Guaranteed income support could have saved millions hit by COVID-19 pandemic

Since the start of COVID-19, the pandemic has seriously impacted at least 60 per cent people from the bottom on the scale of income in every country. Only a little more spending would have prevented millions of them from falling into poverty and great human tragedies, but it was not to be.

A look at the spending by governments the world over on social protection from March 2020 to mid-May 2021 reveals a distressing sign in South Asia, with the largest number and percentage of people having suffered in India.

The estimates also reveal that most of the increase in the number of poor people is accrued by lower income countries (LIC) and lower and middle income countries (LMIC), that too mainly driven by South Asia, with India being the largest contributor.

South Asia has emerged as the hardest hit region by any poverty standard. Out of 117 million people pushed to extreme poverty, 106 i.e. about 91 per cent, live in LIC and LMIC, and 60 per cent, i.e. about 70 million, in South Asia alone. For higher poverty lines, South Asia accounts for 54 to 66 per cent out of 72 to 87 per cent of LIC and LMIC.

Even at the onset of the pandemic, most developing countries were suffering from pre-existing inequalities that would have eventually threatened the lives and livelihoods of their most vulnerable citizens. A large share of workers in informal and at-risk service sectors, such as construction, transportation, retail, tourism, and hospitality, combined with absent safety nets, were somehow living at very low incomes, but social distancing measures prevented many of them from even earning their usual income or earning an income at all.

Indeed, following the implementation of the first lockdown, the earnings of informal workers were estimated by ILO to have contracted by 60 per cent globally in the first month of the crisis, reaching an average contraction of 80 per cent among the poorest countries. Estimates covering the whole of 2020 suggest that, relative to 2019, the loss of labour incomes had reached $3.7 trillion globally, equivalent to more than 220 million full time jobs, with lower-middle-income countries being the hardest hit.

Increased poverty is perhaps the most salient and visible negative consequence of the pandemic. The crisis has made more people food insecure, about 270 million in 2020, an increase of 82 per cent as per World Food Programmes (WFP) estimates.

A recent UNDP paper titled “Mitigating Poverty: Global Estimates of the Impact of Income Support During the Pandemic” has said, “Had countries implemented the temporary basic income (TBI) scheme in response to the shock it would have had potential short-term impact on mitigating the increase in poverty”.

To estimate the pandemic-induced increase in poverty and perform the simulation, this analysis has retrieved the distribution of per capita income and consumption from household surveys in 160 countries which included 128 developing and 32 advanced economies covering 96.5 per cent of the world’s population in 2019-20. Not only that, it has also analyzed the actual response.

The first finding of the simulation says that spending equivalent to 0.5 per cent of developing countries’ GDP, for a monthly total of $58.1 billion spread over six months, would have sufficed to mitigate, at least temporarily, the increase in global poverty at the $1.90 and $3.20 a day poverty lines. The number of people pushed below these poverty lines since the outbreak of the pandemic was due to significant crisis continued within the poorest regions of the world.

The second finding states that actual income support programmes potentially mitigated the short-term increase in poverty in a sample of 41 countries, but the gain is likely to be fragile under a scenario in which income contraction is harder on those at the bottom.

Not only that, the increase in poverty mitigation was chiefly driven by upper-middle-income countries which were able to roll out generous income support. It implies that low and lower-middle-income countries could not transfer sufficient income support.

By March 2020, only 84 countries and territories had planned or implemented 283 social protection measures, which rose to 215 countries and territories and 1414 programmes by December 2020. The number of programmes by mid-May 2021 increased to 3333. Actual investment for about 15 per cent of 3,333 measures was $2.9 trillion.

However, the lion’s share of this effort has been accounted for by high-income economies that have spent about $2.6 trillion or 87.1 per cent. Lower middle income countries (LMIC) spent on 0.37 per cent, lower income countries 0.05 per cent and upper middle income countries 12.5 per cent.

When considering social assistance alone, LIC and LMIC allocated $79.6 billion in cash-based and in kind measures, equivalent to 4.6 per cent of the world’s total spending of $1.7 trillion on these measures. Social insurance and labour market programmes dominated, the response measure in numbers which rose from 133 in March 2020 to 1492 in Mid-May 2021. During this period, cash based programme increased from over 100 to 734. Other social assistance entered into the scene in April 2020 which were 198 at that time, but rose to 1107 now.

However, total per capita social support until Mid-May 2021 in the low income countries remained as low as $4 only. The average per capita support in low and middle income countries included social assistance of only $26 and $124 in total social protection. High income countries have allocated an average of $545 in social assistance and $847 of social insurance and labour market programmes are added.

The paper not only examined the status of people under the poverty lines of $1.90, $3.20, and $5.50 income a day, but also the vulnerability threshold of people under $13 a day per person who were likely to fall under poverty line of $5.50 a day earning. It has estimated that the number of people falling into poverty was 117 million under $1.90, 206 million under $3.20, 199 million under $5.50, and 110 million under vulnerability threshold.

Had not the pandemic hit the world, we would have only 39 million, 65 million, 52 million and 7 million people in these categories by now.

IPA Service

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