Nearly two years into the COVID-19 pandemic, the World Bank’s High-Frequency Phone Surveys (HFPS) in the East Asia and Pacific (EAP) Region show that poorer households have been disproportionately affected and have been slower to recover. Findings from the HFPS reported in the recent EAP Economic Update and a new regional study show that inequality has likely been exacerbated in several dimensions.
- Poorer workers faced greater difficulty returning to work when pandemic-related mobility restrictions were relaxed
HFPS data collected in 11 countries in East Asia and the Pacific indicate that work stoppages have been closely associated with mobility restrictions in each country. Analysis using data on households’ pre-pandemic welfare status shows that periods of stringent mobility restrictions (low mobility) have been associated with higher levels of work stoppages that affected richer and poorer workers alike. As economies started to reopen and restrictions were loosened, however, poorer workers found it more difficult than wealthier workers to return to work (Exhibit 1, Exhibit 2 column 1).
What could be driving these unequal employment impacts? During periods of stringent mobility restrictions, most sectors were affected. When mobility restrictions were relaxed, however, certain economic sectors such as professional and financial sectors (in which workers in the top 20% of the welfare distribution are more likely to work) were able to rebound more quickly. Nonetheless, sector of employment alone does not appear to explain differences. Even within the same sectors, workers from the top 20 were on average less likely to experience work stoppages during periods of higher mobility (Exhibit 2, column 2), a pattern that also holds true when controlling for education levels (Exhibit 2, column 3). Taken together, these results suggest that other differences across the welfare distribution within sectors (e.g., occupation, ability to work from home, job formality, job security) have likely contributed more to observed differences among the top 20 and bottom 20.
Exhibit 1: Poorer workers found it harder to resume work when mobility restrictions loosened
Exhibit 2: Regression of work stoppages on mobility
- Income shocks have been widespread, but the wealthiest 20% of households have been relatively less affected
Household labour income losses have been significant across EAP countries. According to HFPS data, more than half of households report having experienced a reduction in wage or non-farm/farm business income since the previous survey round. Across countries, households in the top 20% of the welfare distribution were on average 7 percentage points less likely than poorer quintiles to experience a labour income decrease (Exhibit 3). Income losses from self-employment were more prevalent than reductions in wage income, but evidence suggests that much of the regressive gradient in labour income losses can be attributed to unequal shocks to wage income.
Exhibit 3: The wealthiest 20% of households were less likely to suffer labour income losses
- To cope with pandemic-induced shocks, poorer households have been more likely to sell assets or increase debt
In addition to being more susceptible to employment and income shocks, poorer households have consistently been more likely to rely on coping mechanisms that can have negative long-term welfare consequences, such as selling scarce assets or engaging in strategies that increase debt. Across the sampled EAP countries, households in the bottom 20% that experienced a labour income shock were 10 percentage points more likely, on average, than those who faced shocks in the top 20% to resort to such measures (Exhibit 4). In contrast, households in the top 20% were, on average, 11 percentage points more likely than the bottom 20% to rely on savings to cope with pandemic-induced shocks.
Exhibit 4: Poorer households have relied more on coping mechanisms that increase their debt or involve the sale of scarce assets, whereas wealthier households have been more able to rely on savings
- Poorer households may be at greater risk of long-term scarring, given higher rates of food insecurity
Rising food prices in several countries as well as widespread reliance on reduced food consumption as a way of coping with the pandemic’s effects have contributed to heightened food insecurity in the region, particularly among poorer households. HFPS data indicate that among households experiencing a decline in labour income, those in the poorest quintile were almost 3 times more likely than those in the wealthiest quintile to be food insecure (Exhibit 5). While conditions have improved over time in some countries, continuing food insecurity, particularly among poor and vulnerable households, may have serious long-term implications on children’s human capital development and future economic prospects.
Exhibit 5: Poorer households were more likely to be food insecure
- Poorer children are at greater risk of being left behind due to more limited interactive distance learning opportunities
Lower access among poorer students to educational activities that involve face-to-face learning or utilise online, mobile, or video platforms that enable interactive learning also risk widening welfare gaps in human capital accumulation with direct consequences on children’s future economic prospects. Across countries, households in the poorest quintile with children attending school pre-pandemic have been 15 percentage points less likely than those in the wealthiest quintile to have children engaged in interactive educational activities (Exhibit 6).
Exhibit 6: Children in poorer households have been less likely than those in wealthier households to engage in interactive educational activities
In sum, the pandemic appears to be increasing inequality in these five critical dimensions, threatening an inclusive and equitable recovery. Employment and income shocks have been more common and long-lasting among the poor than the non-poor. Coping mechanisms, such as the distress sale of household assets and increased debt, are likely making it harder for the poor to bounce back from the COVID shock. Moreover, food insecurity and limited opportunities to engage in interactive learning among poorer households raises the risk of increased child malnutrition and stunting and, thus, long-term losses in human capital and economic productivity.
Lydia (Ypsse) Kim
Lydia Kim is an extended term consultant in the Poverty and Equity Global Practice, where she works on issues related to poverty and inequality in the East Asia and Pacific region with a particular focus on China and Mongolia. Prior to this position, she was based in Yangon, Myanmar, contributing to capacity building, poverty measurement, and impact evaluation efforts. Before joining the Bank, Lydia was a research fellow at the Kennedy School of Government, J-PAL, and Harvard Business School.
María Ana Lugo
María Ana Lugo is a Senior Economist at EAP Poverty and Equity GP for China, based in Washington DC, and a Global Lead of the Equity Policy Lab. She joined the Bank in 2011, and her work has focused mostly on poverty and inequality measurement and analysis, inequality of opportunities and economic mobility, distributional incidence of fiscal policies, and more recently, on poverty reduction and economic transformation in China. Prior to working on East Asia, she worked on Latin America and on the Middle East.
Andrew Mason is Deputy Chief Economist in the Office of the Chief Economist for the East Asia and Pacific Region of the World Bank. Prior to joining the Chief Economist’s Office, Mr. Mason served as Manager of the Social Protection and Jobs Global Practice for the Bank’s Europe and Central Asia Region. During his career, Mr. Mason has worked on a range of development issues, including poverty reduction, gender equality, labor and skills, and social protection. He is co-author of several World Bank flagship studies, including The Innovation Imperative for Developing East Asia; A Resurgent East Asia: Navigating a Changing World; Toward Gender Equality in East Asia and the Pacific; Informality: Exit and Exclusion, a Latin America and Caribbean regional study; and, Engendering Development – Through Gender Equality in Rights, Resources, and Voice, a World Bank Policy Research Report. Mr. Mason has also served as an Adjunct Professor of Public Policy at Georgetown University.
Ikuko Uochi is an Economist at the East Asia & Pacific (EAP) region of Poverty and Equity Global Practice. She currently leads the team for statistical development in EAP as well as poverty and inequality work program for Mongolia. Prior to this position, she worked on poverty analysis and the Bank’s operations for Indonesia and Myanmar.