by Romei, V. Financial Times, February, the 16th 2021
Reading Recommendation by the Blogger
In this article, Romei, V. sources reputable economists’ thoughts as well as credible international institutions data and estimates to present recent empirical evidence on global increased extreme poverty and worsening inequality among workers and countries,[1] highlighting their likely covid-19 pandemic induced causes, as summarized below:
- Despite the world having faced the worst output decline in modern history, rich countries with developed health systems, better foreign direct investment environment, and enough fiscal and monetary spaces, could protect their economies and workers. In stark contrast, poor (underdeveloped) countries, with weak health systems, and rising public debts combined with losses of export and diaspora remittance earnings, were unable to stimulate their economies;
- Low skilled and unskilled workers lost jobs and incomes, due to the lockdown effects on the hospitality, retail, and informal sectors. Differently, skilled (or well-off) workers shifted to home or remote working and experienced not only relatively stable incomes, but also reductions on transport and leisure spending;
- As a result of the income losses, the declining trends of extreme poverty have been reversed. More than 150 million people are estimated to join the extremely poor population in the world, by 2022;
- Furthermore, among the lasting effects of the job losses, are the decrease of career earnings potential, reduced self-esteem, and increased crime.
To tackle the unemployment problem, the author[2] has a policy recommendation: governments should help workers to reskill and move to growing sectors of the economy. Most economists agree with this policy recommendation, provided that economic growth, which is the necessary condition for poverty reduction and inequality mitigation, occurs on a long-term basis.
But one must take that policy recommendation a step further. To achieve long-term growth with skilled workers, highly mobile inter- and intra-sector and resilient to negative shocks, countries – particularly the underdeveloped ones – need to design and implement robust long term development strategies, with a strong human capital formation pilar, through high quality education, mostly, and reliable and effective health services.
I recommend reading this article for, by dealing with extreme poverty and inequality – clearly, from their effects, two public bads – and a government policy proposal to eradicate them, it has a close relationship with the blog vision.
[1] As well as the corollary of rich-getting-richer and poor-getting-poorer, and correlated savings rate trends.
[2] Through the mind of one of her economist sources.