COVID – 19 Aftermath: Poverty, Inequality and Economy

 

COVID – 19 Aftermath: Poverty, Inequality and Economy

 https://nation.com.pk/Columnist/m-ali-kemal-and-muhammad-saleh-muzaffar

M. Ali Kemal (Tweets at @malikemal)

and

Muhammad Saleh Muzaffar (Tweets at @MuhammadSaleh06)

 

Inclusive growth is inevitable to sustained reduction in poverty. Inequality is considered an attached subject of poverty. Nonetheless, it is not necessary that they are moving in the same direction. Poverty estimates show declining trend since 2001-02 nevertheless same cannot be proclaimed for the inequality.

Economic activity is alarmingly shut due to COVID pandemic. Millions of people were expected to face job loss, casual and piece rate workers mostly. After lives of people, economic downturn, livelihood, well-being, and poverty is among the first few concerns during the current pandemic. This is one of the reasons higher premier is reluctant to opt for complete lockdown and followed partial and smart lockdown. Few possibilities of lockdown are discussed in the PIDE’s Bulletin.

Poverty has been declining for the last two decades. The initial 6 years of this decade has shown increase in the rate of decline compared to decade of 2000-2010. Annual average decline in poverty surged to 9 percent compared to previous decade, i.e., 5-6 percent. Overall Poverty declined by 2.86 percent every year since 2001-02. Forecasting the same trend, it is optimistic and ambitious to assume that by 2023, poverty will be reduced to single digit, albeit time to re estimate poverty line by then. Notwithstanding the current pandemic and lower growth may not reduce poverty rapidly.

Logically speaking, unambiguously decline in the economic activity, employment loss and livelihood issues directly affects the poverty level of the country. On the contrary, since the poverty is computed using consumption data given in HIES it may not be the case; poverty may not increase but remains the same or decline during the pandemic. Why?

Our argument of non declining poverty during the pandemic is based on; inclusion of 12 million households under the Ehsaas program, deferment of payments of borrowed principle amount and mark payments for 6 months to one year, decline in electricity bills by reducing fuel price adjustments and waiver of income taxes on the electricity bills etc. Besides Government’s stimulus packages, private sector, NGOs, civil society and other individuals in the society have come up and generously donating the needy items such as 15 day to monthly rations, medicines, masks, sanitizers and soaps to the needy households. Philanthropists overwhelmingly distribute prepared food at designated places.

The philanthropic deeds are part of religion, thus, what people are doing is not a surprise. BBC while interviewing a person reported “I am answerable if any of my neighbours go to bed hungry. How can I have an overstocked pantry while one of my neighbours is in need?”

Consequently, consumption may not decline due to tremendous philanthropic activities. It is expected that their consumption, overall, becomes higher and secured especially in the first three to four months than previously. Nevertheless, a pertinent question is how much time the philanthropists would do this; 3 months, 6 months or a year?

Nevertheless, we may not see the impact of pandemic on poverty due to non-availability of data. The current available data which will be used to estimate poverty will give us the numbers of 2018-19, i.e., before pandemic and the next data will be collected next year in 2020-21 and the estimates will be available in 2022.  

Inequality, at the same time, has vital and interesting dimensions. Although we are the strong believer that inequality does not matter much until it passes some significant threshold and growth of rising inequality is significantly higher and persistent. Pakistan is experiencing moderate inequality for a very longer period of time. Although official estimates are not available, but available estimates show mild up and down movements in Gini coefficients.

Inequality reduces there is a fair distribution of resources, wealth and redistribution of wealth/income which in turns reduces poverty as well. In the current scenario Households has been experiencing income loss. Ignoring the elite capture of resources, redistribution of money through Ehsas-program and philanthropic activities by the local society manages the distribution and redistribution of resources. In addition, capitalists are losing their income due to lesser or no businesses. All of these facts, consequently showing decline in inequality due to better distribution of resources.

Although lockdown is over, people may find work in different industries and services sector. But due to global decline in output the demand for our products may not go up. Income of the workers may decline and remain lower due to lesser business, hence lower weekly or monthly wages. Few estimates are available that shows scary situation of prolonged unemployment. Rehiring and employing new entrants in labour market may have issue in the next one year at least. Thus we are proposing the following measures to be taken;

1.     Second round of impact will be crucial after the dust settles. Decline in global trade may affect harshly to many industries. Therefore, domestic demand led growth will be the only feasible options for next few years.

2.     Decline in economy directly affects the livelihood of people. Government’s interventions such Ehsaas program lessen the adverse impact on livelihood. Moreover, philanthropic activities would also mitigate the impact of hunger and poverty. Ehsaas may increase the scope and range of its program until the pandemics ends. Philanthropists must not reduce the aid to the needy people.

3.     In the meantime, over regulated sectors need to be deregularised to create new businesses that reduce unemployment as well as burden on government budget. As a results inequality would also improve amid better distribution of resources.

4.     Next HIES data may capture the longer-term repercussions of pandemic on poverty. However, there is a need to design a short survey that covers at least data on (i) job loss and (ii) possibilities explored by the different households to do other businesses during pandemics.