#8 Miniseries on COVID-19 and Inequality
“Now is the time for errors of inclusion rather than exclusion”, say Merike Blofield and Fernando Filgueira about the need for wide-ranging and inclusive social protection floors in Latin America in response to the COVID-19 crisis. Blofield, Director of the Institute of Latin American Studies at GIGA, and Fernando Filgueira, Professor of Social Science at the Universidad de la República in Uruguay, are next up in GRIP’s miniseries on COVID-19 and global inequality.
We are already seeing how the impacts of the COVID-19 are unevenly distributed depending on where you live, your job situation, age, class position, gender, ethnicity, the availability of health services, and a range of other factors. In this series, we provide short interviews with scholars and relevant organisations that share their insights and views on how the pandemic might exacerbate or alter existing inequalities across six key dimensions: social, economic, cultural, knowledge, environmental and political inequalities.
Next up in our series are Merike Blofield and Fernando Filgueira. Blofield is the Director of the Institute of Latin American Studies at the German Institute of Global and Area Studies (GIGA) and Professor of Political Science at the University of Hamburg. Filgueira is Professor of Social Science at the Universidad de la República in Uruguay, and Senior Researcher at CIPPEC in Argentina and CIESU in Uruguay.
To what extent could we now see urban inequalities both between and within countries – in Latin America or more generally – becoming accentuated as a result of the corona outbreak?
Governments in Latin America have, mostly swiftly, moved to social distancing and lockdowns. The key epidemiological and social challenge in the immediate term is to ensure basic subsistence to all the vulnerable households during this time period. In the most unequal region in the world, almost half of the economically active population gains its living in the informal sector, and much of this employment is concentrated in the sectors that are coming to a complete halt with the pandemic. These households are already suffering these effects. Moreover, low-income households with dependents – especially children – are particularly vulnerable to immediate effects with access to basic utilities and nutrition endangered. Most of this population does not have social security protection or other forms of income protection, and are at immediate risk of a humanitarian catastrophe. Indeed, in more than two-thirds of Latin American countries, more than two-thirds of children live in households without access to social security, and no or very limited savings capacity. In addition, urban segregation has segmented the big cities and megalopolises of Latin America in their access to health services, urban infrastructures and access to basic utilities. Such stark inequalities will unfold as the COVID-19 crisis evolves and as the epidemiological responses force people to remain in lockdown in such a segmented reality.
This is true for all of Latin America. However, heterogeneity in the region also implies widely different starting points and also very different capacities to build and sustain an adequate social response that can mitigate the unequal effects of the COVID-19 crisis and the epidemiological responses needed to contain and mitigate it. Countries like Uruguay, Chile, Argentina and Costa Rica can be defined as having modest welfare gaps (comparatively in the region). They have the highest rates of formal employment, social spending, pension coverage, access to health insurance schemes, coverage of basic public utilities and lower poverty and extreme poverty rates. On the other extreme are countries such as Guatemala, Honduras, Nicaragua and to a lesser extent Bolivia and Paraguay. Extreme welfare gaps are present in these countries alongside low social spending, limited pension coverage, high informality, insufficient coverage in public utilities and healthcare access, and large portions of their populations are already living in poverty and extreme poverty. Countries such as Brazil, Colombia, Peru and Panama, among others, have better indicators than the latter group, but have moderate to high welfare gaps and very high inequality within them.
Unless governments at the national level and multilateral institutions and governments at the regional level agree to set up and collectively finance a basic social protection floor for all of the vulnerable population in each country and in the region, the social effects of the COVID-19 pandemic will be devastating in the short and medium term, with increasing poverty and heightening inequality of opportunity and outcome. If, on the other hand, a robust social response is forged, the crisis might end up being an opportunity to advance a form of basic social citizenship that might be a blueprint for a post COVID-19 scenario.
In what ways is the global outbreak of the virus also revealing the underlying political, economic or other drivers of heightening inequalities?
As the pandemic reaches the Global South, the global inequalities show their starkest face at least in two critical areas: the capacity of countries to access tests and protective equipment as well as their health care infrastructure, and the capacity of countries to mount and finance adequate social responses to the effect of the COVID-19 crisis. Latin America is in this sense a clear example of both critical bottlenecks. We focus on the latter.
The good news is that over the past fifteen years, access both to social security and to different forms of non-contributory targeted income transfers has increased in the region as a whole, especially for families with children. Governments have in many cases developed relatively sophisticated, non-discretionary administrative capacities to identify, recruit and deliver services to the vulnerable population. By 2016, 30 cash transfer programs reached 130 million people, about 20% of the population in the region. Moreover, almost all Latin American households have gained access to electricity, drinking water and cell phones over the last fifteen years, and now depend on these services. This existing infrastructure can now be mobilized to confront the social crisis, to put in place basic income guarantees and to ensure continued access to basic utilities to weather the public health and economic crisis.
