How to help the poor amid COVID-19? Give them money, says Nobel laureate Esther Duflo
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In the United States and around the world, poverty is exacerbating the spread of COVID-19 and making it more deadly. Officials are pointing to economic inequalities and barriers to health care as leading reasons why the novel coronavirus is disproportionately affecting black and brown Americans. Lockdowns in countries like India and Zimbabwe have forced many to decide between the risk of the virus and the certainty of going hungry if they abide by social distancing orders.
There’s a new estimate that COVID-19, the virus and the response to it, could wipe out half of all jobs in sub-Saharan Africa. Researchers commissioned by the charity Oxfam also warn the pandemic could push half a billion people into poverty in countries that are already low-income.
As the international community scrambles to help low-income countries weather the pandemic, it’s not always clear how aid money will reach the people who need it.
MIT economist Esther Duflo, who won the 2019 Nobel Memorial Prize in Economic Sciences last year along with colleagues Abhijit Banerjee and Michael Kremer, says governments should start with direct cash transfers to individuals.
“There is no trade off in poor countries between helping people sustain themselves financially and getting the health conditions to improve; the two have to go hand in hand. Because if you cannot assure people that they will be able to eat in the future, then it’s going to be impossible for them to stay home,” Duflo told “Marketplace Morning Report” host David Brancaccio.
It doesn’t need to be a lot of money — just enough to get by while you’re staying at home and not working.
It’s especially critical for low-income countries to ensure people can buy basic necessities. If a segment of the population stops buying things like agricultural goods, it could lead to a much larger economic crisis, Duflo warned.
“What starts as a shock could snowball into a complete standstill for the economy, which would make it very difficult to restart once the health condition improves,” she said.
Before the pandemic, Duflo was telling governments — “a little bit too late and maybe not loud enough” — to establish infrastructure that would allow them to efficiently get cash to individuals in an emergency like today’s.
“Unfortunately, not all countries are at the level of readiness that I was hoping for them to get to before the crisis,” she said.
We’re seeing that play out in the U.S., where it’s unclear when many low-income people will receive their coronavirus relief checks.
Ironically, direct cash transfers might not be the best choice for wealthy countries like the U.S. Duflo pointed to the strategy adopted by some European governments, of paying the wages of workers who would’ve lost jobs due to the coronavirus, as better in the long run.
“In the U.S. I don’t know why we didn’t go this way,” she said. “That brings the much more complicated problem of getting the money to people’s bank accounts. And that means that people are now unemployed, which brings all of the insecurity that is going to prevent them from consuming and living again once it becomes possible from the pandemic point of view.”
COVID-19 Economy FAQs
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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