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Efrén Cornejo: The increase in inequality, one more effect of the pandemic

José Efrén CornejoJosé Efrén Cornejo Source: Courtesy

In this 2020 the world entered a strong pause as a result of the emergence of the COVID-19 pandemic and Mexico is no exception. To give us an idea of ​​where we are, it is enough to review the Gini coefficient, which is a widely used measure in economics to measure the economic inequality within a society, through the level of concentration of income distribution. This indicator takes values ​​between 0 and 1, where zero reflects a better condition of equity in income distribution, while 1 indicates the opposite.

A condition of greater inequality reflects a lower consumption and a lower level of production, impacting on economic growth and reducing opportunities for the population living in poverty to get out of this situation. In the case of our country, the Gini coefficient in 1989 was 0.543, while for 2018 it had improved to 0.463, which reflects the efforts that have been made in this area to gradually reduce the poverty and the inequality. However, despite the fact that our country has one of the highest levels of per capita income pFor Latin America, we are the tenth country in the world with the greatest inequality in income distribution.

In order to understand where we come from and how we have evolved, the following analysis is proposed that aims to establish a correlation between GDP and poverty, this in order to see how economic development affects poverty.

If the values ​​of GDP worldwide and the extreme poverty rate are taken as a reference, in an analysis between 1981 and 2015, there is a degree of correlation between both variables of -0.995, which means that as GDP increases there will be a 99.5% downward relationship in terms of poverty, and vice versa. During this period, the number of people living in extreme poverty decreased from 36% in 1990 to 10% in 2015, according to data from the United Nations. It can be sensed that a development of economic activity is accompanied by a reduction in poverty. If this situation is extrapolated to the current moment in which the economy is stagnant, it will be easy to understand how the number of poor people in the world will increase drastically. It is estimated that although today there is great progress on this issue, if efforts are not intensified to get out of this moment soon, it will not be possible to achieve the first objective of sustainable development: eradicate extreme poverty.

The world Bank has estimated that extreme poverty worldwide could increase between 0.3 and 1.7 percentage points, which means that between 40 and 60 million more people will fall into the extreme poverty level, representing around 9% of all poverty in 2020, (remember that in addition to extreme poverty there is also the food and skills poverty). the same organism has estimated that the proportion of people living on less than US $ 3.20 a day (around 67 Mexican pesos) could increase by at least 23%, and that the proportion of people living on less than US $ 5.50 a day (around 115 Mexican pesos) could increase between 0.4 and 1.9 percentage points, that is, a minimum increase of 42%.

According to data from the World Bank, around 783 million people in the world live below the international poverty line with 1.90 dollars a day (around 40 Mexican pesos), while in the age group between 25 and 34 years , there are 122 women in the world living in this condition of extreme poverty for every 100 men. Finally, the majority of people living below this poverty line live in two regions, South Asia and Sub-Saharan Africa, and forecasts indicate that by 2030, 9 out of 10 people in extreme poverty will be in this region. from sub-Saharan Africa.

Where are we going in Mexico?

The COVID-19 pandemic will significantly aggravate the already existing problems of poverty and income distribution in Mexico and the world. Additionally, expectations of a decrease in trade flows worldwide will hit strongly due to the decrease in expected consumption from the United States and other countries. The foregoing makes it urgent, especially for our country, the application of public policies aimed at strengthening the income of the population by creating jobs. The National Infrastructure Plan recently announced and consisting of 39 projects between the Federal Government and private initiative may be a first step. Another fundamental element will be to promote social mobility promoting educational development as the mainstay for this project.

It will be necessary to protect women as well, since gender inequality will increase due to the closure of schools, because now women who work professionally will be doing a double job practically simultaneously, the home office of their work activity and home schooling to support their children in their education, especially those in smaller ages; In addition, social isolation and care in case there are cases of COVID-19 in the family, will cause a sworkload unpaid in this population group.

In the case of Nuevo León, it will be advisable to be aware of the evolution of the epidemiological traffic light, since the reopening of some economic activities will bring an increase in the number of cases of contagion by Covid-19, causing health authorities to question how to advance in this aspect, along with the natural problems caused by the entry of the influenza virus season, which which may have an even greater impact on the poverty and inequality scenario already described.

The author is Director of the Academic Program for the Bachelor of Economics at the University of Monterrey. He has a degree in Economics and a Master in Administration Sciences from ITESM. He has experience in the public sector after having worked for the defunct Secretary of Commerce and Industrial Development, and the Secretary of Finance and Public Credit.

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.