The bad news is that few governments are not moving fast enough to activate basic guarantees that are both sufficient and far-reaching enough. This might be partly due to fiscal stress, and partly due to myopic behaviour led solely by epidemiological concerns. However, the speed at which some governments are moving to support financial institutions and large enterprises, as well as public sector employees, also suggests that this might simply be the expression of a common pattern in the region: the vulnerable come last. The problem with such an approach, besides our moral outrage, is that in this case there is no effective epidemiological strategy without considering the vulnerable population.
To sustain the epidemiological strategy of social distancing, social assistance must reach fast and far in the Latin American social structure. With the immediate and still-to-come economic effects, close to half the population in the region is facing an impending humanitarian crisis.
How are governments responding?
Governments are responding in a variety of ways. Basically, there are three groups of people (and their dependents) that need income support. First, those included in existing social security schemes; second, those included in non-contributory schemes/government assistance programs; and third, the self-employed and informal sector workers and their families, who are not recipients of government assistance programs. This group also includes undocumented migrants. The first, and even the second group, are now relatively easy to reach. Here, governments are reacting at different speeds and with different levels of generosity. Governments are also decreeing suspensions of cut-offs to basic utilities, credit to help pay with utilities, and, in some cases direct government coverage of electricity and water up to a cap.
The third group requires the most effort to reach as it is outside existing public programs. Yet it is this group, along with the households that are recipients of non-contributory programs, that is least likely to have savings and assets, and that is most vulnerable to income loss. This group also has a high share of households with children.
We have examined the government promises and policies on social assistance so far, to both recipients of existing non-contributory cash transfer programs, and those who are not part of programs in the informal sector (see Blofield and Filgueira 2020). What we found is that the amount of assistance promised so far ranges from 34% of the monthly per capita urban poverty level in 2018 in Chile, to meeting the poverty level in Brazil, El Salvador and Peru. Some countries, such as Mexico, Honduras and Nicaragua, have yet to institute any COVID-19 related emergency cash assistance transfers. Moreover, there is uncertainty about the speed of delivery and duration of the transfers.
Second, and crucially, the coverage promised in many countries is unlikely to reach all vulnerable households. While in Argentina, Brazil, Chile and Costa Rica, the criteria for selection are transparent and inclusive (even if the amount promised so far in Chile is very low), other countries have instituted restrictive criteria that will mean that not everyone in need is reached. For example, a government promise to extend a transfer of US$40 to a pre-specified three million informal sector workers in Colombia, with a population of 44 million, or to just 780,000 informal sector workers in Peru, with a population of 32 million, will fall far short of reaching everyone who needs support. Moreover, to date, Colombia is not including the 1.6 million displaced Venezuelans in these transfers. While the Colombian government rightly points out that the international community needs to do more to help this population, it is cold comfort to the Venezuelan women, men and children in desperate need on the ground.
What might a global and equitable response to the outbreak look like?
There is a huge asymmetry in how people from different social strata can cope with these radical distortions to life, markets and families that have been brought about by the COVID-19 pandemic and the associated economic, political and social fallout.
Latin American governments face this crisis with less fiscal space than a decade, or even five years, ago. At the turn of the year, expected economic growth for 2020 was just 1.4%, and the year started with a regional unemployment rate of 8%. This said, now is not the time for fiscal austerity, and social assistance spending should be funded by loans, credit, and redirected spending, in the short terms, and multilateral assistance, including debt forgiveness, and future fiscal social pacts with domestic elites, in the medium to long term. In the immediate term, to avoid impending human catastrophe and exacerbated inequalities, governments must implement inclusive, relaxed eligibility criteria and targeting during this emergency. Now is the time for errors of inclusion rather than exclusion.
Moreover, providing cash assistance to the most vulnerable is not that expensive. We estimated the fiscal cost of providing a poverty-level income to all children in vulnerable households, using the ECLAC definition of those below 1.8 poverty lines (see Blofield and Filgueira 2020). What we find is that ensuring a basic minimum income for vulnerable households with children for three months is actually quite affordable for most countries. Extending such transfers to the vulnerable population aged 65 years and older can also be done at relatively low costs. All in all, the estimated cost for governments of providing one poverty line per child/elderly for the vulnerable population implies a fiscal effort equivalent to between 0.5% of GDP and less than 0.1% of GDP, in the more economically developed countries. In its most expensive format, and in the least developed countries, the cost can amount to over 2% of GDP for Guatemala and Honduras, 1.6% of GDP in Nicaragua, just over 1% of GDP in Paraguay, and in the other countries, less than 1% of GDP. With less generous transfers, such as the ones that cover just a basic food basket, the cost goes down further.
In sum, lockdowns are neither feasible nor sustainable unless a basic social protection floor is put in place. While governments are moving in the right direction, they are not providing enough of a floor or broad enough coverage. Yet fiscal costs on social assistance specifically are quite manageable. And unless a social protection floor is put in place, the epidemiological strategy will either be ineffective, or the social and human costs will be enormous. Furthermore, even after a regulated exit from quarantine and lock downs is viable, the economic disruption will linger on much longer. This basic protection floor should, thus not just be for the short term, but some version of it for the medium term at least.