"One country, two crises: inequality and COVID-19 in Panama".

Elpidio González

Elpidio González holds a degree in economics from the University of Panama. He has conducted research in the area of agricultural economics and labour markets. He is currently studying for a Master's degree in Agricultural Economics at the University of Buenos Aires.

Danilo Rivera

Economist, graduated from the University of Panama with almost 4 years of professional experience. He is involved in studies, research and has even participated in the elaboration of the book "Resilient Fiscal Rules in Latin America" and the Journal of Scientific Initiation of the UTP "The importance and prices in the rice production chain during the period 2001 - 2014".

During the past year, especially in the second half of the year, Latin America was the epicentre of multiple protests and social outbursts unprecedented in recent history in countries such as Chile and Colombia. One of the main motivations for taking to the streets to demonstrate the discontent accumulated over decades was, directly or indirectly, an issue that is increasingly at the centre of public debate: economic inequality. However, no matter how much this issue is discussed, statistics on inequality do not transcend: in most of the region's countries they have remained - in the popular imagination - nothing more than data that are presented under the aegis of some political extreme.

To this recipe of economic inequality and its denial was added the unexpected and powerful pandemic ingredient which, given its particular characteristics and the unusual reactions of governments to contain it, has ended up shockingly revealing the mirage in which some people continued to live. The data on economic inequality are no longer simply statistics, but a concrete reality that reveals the glass structure on which our economies rest, and in which the well-being of a considerable part of the population is at stake.

It is widely known that Latin America is the region of the planet with the greatest inequality in income distribution. According to ECLAC statistics, in our region the poorest quintile of the population receives 4.7% of the income, while the richest quintile receives 51.6%. In other words, one segment of the population receives 11 times more income than another. Through official data it is possible to demonstrate how in the midst of the pandemic, being at one of the two extremes of income distribution makes the difference between life and death.

In recent years, the Panamanian economy had one of the most dynamic performances in the world, reflected in the development of colossal infrastructure projects and low unemployment rates over a considerable period, which, although it favoured part of the population, did not correct the enormous gap between the extreme deciles of income distribution: according to the most recent ECLAC data, Panama is the second country in Latin America with the largest income gap between the first and tenth decile. Even under this scenario, the narrative has been promoted that the effects of the pandemic "impacts us all equally", that it "does not recognise social classes", or even that "the virus is democratic". The truth is that the world is facing a health emergency that is reproducing an unprecedented economic crisis whose impact varies according to income level.

Undoubtedly, the situation experienced by the poorest decile (1D) in Panama, which receives 1.1% of the income, will not be the same as that of the richest decile (10D), which obtains 37.3% of the national income. But this gap is even wider if we take into consideration only the distribution of labour income, whose share is 0.6% and 36.7%, respectively.

Through an analysis of the Household Survey, we can observe other contrasts between the two extremes of the population, which will undoubtedly determine people's material well-being during and after the current conditions. In terms of unemployment, we estimate that 9.4% of the Economically Active Population (EAP) in the poorest decile were not engaged in the labour market, in contrast to the 2.9% of the richest population who were unemployed.

If we look at the educational landscape, we find an abysmal difference: only 3% of the EAP in 1D have higher education, compared to 60% in 10D. This academic divergence is a determining factor for the most disadvantaged to be able to work from home, especially when the relationship between telework and educational level has been proven (Mongey & Weinberg, 2020). This exposes the participation in public and private employment at the two extremes of society: while the public sector occupies about 0.8% of the EAP of the poorest decile, in the richest decile 31.7% of the EAP is linked to the public sector; regarding the private sector, 14.2% of the labour force in 1D is linked to the private sector, a tiny figure compared to 40.6% in 10D. These divergences are also expressed in the level of income: the median monthly wage we estimate for the first decile is $78.2 per month and $2,222 per month for the tenth, i.e. 28 times higher for the better-off. These figures refer to labour income, and in the first case it is necessary to take into account that probably - according to economic targeting policies - a significant percentage of this population is covered by some kind of conditional cash transfer programme.

Since the appearance of the first case of coronavirus in Panama on 9 March, several companies decided to implement teleworking. On 21st of March, the closure of non-essential businesses was decreed, and on 25th of March, a mandatory quarantine was declared becuase of the spread of the virus. In other words, a fortnight passed between the detection of the first case and the implementation of compulsory isolation measures. This data is relevant because 51.4% of the poorest people in the country are self-employed, and 29.2% are family workers; in other words, 80% of the EAP of this segment of the population is in a clear situation of labour vulnerability, compared to the 14.1% of workers in the richest decile who work in these categories, for obvious reasons, in better conditions. In other words, the livelihoods of a large percentage of the lower-income population depend on casual income.

A recent article published by The New York Times analysed the physical commute of 15 million people in different US cities using their smartphones, and found that higher-income people reduced their mobility three days before the implementation of physical distancing measures, while for lower-income people, the decrease in mobility occurred three days after the implementation of physical distancing measures; This is empirical evidence that, in addition to benefiting from greater material well-being during quarantine, higher-income households also have a much lower level of exposure to the virus, as their situation allows them to take a break from their work or carry out their work remotely. This conclusion could be very similar in Panama if the data presented above are taken into account, as with a higher level of informality, workers in the first decile were more exposed to the virus in order to safeguard their income.

This pandemic, as we mentioned at the very beginning, does not affect us all in the same way; neither the salaried staff who have the benefit of working from home, nor those who, because of the pandemic, have lost their daily livelihoods. And certainly not those who are now part of the essential workforce, who are more likely to be infected. The aim of addressing the issue of economic inequality is not to generate internal disputes in society, but to nurture a debate that will allow us to make the structural changes that a significant part of Latin America's population is rightly demanding.

Konrad-Adenauer-Stiftung e.V.

Regional Programme ''Alliances for Democracy and Development with Latin America (ADELA)''.

Albrook 16, Cl. Las Magnolias, Ancón

Panama City / PANAMA

Bibliography

Economic Commission for Latin America and the Caribbean (December 2019). Household Survey Databank. Social statistics.

National Institute of Statistics and Census (March 2020). National Accounts. Retrieved from:

https://www.inec.gob.pa/publicaciones/Default2.aspx?ID_CATEGORIA=4&ID_SUBCATEGORIA=26

National Institute of Statistics and Census. Continuous Household Survey 2018.

Valentino-DeVries, J., Lu, D., & J.X. Dance, G. (April 3, 2020). The New York Times. Retrieved from https://www.nytimes.com/interactive/2020/04/03/us/coronavirus-stay-home-rich-poor.html

Mongey, S., & Weinberg, A. (March 2020). Characteristics of workers in low work-from-home and high personal-proximity occupations. Becker Friedman Institute. Retrieved from: https://bfi.uchicago.edu/wp-content/uploads