What is inequality and how did Covid-19 highlight the problem?

Disparity in income and wealth is often considered a main gauge of social inequality. But inequalities can also exist in access to basic needs, or “life essentials”, such as food and water, as well “livelihood essentials”, like access to education and financial services.

The Covid-19 pandemic has accelerated the problems of exclusion and inequality, with implications beyond health and wellbeing. It has exposed serious problems that can arise when countries or communities lack the resources and opportunities that others take for granted. In the worst situations, these communities may be marginalised from society entirely, experiencing what is known as “social exclusion”.

Consider the example of education. The closing of classrooms during the pandemic has pushed 101 million children globally below the minimum reading proficiency threshold[1] . And according to the World Bank, children affected by learning losses stand to lose USD 10 trillion in future lifetime earnings – equivalent to 8% of global GDP[2] .

Similarly, the pandemic highlighted the “digital divide” as learning and working shifted online and to the home. Since robust technology is increasingly critical in such an environment, the divide between those who have adequate digital infrastructure and those who do not is a significant new driver of inequalities. Some 2.9 billion people remain offline globally – equal to around 37% of the world population – with 96% of them living in developing countries[3] .

Insufficient access to basic needs and services help explain why during the crisis progress in fighting poverty has gone into reverse. The rate of extreme poverty rose from 8.4% in 2019 to 9.5% in 2020 – the first global rise since 1998[4] .

Growing recognition that inequality can hold back the growth and resilience of economies is placing a renewed focus on addressing social issues, bringing the “S” in ESG into the investment spotlight.

[1] ?The Sustainable Development Goals (SDGs), 2021 | United Nations

[2] WEF_Shaping_an_Equitable_Inclusive_and_Resilient_Recovery_2021.pdf (weforum.org)

[3] Measuring digital development - Facts and figures 2021 (itu.net)

[4] UN The Sustainable Development Goals (SDGs), 2021 | United Nations – The extreme poverty rate is the share of world population that is living on less than $1.90 per day.

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