COVID-19 Inequality: Aftermath of India and America
By Chavi Walia
Student of M.A. Economics
Delhi School of Economics
COVID-19 has increased inequality in a world where equal opportunities were already limited and disproportionate. This virus affects the needy, goes after those that are already in a poor health condition and have jobs that expose them to daily contact with others, putting them in the high-risk group.
Around the world, there are significant differences in the policies and measures that have been taken by governments to control the spread of the virus and to take the economy to the path of recovery. These differences majorly arise due to the preexisting state of health care and inequalities, a country’s preparedness and the resiliency of the economy; the quality of public response including reliance on science and expertise, citizens’ trust in government guidance, and how citizens balance their individual freedom to do as they please with their respect for others, recognizing that their actions generated externalities, as stated by Joseph Stiglitz.
The impact of COVID-19 can be seen in various sectors of the economy as well and not just on the health of people. Covid has exacerbated the inequality in manufacturing, trade, education, and gender-based unemployment. We will be looking in detail at two sectors that have been adversely affected by the ongoing pandemic.
Manufacturing Sector around the world is facing continued downward demand, production, and revenue. This is mainly due to the fact that manufacturing is an on-field job and cannot be done remotely, as a result of which and the lack of resources available with the industries, and the high cost to provide safe working gears to the workforce, the sector has had to deploy many of its workers which affected the supply chain.
America: This pandemic brought in a lot of challenges for the American industrial manufacturers. According to a survey by the National Association of Manufacturers, 80% of manufacturers believe that the pandemic will have a financial impact on their business. Due to plummeting oil prices, demand-supply chain bottlenecks, and extreme nervousness in credit markets, 53% of the operations in the manufacturing industry have been impacted adversely. The US manufacturing industry had been working to undo the effects of the 2008 recession before the pandemic hit. The current US industrial production index stands at 105.7, which is substantially lower than 110, which was before the pandemic level. Looking at the future, we can say the levels of production will still be below the pre-pandemic level to what it was in 2019 but the trajectory of decline is low, as per the Oxford Economic Model which forecasted a decline in manufacturing GDP growth levels for 2020 by 6.3% and 3.5% for 2021.
India has become one of the most lucrative options for the manufacturing industry to prosper in and holds a share of 14% in India's GDP. The target set by policymakers to reach the potential of 25% by 2022 remains difficult to reach due to the ongoing pandemic. The Nikkei Manufacturing Purchasing Managers Index rose from 56.3 in November 2020 to 56.4 in December 2020. This shows that the economy is on the path of mending the damage done by the pandemic when the contraction in business activity reached a level of 23.9% in April-June and 7.5% in July-September last year. The orders and demand from the producers are growing strongly but at a slower pace, the continuous efforts of the firms to rebuild safety stocks have shown an upgrade in the sector and a sharp rise in production. The recent surge in covid cases in India has taken a hit on the export demands which saw a dip when compared to the past four months and is also the reason for falling employment in this sector.
Conclusion: Production in Indian industries is 2.81 million, which ranks India as 6th in the world and America holds the 7th rank with 2.73 million production in the industry. Another comparison can be made with the growth in the manufacturing sector in India by 10.83% and in the USA, it is 3.55% This is due to the fact a developed country like the USA imports a lot of its daily use items from the developing countries like India and Cambodia and they faced major cuts due to supply chain disruptions with the hard-hit Tier-2 and Tier-3 suppliers. The gross value added by manufacturing is 8 times higher in the US than in India but the Rs 5.79 trillion manufacturing in Quarter 2 FY21 was more or less similar to that of the corresponding quarter in FY19 and FY18. This cannot be termed as a turn-around as the bump in the manufacturing sector is due to cost-cutting with declining sales and not due to a growth trajectory in volume. For this, the production-linked incentive scheme will have to show real-time effects which have been extended to 10 other sectors by the Finance Ministry.
Gender-Based Unemployment: Covid has had a global economic fallout and it has also had regressive effects on gender equality. Women's jobs are 1.8 times more vulnerable to the crisis that we are in than men's jobs. Out of 39% of the women in the total employment force, 54% have lost their jobs in 2020, even though men and women work in different sectors.
America: The unemployment rate in the USA among women had risen from 3.6% in 2019 to 8.3% in 2020. These statistics show how the COVID-19 pandemic sent women's progress backward. The strong hit faced by the child care sector that predominantly employed women brought a risk of mothers leaving the labor force to take up child care activities at home, which led to 64.5 billion dollars lost in wages and economic activity. Therefore in order to bring back the economy and to promote gender equity, the US Government should force policy towards child care options and work-family opportunities. The preliminary results show that majority of the negative effect of the ongoing lack of child care options falls on women more than men, who are spending more time on the education of kids to help them navigate the online mode and on household tasks. In early closure states, more than 30% of mothers took a permanent leave from work and this is 4-to-5 times higher than fathers. American women have never experienced an unemployment rate in double digits since 1948, as per the Bureau of Labour Statistics, until now when 16.2% of women in the States were forced to leave their jobs permanently in the beginning of the pandemic.
India is no different than the States, where the pandemic has deepened the gendered fault lines in the labor market. An examination of time-series data shows that labor force participation of women has worsened and the working-age population of women looking for work has fallen from the pre-pandemic level. Women are finding it difficult to manage paid work along with the increased domestic work. In comparison to all the G20 countries, India has the worst labor participation rate from women and the widest gender gaps in the post-covid world. Women in India bore a greater consequence of the lockdown with 27% losing their job in comparison to only 13% men losing theirs and the employment recovery is distinctly and particularly gendered. In December 2020, the female labor force was 14% smaller than the December 2019 level, but the male labor force was only 2.3% smaller than before. Many MSME’S, retail, and beauty sectors that employ more women suffered the most due to social distancing norms and have had severe pay cuts and layoffs. As a result, India suffers from pervasive gender divides.
Conclusion: COVID-19 has become the proverbial straw that has broken the camel’s back when it comes to women's exclusion from the labor force altogether. Both India and the USA would have to now force policy actions to combat this 'she-cession' and to bring back the economy to its full groove and ensure financial independence. Covid has not only increased gender inequality but also inequality within the female workforce. In the USA, Black, Hispanic and Asian women took a greater blow of the virus than White women and in India, less educated rural women have been laid off before the educated urban women to cut costs. The V-shaped recovery that we witnessed after the lockdown eased has fallen again with the recent surge in cases. The unemployment rates historically have shown that women labor participants are always the first ones out and the last ones in, turning around the effects of gender inequality that have seeped into our societies will take more than a year.
One year into the pandemic, we know that it is a wrecking ball of intergenerational consequences. Global growth has plummeted and most of the countries have had to face the negative economic consequences of the outbreak. The governments and policymakers around the world not only need to focus on reducing infection and fatalities but also on reducing the increasing inequality within countries. This has knock-on effects of increasing crimes in the society due to the down hitting impact on poverty and income levels. From the above comparison, we can see that a developed
nation can turn around this situation by giving out better social security nets, whereas a developing nation does not have the capacity to do so. In these developing countries, the perverse economic impacts are hidden from the view because roughly a third of the workforce of around 2 billion are in the informal sector. The IMF suggests that these countries need $2.5 trillion to bail out from the situation and they have received only around $100 billion for their economies. Rising inequality can threaten the political systems of nations and cause rising reactionary nationalism. Our focus should be turned to creating a more inclusive society at home and abroad by writing off their debts and ensuring that multilateral institutes like the IMF and World Bank are able to meet their needs to combat rising inequality.