Economic growth and investment in education critical to reducing inequality: Yale-NUS panel

Experts at the virtual Yale-NUS Global Affairs Lecture noted that creating productive jobs for the middle class is especially vital to the health of societies.
Experts at the virtual Yale-NUS Global Affairs Lecture noted that creating productive jobs for the middle class is especially vital to the health of societies.ST PHOTO: LIM YAOHUI

SINGAPORE - The Covid-19 pandemic has exacted a disproportionate toll on women, who risk dropping out of school and the workforce because of additional household responsibilities.

But while policies such as flexible work arrangements are helpful, what is critical in the long run is sustained economic growth and investments in education. These in turn create good jobs for the middle class and reduce inequality for all, not just women.

This was the conclusion drawn by experts on Tuesday (March 30) at the virtual Yale-NUS Global Affairs Lecture moderated by Professor Danny Quah, dean of the Lee Kuan Yew School of Public Policy.

Speaking on addressing global inequality, former World Bank chief economist and Yale University economics professor Pinelopi Goldberg said that during the Ebola epidemic in West Africa from 2014 to 2016, more girls than boys dropped out of school and were less likely to return after the epidemic ended - something which could also happen with Covid-19.

Due to widespread lockdowns and shuttered businesses, many women - who are overrepresented in services sectors hardest hit by Covid-19, such as food and beverage, retail and entertainment - found themselves out of work.

This is unlike past recessions, which tended to affect men more than women, she said.

"Traditionally, recessions hit the manufacturing sector harder where there are relatively fewer women than men. This time, though, it is different."

Prof Goldberg added that in low-income countries, this is compounded by an additional layer of women who are employed in the informal sector.

They are invisible to governments and not covered by formal employment agreements, which means they have no access to Covid-19 relief packages.

The stresses of additional childcare and housework also caused many women across the world to drop out of the labour force altogether.

A solution to this, she said, is flexible work arrangements coupled with aggressive childcare and eldercare policies. "Because if you work from home and don't have (good quality) childcare options, you're not going to be as productive."

But it is economic growth which is key to reducing inequality in the long run, as this creates good jobs and helps lower-income workers and countries level up, said international political economy professor Dani Rodrik from Harvard University's John F. Kennedy School of Government.

"It's also about the maintenance of a fairly open international economic system... and having a world economy that is open to trade and investment, and the sharing of ideas and vaccines."

He said that while economists tend to focus on income disparities at the expense of other forms of inequality, one cannot deny that income is a "great facilitator" of access to other dimensions of a good life.

For example, he said, unequal access to Covid-19 vaccines, with wealthy countries having more access than poor ones, is "a stark reminder that income matters a lot".

Participating in the Yale-NUS Global Affairs Lecture were (clockwise from below) former World Bank chief economist and Yale University professor Pinelopi Goldberg; moderator and Lee Kuan Yew School of Public Policy dean Danny Quah; and Harvard University's John F. Kennedy School of Government international political economy professor Dani Rodrik.  PHOTO: YALE-NUS COLLEGE

Prof Rodrik added that for people to have faith in globalisation, pressing issues such as climate change and creating good jobs must be addressed.

The latter, he said, has become a structural challenge for countries of all income levels, due to globalisation and rapid changes in technology.

Creating productive jobs for the middle class is especially vital to the health of societies, he said, just as climate change affects humanity in a direct and physical way.

"Much of our sense of who we are has to do with our work and how we contribute to society. There is no bigger shock to one's sense of happiness and satisfaction than losing a job, other than perhaps a medical emergency.

"So that's the reality and we need to work off that. Healthy societies and politics really rest on a growing middle class, and that is the basis of wanting to have productive jobs for them."

Agreeing, Prof Goldberg said that creating such jobs would not happen by simply bringing manufacturing and automotive plants back to the United States - a key prong of former US president Donald Trump's Made in America campaign.

"Not only is this not feasible in the long run, it's also inconsistent with efforts to address climate change, as these are heavily polluting industries," she explained.

In her view, the future is in the services sector, but the jobs should be highly skilled ones.

This means increasing human capital and investing in education, she said. "These are things that countries such as the US and Europe should prioritise.

"In developing countries, it's harder because the resources are often not there, which is why these countries need to rely on global cooperation."

Prof Rodrik said that countries which deal with the pandemic and other challenges effectively have high levels of social trust and trust in their government.

On this count, East Asian countries have generally fared better than the US and Europe, said Prof Goldberg.

She noted that not only did they have a lower number of deaths per capita, they also managed inequalities better.

"Nonetheless, there are too many differences across countries to take the lessons from one and apply to another. I hope that down the road, we will devote some energy to figuring out what explains the cross-country differences."