The COVID-19 pandemic and lockdown has exacerbated economic inequality in India massively. A recent Oxfam report found that the pandemic stalled the economy, forcing millions of poor Indians out of jobs. During the same period, however, the richest billionaires in India increased their wealth by 35%.
How concerned should we be about the increase in the level of inequality? Is the increase temporary or permanent? What policies should the government adopt in this situation to combat poverty? One way to answer these questions is to measure the rate of intergenerational economic mobility (IGM).
The rate of IGM refers to the likelihood of improvement (or reduction) of a given generation’s economic status relative to its previous generation. If IGM is low in a society, then there are enough reasons to be concerned about the increase in inequality in that society. This is because, in such a society, across generations, individuals’ economic status remains unaltered – the poor remain poor, the rich remain rich. Consequently, an increase in inequality is likely to be permanent. In such cases, for combating poverty, the government must adopt long-term policies which could empower the youth in poor households (for example, policies to improve their human capital).
However, if the opposite is true (that is, if IGM is sufficiently high), then there are relatively less reasons to be concerned about the current rise in inequality. This is because, in this case, across generations, individuals belonging to the lower end of economic ladder can easily climb towards the upper end. Consequently, a rise in inequality is unlikely to be permanent. In such situations, for combating poverty, it is sufficient for the government to adopt short-term policies (for example, removing barriers for the poor to entry into credit markets).
The rate of IGM is usually measured using income or education of individuals belonging to two successive generations (parent and child). Research shows both these variables are good indicators of economic status. For India, measurement of IGM using income is not possible due to unavailability of the required data. However, measurement of IGM using education is possible based on data from the Indian Human Development Survey (IHDS). This survey provides information on number of years of education of around 40,000 male household heads and their fathers.
Using this information, I divide both the generation of fathers and sons into four partitions: illiterate; literate but those who could not finish primary schooling; those who finished primary schooling and reached upper primary, secondary or higher secondary school but could not enter college; and those who managed to at least enter college. Then, for each of the four partitions, I calculate the likelihood of sons to ‘stay’ in the same partition as their fathers, and of them ‘moving’ to each of the other three partitions. The calculated quantities indicate economically how ‘mobile’ Indians are across two generations.
My analysis reveals that sons of fathers who are illiterate have 40% chance of being illiterate themselves, 22% chance of being literate but not finishing primary schooling, 35% chance of reaching upper primary, secondary or higher secondary school but not entering college, and only 3% chance of entering college. On the other hand, sons of fathers who have finished school and have at least entered college have 69% chance of finishing school and entering college, 29% chance of reaching upper primary, secondary or higher secondary school but not entering college, 2% chance of being literate but not finishing primary schooling, and no chance of being illiterate.
In sum, these figures suggest that sons of fathers who are illiterate have the maximum likelihood of being either illiterate themselves or becoming literate but not finishing school; their likelihood of entering college is dismally low. On the contrary, sons of fathers who have finished school and have at least entered college have the maximum likelihood of finishing school and entering college; they do not have any likelihood of being illiterate and very little likelihood of only completing primary school.
Further analysis suggests that these trends are stronger among the minorities than among the Hindus, and among the scheduled caste and tribes and other backward classes than among the upper castes. These findings indicate that not only is IGM remarkably low in India, but it is lower among those communities who live on the margins than among those who do not.
In light of this, it can be concluded that the increase in inequality in India due to the pandemic is likely to be permanent. Thus, for combating poverty, the government must undertake long-term policies that could help the next generation of poor households to move out of poverty. Further, the government should put special focus on the poor of minority religions and backward castes, who are likely to be hit hardest by the pandemic. Unless these steps are taken, the COVID-19 pandemic would evolve into a pandemic of inequality in no time.
Punarjit Roychowdhury is Assistant Professor of Industrial Economics at the University of Nottingham, UK. His research focuses on inequality, poverty, and gender issues. His research has been published in many international journals like the Journal of Business & Economic Statistics, Oxford Economic Papers, Oxford Bulletin of Economics and Statistics, and World Development among others. He also writes for leading Indian dailies. His pieces have appeared in Hindustan Times, Mint, The Telegraph, and Anandabazar Patrika.