Coronavirus and social inequality: How poorer Kiwis are set to bear the brunt of COVID-19

The effects of the COVID-19 pandemic could be long-lasting.
The effects of the COVID-19 pandemic could be long-lasting. Photo credit: Getty

As COVID-19 continues to spread throughout the country, poorer Kiwis are set to bear the brunt of the pandemic more than those with money, predicts a political economist.

So far there have been 797 confirmed or probable cases of COVID-19 in New Zealand, with one person losing their life to the virus. Worldwide the death toll stands at more than 46,000, with over 900,000 confirmed cases.

Although statistically older people - those aged over 70 - have been marked as being particularly vulnerable, Associate Professor Brian Roper, a political economist from Otago University, says poorer Kiwis are also at risk of suffering disproportionately from the pandemic - both in the short term and the long term.

Lower-income New Zealanders have both a higher risk of being exposed to the virus and also of suffering more if they catch it, he said.

"The survival rate is going to be much higher amongst those in higher-income households because statistically those in higher-income households are less likely to have pre-existing health problems, therefore more likely to be able to recover," Roper told Newshub. 

"Whereas, there is a much higher prevalence for pre-existing health problems amongst those in lower-income households."

Lower income households were also likely to be more crowded, making social distancing harder. And with those earning less often living week-to-week, they have to make more visits to public places like supermarkets, leading to an increased risk of COVID-19 exposure.

"For people on benefits and low incomes there's no way they've been able to stockpile foods to prepare themselves for the lockdown because they're always waiting for their paycheck or their wage payment or their benefit payment in order to buy next week's groceries."

"The effects are likely to be felt for a very long time"

As well as the short-term impacts on those sitting lower on the socio-economic ladder, the country is also likely to see long-term consequences in the political economy that will not only affect lower-income households but could also see more New Zealanders become poorer over time.

"From very early on, economists from right, left and centre have clearly recognised that this is going to dwarf the global financial crisis of 2008 and be much more akin to the Great Depression of the 1930s," Roper said. "You can't stall the global economic system for this kind of period and on this kind of scale without it having a major impact on economic growth and unemployment."

On Wednesday, Finance Minister Grant Robertson told the Epidemic Response Committee that the country's GDP would "take a serious hit", with Treasury also warning that unemployment could hit "double figures".

Economist Shamubeel Equab told the committee that the country is in "uncharted waters" and warned that many businesses wouldn't survive the lockdown and aftermath of the pandemic.

Roper says that historically major recessions have been shown to go hand-in-hand with an increase in social inequality, with unemployment tending to impact those on low and middle incomes the worst. 

"Those on low and middle incomes are less likely to have savings, they're much more likely to be more highly indebted - there's a range of different factors at play there," he said.

He estimated that if a vaccine was found within the next 18 months - as experts have predicted - an economic recovery could take place here within a few years' time.

However, the economic and political effects of the pandemic are likely to last far longer.

"I think that the effects are likely to be felt for a very long time," he said.

Coronavirus and social inequality: How poorer Kiwis are set to bear the brunt of COVID-19

If governments around the world respond like they did after the global financial crisis in 2008 - as they appear to be doing so far by offering huge fiscal stimulus packages - then paying back the debt accrued will be the next challenge.

Already the Government here has injected billions into the economy to keep businesses afloat, and experts say even more will be needed over time.

Those massive economic stimuli are not consequence-free, however, warns Roper, saying future Governments will have to make some hard decisions about how to pay that money back.

"In order to reduce that public debt, there's going to have to be fiscal austerity that's going to last at least a decade," he said.

"And if that fiscal austerity involves reduced government social spending in areas such as housing, health, education, welfare and superannuation, that is going to impact much more severely on low- and middle-income households than high-income households.

"My view is that we are likely to see economic recovery kicking in within the next two to four years and that will lead to a substantial reduction in unemployment. But what's likely to last much longer than that is a programme of fiscal austerity to pay down debt - and that is going to have ongoing impacts on social inequality."