COVID-19 Raises Concerns About Inequality

We have known for months now that those most affected by the COVID-19 pandemic throughout the world have been the working class. Many upper middle-class workers have been able to leverage work from home technologies, such as Zoom, into being able to continue working during the pandemic. This has certainly not been the case for work which require an in-person presence.

A recent Wall Street Journal raises these concerns in the context of China’s pandemic recovery. The article highlights concerns that weakened consumer spending in China might create a self-reinforcing cycle that leads to decreased performance from smaller businesses which would in turn lead to decreased consumer spending. In addition, the author points out China’s weaker welfare system compared with the United States, which would make inequality even greater.

Puerto Rico appears to be following the same K-shaped recovery as China and the United States, with some sectors of the economy recovering whilst others lag behind. A K-shaped recovery would be the worst-possible outcome for inequality throughout the world. As we see white-collar professionals be able to work from home, and seeing little to no effect on their income, we see thousands of workers unable to work from home be laid off. Restaurant workers are just one of the demographics that are vulnerable to this uneven recovery. Restaurants, bars, and music venues throughout the United States could be forced to close down, which aside from affecting directly those employed by them, could have a domino effect on banks and housing markets throughout the country.

This should raise the same concerns as this article points out in China regarding inequality. One example of this we have seen is the rise in housing sales during a time period when many businesses remain closed and unemployment insurance claims remain at an all time high. This could raise concerns that local real estate is being bought up by non-residents.

One measure of inequality, the ratio between mean and median household income, has risen in the last 10 years. What this ratio indicates is the difference between the average income and the income that most people actually earn. A jurisdiction composed solely of minimum wage workers and a small group of billionaires would have an extremely high average income compared with another jurisdiction with no billionaires but would have a very low median wage.

This ratio in the year 2010 stood at 1.55 and has risen by 4% since then. While there has been an influx of transfer payments from the federal government during the pandemic, further funds will be necessary in order to ensure that the island’s economic recovery does not create further inequality.