Lower paid workers key to consumer driven economic recovery

19 August 2020 (Last Updated August 19th, 2020 08:22)

19 August

China has been successful in controlling the Covid-19 outbreak and is expected to recover before the rest of the world.

The policies adopted by the government, however, may be increasing the wealth gap between high-income and low-income groups in the country.

Adam Tooze, an economist and director of European Institute, shared an article on how the Covid-19 pandemic is widening the wealth gap in China.

Wealthier people in the country have not been affected by pandemic as much as the lower income groups who are struggling financially.

The reason behind this uneven recovery is the policies adopted by the government, which has focussed on stimulating investment and construction, instead of providing direct cash to people as other countries have done.

The International Monetary Fund (IMF) has projected a 1.2% GDP growth for China but the policies adopted by the government will not help in consumption recovery, which accounted for 57.8% of GDP.

The low and middle income groups account for majority of the overall consumption compared to the high-income group.

The situation is expected to worsen as job losses increase, which will push the low income groups into poverty.

Meanwhile, in the UK, households have put non-essential spending on hold amid the uncertainty caused by the pandemic, while India could lose gains made in the last two years as 400 million educated workers are at risk of falling into poverty due to the pandemic.

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