Latin America in a post-Covid world: The cost of inequalities

Inequalities are staggering high in Latin America, impacting groups of the population very differently when faced with a shock of the magnitude of Covid. With the pandemic here to stay, not only is it causing a worsening of inequalities, but also have pre-existing inequalities made the impact of the first waves far worse for the most vulnerable segments of the population.

 

Nicolas Forsans*

 

Although the region has made great progress towards poverty reduction in the past twenty years, the goal of reducing inequalities has remained elusive.

Rates of inequalities plummeted during the most recent commodity boom but progress had stalled before the pandemic and inequalities remained high by world standards.

Not only is Latin America the world’s second most unequal region overall, according to the United Nations, but the region also evidences higher wealth inequality than comparable countries at a similar stage of development.

Inequalities: a recent phenomenon

It has not always been this way. Indeed, that Latin American inequalities have their roots in colonialism is a myth, according to research based on an ‘ancient inequality’ database for 28 places in the region over two millennia. Inequalities are much higher today than they were 200 years ago.

Indeed, inequalities became high during the commodity boom of 1870-1913, and high too relative to countries in other continents that have become ‘developed’ since the first world war.

In those countries, social policies shifted towards the goal of creating ‘egalitarian societies’, and progress was secured through changes in public policies and institutions.

It is public policy that led to more equal societies, and yet this is something the region skipped all together.

Today, income inequalities are high, not only in relation to OECD countries but also relative to countries at levels of development similar to those of Latin America.

Recent progress towards inequality reduction started in the 2000s, coinciding with the commodity boom.

Inequality is assessed through a coefficient commonly known as the ‘Gini coefficient’ that measures the distribution of income across a population. Highly unequal countries are characterised by a high Gini coefficient.

While reductions in the coefficient were not uniform across the region, it was remarkable by world standards.

Irrespective of how measured, inequalities decreased everywhere between 2002 and 2012, and even more so in the Andean region.

This was achieved by making significant progress in terms of female participation in the labour market, wage increases and government transfers.

By the time Covid hit the commodity boom had come to an end and social progress had stalled.

The pandemic then led to a reversal of that trend and caused a sharp exit of women from the labour market – a huge setback.

Multifaceted inequalities

Inequalities are not just about income or wealth. Indeed they are multidimensional.

Put simply, some population groups suffer greater inequalities than others, and in various dimensions.

The pandemic has highlighted the role of markers such as race, social class, education level, geography and ethnicity – markers that have become embedded in the social structures and institutions of all Latin American countries. And it is those under-represented groups that have been hit the hardest by the pandemic.

Spatial segregation in the region’s cities, the prevalence of insecure casual work and informal working practices in the region as well as fragmented public health systems amplified inequalities during the pandemic, impacting most significantly women, children, youth and immigrants – all under-represented groups.

CEPAL estimated that 22 million people had fallen into poverty in the first year of the pandemic alone as this crisis hit informal work the hardest, rather than formal employment – widening inequalities further.

Lockdowns were experienced very differently by households at the bottom of the income distribution. They made the primary residence the locus of daily interactions. Yet, overcrowding increases with poverty.

The UNDP in its 2021 Regional Human Development report notes that the average number of rooms per person in households at the bottom 20% of the income distribution is half that of better off households, and that a greater share of poor households live in dwellings made of low quality material: 73% in Bolivia, 70% in Colombia, and 53% in Mexico.

While the closure of educational settings impacted children of all ages, it is the poorest ones that suffered most as inequalities are deeply embedded in all aspects of life in the region. Latin America was the region that witnessed the lengthiest average disruption in classroom instruction.

As of February 2021, 54% of schools were fully or partly closed, impacting 200 million children.

The shift to online education exacerbated pre-existing inequalities in terms of access to technology and academic tools, with only 47% of the poorest students able to work on a desk and 65% having some kind of study space at home.

Unsurprisingly, only 18% of the poorest students had access to a computer at home, and 11% access to a tablet.

These compare against 90, 90 and 99 and 86% for the wealthiest students respectively.

Similarly, parental involvement in the education of their children and in providing emotional support was significantly lower in poor households relative to those at the top of the income distribution.

Towards a new social contract?

This is another reversal – Latin America had made great progress in reducing the education gap for girls and different minorities.

Evidence suggests schools are essential for food security among the poorest children, and households that have witnessed loss of income and/or of a family member as a result of the pandemic have seen an increase in malnutrition as a result of the closure of schools

The absence of any truly inclusive social protection mechanism, combined with fiscal conservatism meant that public spending in the region was not only insufficient in monetary terms, but also poorly effective in reaching those most in need, as we will see next week.

Building a more equal continent after the pandemic will take time and require significant shifts in policies, as CEPAL argues in favour of a guaranteeing of ‘universal social protection as a central pillar of the welfare state’.

* Nicolas Forsans: Professor of Management and MBA Director at the University of Essex, UK. Co-director of the Centre for Latin American & Caribbean Studies and a member of many Latin American societies and think tanks, Nicolas investigates the economic and societal challenges in the region generally, and in Colombia more specifically.

(Photos: Pixabay)

The Series:

Latin America in a post-Covid world:  Assessing the damage from the pandemic.

Latin America in a post-Covid world: The economic damage, a depressing picture.

Latin America in a post-Covid world: Work during the pandemic.

Latin America in a post-Covid world: The cost of inequalities.