD citizens were indeed concerned about economic disparities and demanded more equal distribution of income. Around 2017, four in five people felt income disparities were too wide in their country. Such concern had risen since the late 1980s, in line with the increase in income inequality measured by conventional statistical indicators. In general, the more people are concerned about inequality, the higher their demand for redistribution. Besides concern over inequality, demand for inequality-reducing policies is driven by beliefs around what drives inequality, in particular whether access to opportunities is widespread and hard work brings success. People’s support for specific policies also depends on whether those policies are perceived to be effective in reducing inequality.
Different pieces of information can help getting citizens and governments on the same page when it comes to policies reducing inequality, for instance by: promoting better understanding of public support for reform; evaluating the impact of inequality-reducing policies transparently and facilitating people’s understanding of their functioning; and finally generating new information on inequality and equality of opportunities (as for instance through the OECD Compare Your Income webtool).