Economic Mobility and Covid

If the news hasn’t reached you yet, and for that to happen you must be living under a rock, Covid has made its unwelcomed come-back. Covid-19 was labelled a pandemic by the World Health Organization (WHO) on March 11, 2020, citing approximately 3 million diagnoses and 207,973 deaths in 213 nations and territories. The new Covid-19 variant, Omicron, is set to unleash yet another slew of limitations and make economies sweat by hindering the already sluggish recovery. The financial conditions of some families have deteriorated to the point where even well-off families have been forced to flee their homes while others have prospered as if gold mines had been discovered. This can be attributed to what we call economic mobility.

Precisely, an individual’s, families, or other group’s ability to better or worsen their economic standing is called economic mobility. It is accessed in the terms of their respective incomes. In contemporary society, people are classified into certain “classes” depending on their earnings and expenditures like upper, middle, lower, etc. With the epidemic looming over their heads, people in various households are attempting to uphold their spending as their income permits. As the pandemic continues to affect other aspects of the economy, such as currency rates, taxes, and the cost of other general commodities, their tasks become even more difficult. Furthermore, governments' underestimation of the epidemic did not benefit the situation.

An individual’s standard of living can improve throughout their lifespan or generation. Intragenerational mobility refers to one that occurs over a lifetime whereas intergenerational refers to one that occurs over a generation. The categorization of intragenerational and intergenerational mobility aids in the analysis of other aspects of the economy, objectives, and accomplishments. The other two, absolute and relative, are concerned with widespread economic growth and individualistic change, respectively. These sorts aid in studying behavioural economics and, as a result, taking the necessary actions. 

How do Public and Private Debts affect the Economy?

High debt levels could stifle monetary policy effectiveness and put political pressure on the Federal Reserve to keep interest rates low for an extended length of time. Debts, both private and governmental, have a considerable impact on banks’ lending interests and exchange rates, which in turn influence general economic decisions. Since the third quarter of 2019, falling income combined with costly pandemic relief measures has boosted global debt by $20 trillion. And as of now, public debt measures up about 40% of total global debt which has been the highest share since the mid-1960s.

Since GDP is largely the sum of all the spending, and thus income, of households and businesses in an economy, if aggregate private debt to GDP has tripled, that means that average businesses and households have three times more debt in relation to their income.”, says ‘Democracy’, a well-published periodical.

The greater the private debt, the more adversely it affects growth trends and the greater the risk of an economic crisis in that country.

How the less-affluent fared throughout the pandemic?

According to a study conducted by Pew Research Centre in July 2021

As the influencing factors vary, these figures continue to fluctuate. Over the last couple of years, people in each of these categories have borne the brunt of the pandemic’s impact on the economy.

The Middle class, which lies in the centre of the socioeconomic ladder, generally piques the interest of many researchers and economists because of its public-influenced behaviour. The current pandemic situation seemed to be wreaking havoc on the middle class as the senior researcher, Rakesh Kocchar says, “The economic downturn is likely to have diminished living standards around the world, pushing millions out of the global middle class and swelling the ranks of the poor. At the same time, the path to a recovery is clouded with uncertainties.” The rise of the epidemic compelled many countries to take countermeasures, such as the Chinese government forcing companies to close or developed countries like Italy closing most of their stores. Lockdown resulted in loss of wages for the labour class in the informal economy which further deteriorated their condition in addition with the increased expenses in the situation of covid19 . Black and Latino workers were seen facing major employment losses. The uncertainty surrounding the situation made it difficult for every income-class of people to speculate the global trends which resulted in hoarding and overspending. “Health care costs pushed more than half a billion people into or deeper into poverty.”, says WHO. As the epidemic continues to affect the public revenue, the government is incited to upheave the rate of taxes such as the economical crisis can be dealt with. And taxes being one of the involuntary expenses of the public influences their budgets.

Understanding how a mere shift in annual or monthly income, be it positive or negative, doesn’t result in economic mobility of the households; governments of countries strive to make a difference through innumerable schemes and upliftment programmes. The World Bank Group has committed more than $157 billion to combat the pandemic’s health, economic, and social effects, making it the fastest and largest crisis response in history. Lockdowns in mid-recovery are further accelerating weakening of the economies, forcing even the developed nations like USA to do some serious thinking about the contemporary choices by their policymakers.

- By Saloni Rane (SYBA)