Extreme Poverty in the Time of COVID-19

The short-term economic and well-being costs of COVID-19 have been severe. Though we hope the pandemic will be a temporary shock, in the interim it has pushed many vulnerable households living at the margins back into poverty. Due to lockdowns and social distancing measures, people have lost jobs and livelihoods, leaving them unable to pay for housing and food. Schools have been closed and some children may not return, shutting off one of the main pathways out of poverty for low-income children. Women and girls have been especially impacted by these school closures. Mothers at all socio-economic levels have dropped out of the labor force to supervise online learning and care for children and older relatives, and many will not reenter. Even before the pandemic, women and girls of reproductive age were overrepresented among the poor, making these setbacks all the more concerning. We likely will not know the full impacts of COVID-19 on poverty for a few years, as most poverty data comes from household surveys, which have been difficult to carry out during the last year. However, we do know that economic growth is the largest driver of poverty reduction. Conversely, economic recessions drive a rise in poverty, other things being equal. In 2020, however, other things were not equal; national and local governments were able to mitigate the impact of COVID-19 on their poorest people to varying degrees and assessing the economy-wide impact of these measures cannot yet be done systematically. What can be done at this juncture is to use new estimates for economic growth through 2030 to capture the potential impact of COVID-19 on poverty in the long run. While the poverty setbacks caused by COVID-19 have been severe, they are reversible. The global poverty gap, the amount of money it would take to hypothetically bring everyone in the world above the extreme poverty line if there were zero transaction costs, is around $100 billion and is set to stay at this level out to 2030.