“Government intervention in markets further exacerbates the divide between those with higher and lower incomes.”
Even policies with the best intentions lead to unintended outcomes. Most people agree that the goal of “flattening the curve” in March was a worthy end, but a careful evaluation of the lockdowns demonstrates that the costs of lockdowns may have outweighed the benefits. The lowest income brackets were, and continue to be, the hardest hit by lockdowns while the higher income brackets are mostly insulated from the economic downturn. Although mandated shutdowns were well intentioned, they disproportionately harmed the poor and exacerbated economic inequality worldwide.
The International Monetary Fund warned in April that inequality was likely to rise during the pandemic. However, the actual impact of the pandemic on inequality was grossly underestimated. With unemployment levels climbing rapidly and global poverty rising for the first time since 1998, it is clear that the pandemic has made a serious impact on economic inequality. Government intervention in markets further exacerbated the divide between those with higher and lower incomes.
Those with lower incomes are much more vulnerable to the closure of workplaces. Poorer income brackets are more likely to have jobs that cannot be performed remotely (e.g., construction, housekeeping, gig economy, etc.). The white-collar workforce, on the other hand, is largely insulated. White-collar jobs can easily move online and people who do these jobs can work from home. This shelters white-collar workers while leaving blue-collar workers behind, thus perpetuating inequality.
Due to the inability to work, the poor have had to resort to spending their savings and relying on credit in order to make ends meet. Households in the lowest income brackets have to spend the majority of their income on essentials, while households in the higher income brackets can save their money or spend on non-essential goods. When the lockdowns stopped most non-essential shopping, higher income brackets could afford to save while lower income brackets could not. In fact – a Harvard study found that consumer spending was down by about 20 percent for the richest quarter of Americans, compared with less than five percent for the poorest quarter. The ability to save puts higher income groups even further ahead of their lower income counterparts.
Renowned economist Frederic Bastiat once said that good policy analysis considers both the effects that are seen and the effects that are unseen. The seen effects of lockdowns are flattening the curve and slowing the spread of the coronavirus, but the unseen effects are important as well. The ever-growing divide between income brackets is a critical part of evaluating whether the lockdowns were worth it. Leaving behind the socially vulnerable and perpetuating income inequality is not sound public policy.
Susannah Barnes is a senior economics major from Midland, Michigan. Susannah has loved politics and policy since she began speech and debate in eighth grade. Since then, her passion for economic and political freedom has only grown. On campus, Susannah is the co-captain of the Debate Society and serves as the Executive Administrative Editor for the Grove City College Journal of Law and Public Policy. Additionally, she works in the Admissions Office and as a Public Relations manager and Teacher’s Assistant for the Economics Department.
Susannah interned at the Mercatus Center at George Mason University as a Media Relations Intern first through the Koch Internship Program in 2019 and again in 2020. Before that, she interned as a Communications Intern at the Mackinac Center for Public Policy. After graduation, Susannah hopes to work in communications for a think tank and get a graduate degree in economics.