The experience and impact of Covid-19 calls for government to use measures beyond GDP to shape our recovery, level-up, and ensure opportunities for everyone
9 Jul 2020
Rosie Gloster, Senior Research Fellow
This year is not turning out as predicted. Our routines, livelihoods and family lives have been turned upside down. Some of us have found ourselves unexpectedly without work, others have been furloughed and some have continued working, perhaps from home. The effects and experience of Covid-19 have been shaped by personal circumstances, and a sense that we are riding the same storm in very different boats. Yet in many respects there has been a new sense of collectivism; by working together the virus can be overcome. And a light has been shone on the ‘key workers’ in our society – often those in low-paid work. The crisis has collided with, and exacerbated existing inequalities: in health outcomes, in who provides unpaid care, income from work, and access to accommodation. These inequalities can be viewed through various lens: gender or ethnicity for example.
The UK entered the Covid crisis with a high degree of inequality when compared to other developed countries: not just in relation to income, but also in household wealth. Regional inequality was also higher in the UK than any other developed nation. High levels of income inequality raise social, political and economic concerns. They distort economic incentives, undermine social mobility, and tilt democracies in favour of powerful interests. Inequality tends to slow GDP growth, and people with lower incomes are prevented from realising their potential. The divergence in household income in the UK was forecast to continue prior to the Covid crisis, with disparities in the increase in real earnings between occupations and relative cuts to working age benefits being the two drivers of this. With the impacts of Covid falling unequally, these predictions will surely be exacerbated without action. Growth needs to be inclusive and now is the time to act.
After the Second World War there were the major reforms, with the establishment of the NHS and welfare system. As we move out of lockdown, this is the moment to take stock and consider the kind of society we want to return to. What have we learned from the experience of the last few months? How can the current government deliver their promise of ‘levelling-up’ our regions, and our society for the decades to come?
We should change how we measure economic success. The way we choose to measure our economy determines the perceived value and importance placed on various aspects by government during the policymaking process. Gross Domestic Product (GDP) is the most well-known and used economic measure and is likely to fall in the coming months. The sharp fall in UK GDP in April as a result of lockdown was well publicised. Which other measures should we now also use to express the value of our work, and how we live? Which measures deserve equal standing to guide government and policymaking to ‘level-up’ society?
This discussion began in the years following the 2008 crash and recession where employment growth was largely built on precarious forms of employment – a growth in zero hours contracts, self-employment and the gig economy. Stigliz, Sen and Fitoussi discussed the broadening of national measures to include GDP alongside measures of inequality and economic vulnerability, wellbeing and sustainability is a ‘dashboard’ to inform economic and social policy making. The New Economics Foundation also later discussed five complementary measures to GDP, including measuring the quality work, rather than solely the number of people in work. New Zealand has been experimenting with this in recent years and developed a Living Standards Framework; a set of 12 well-being measures based on the idea that human, social and natural capital alongside financial capital provide the basis for intergenerational well-being. Scotland too through its National Performance Framework sits GDP alongside several other measures of progress.
As we aim to get our country back to work through active labour market and training and skills programmes, let’s also consider how we will measure our success. We have demonstrated renewed togetherness and understanding of the importance and our reliance on many low-paid occupations in lockdown. Let us now build on this revived sense of community and appreciation of the roles we all have in society, and how they are intertwined in order to move away from simple economic measures.
We should build and use a broader set of measures to monitor our economic and social progress which better reflect the wider determinants of quality employment and wellbeing. This should include measures of financial security, work-life balance, secure work contracts, and income inequality. These measures should be routinely analysed for regional differences, as well as differences between demographic groups, such as gender, disability and ethnicity, to highlight imbalances and identify opportunities for ‘levelling-up’. In identifying these new measures we need to avoid simply using a new narrative for an old problem of inequality, but be genuinely focused on increasing wellbeing and providing opportunities for everyone to get on, holding onto the importance of caring for the collective and valuing of low paid essential workers brought to the fore by Covid-19.
Any views expressed are those of the author and not necessarily those of the Institute as a whole.