Positioning Academia | Reducing inequality should be our top priority during the COVID-19 pandemic—but it isn’t

The COVID-19 pandemic has exacerbated income inequality all over the world. The UN’s Sustainable Development Goal of reducing inequality (SDG 10) is getting more and more off track. How are countries reacting to this worrying trend? This blog reviews how governments report on reducing income inequality to the UN, showing  that although attention to income inequality is increasing, strong policy measures to tackle the underlying structural factors that cause income inequality are often not reported and are still found wanting.

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COVID-19 has been with us for around a year, and we can finally see what it’s doing based on the results of ongoing research. Such research on the dynamics of the COVID-19 pandemic clearly shows that income inequality in low-, middle- and high-income countries is increasing: according to the ILO, poor workers are becoming poorer as some 600 million people work in sectors which are hardest hit and that pay poorly, while the informal sector where many of the poor work and lack any protection and public support is also severely affected. On top of that, the generation gap is increasing, with a greater number of younger workers being excluded from the labour market and having to work under precarious conditions, while relatively privileged workers are better sheltered from the COVID-19 economic outfall. Furthermore, as the value of global stocks has soared after an initial brief dip, the rich, and especially the super-rich, are getting richer during the pandemic.

It is in light of these worrying developments that a lack of progress in meeting the SDGs requires greater attention. The UN’s Voluntary National Reviews (VNRs) discussed at its annual High-Level Political Forum (HLPF) can help shed light on how countries have been doing in meeting the SDGs during the pandemic. Every year a batch of 40-50 different countries provide the forum with an extensive report on progress on the SDGs in their country—the so-called Voluntary National Reviews (VNRs). I have been involved in these discussions and in shaping an analysis discussed below.

According to a UN-CDP analysis published in 2019, SDG 10 (Reduced Inequalities) was the most underreported SDG in 2019 VNRs. However, a preliminary analysis of last year’s reviews shows that attention to this SDG has increased. This is a positive sign, as reducing income inequality, which is growing as mentioned above, is needed more than ever in a post-COVID-19 world.

But we also observe that those SDGs that echo the MDGs, such as the ones on health, education, and gender, still dominate in most of these reviews. The MDGs were concentrated almost exclusively on social issues, while the SDGs seek to include broader issues of economic, social, and environmental issues and the structural changes required to address these, which are necessary for real progress in reaching the social targets and in reducing income inequality.

The UN reports that increasing income inequality ironically not only moves the world further away from reaching SDG 10, but equally importantly also affects many other SDGs. Thus, that inequality still gets insufficient attention in the reviews remains worrying, especially in the gruesome times of the COVID-19 pandemic, which is exacerbating social and economic inequalities due to the far-reaching effects of national lockdowns. The effect of inequality on efforts to address it now requires our attention.

Some 2020 VNR country reports do refer to the COVID-19 pandemic and its economic and social consequences, including its effect on income inequality, but fewer refer to policies on how to structurally redress increasing income inequality. In this respect, it is useful to recollect what happened to income inequality after the 2008 recession.[1] A striking factor of the 2008 global recession and its aftermath was that poor and unorganized groups both in developing and developed countries were thrice affected—firstly because they did not profit from the economic boom preceding the crisis, secondly because they profited less from income support provided after the crisis, and thirdly because they suffered more from an economic slowdown when restrictive monetary and fiscal policies were prematurely introduced in 2011.

So, in order to not to repeat the mistake in the form of economic policies introduced after the 2008 recession, governments must foster structural changes to redress the growing inequality between incomes from capital and labour and to stimulate sustainable growth. Do we see in the 2020 batch of VNRs a strong tendency to undertake such policies?

Of the 40 reviews of last year mentioning SDG 10 explicitly, only 22 refer to Target 10.1 (increasing growth of the poorest 40% of the population faster than the rest[2]), while even fewer countries (19 and 12 respectively) refer to targets which have a bearing on fostering structural changes, such as Target 10.4 (improving fiscal, wage, and social protection policies) and Target 10.5 (regulation of national and global financial markets)[3]. And of these countries that report on these targets, less than half give sufficient details to gauge important changes in budget outlays and explicit policies. It therefore also comes as no surprise that special schemes and projects (including those to reduce gender inequality) dominate actions related to SDG 10 in the overview report of the 2020 VNRs.

Some 40 to 50 countries are now starting to prepare their reviews for this year’s High-Level Political Forum that will take place in July this year. One might hope and even assume that the continuous onslaught of the pandemic will result in greater attention to income inequality and to the necessary structural changes that are called for to achieve that. But policy change does not come automatically. It needs continuous efforts from progressive and concerned scholars and from civil society to push for structural changes.

Foot Notes

[1] van der Hoeven, R. 2019.  ‘Income Inequality in Developing Countries, Past and Present’, Chapter 10 in Nissanke, M. and J. A. Ocampo (eds.), The Palgrave Handbook of Development Economics, Palgrave McMillan, https://doi.org/10.1007/978-3-030-14000-7_10

[2] Target 10.1 is in itself a rather weak target. See van der Hoeven, R. 2019.  ‘Income Inequality in Developing Countries, Past and Present’, Chapter 10 in Nissanke, M. and J. A. Ocampo (eds.), The Palgrave Handbook of Development Economics, Palgrave McMillan, https://doi.org/10.1007/978-3-030-14000-7_10

[3] Some countries addressed income inequality and SDG 10 in the context of other SDGs, but as such did not focus on structural changes needed to reduce income inequality.

About the author:

Rolph van der Hoeven is Professor Emeritus in Employment and Development Economics at the ISS and a member of the UN Committee for Development Policy (UN-CDP).

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