Did Lockdowns Push 100 Million People Into Extreme Poverty?

Gathering data on extreme poverty is difficult at the best of times, but it’s doubly harder (or well-nigh impossible) during a pandemic. Such data are typically collected via face-to-face household surveys, but these were put on hold last year.

In a study of 122 national statistical offices carried out in May of 2020, the World Bank found that 69% had completely stopped collecting data via face-to-face surveys, and a further 27% had partly stopped (leaving only 4% that had continued with normal data collection).

We therefore don’t yet have good data on the effect of the pandemic on extreme poverty. However, there are ways of estimating how many people are in poverty, using data from national accounts (i.e., GDP per capita). These data are not collected via face-to-face surveys, so it has still been possible to obtain them during the pandemic.

In order to estimate (or ‘nowcast’) the number of people in poverty, the World Bank takes the last year for which the full income distribution was known, and then shifts it left or right, depending how much GDP per capita grew between that year and the current year. (See the diagram on p.5 here.)

Using this method, World Bank researchers calculate that 97 million people fell into extreme poverty as a result of the pandemic. In the chart below, 97 million is equal to the difference between 732 million (the estimated number of people in extreme poverty) and 635 million (the expected number).

This “represents a historically unprecedented increase in global poverty”. Note that the increase was concentrated in the Middle East, Latin America and Sub-Saharan Africa.

Interestingly, the World Bank projects that there will be 21 million fewer people in extreme poverty in 2021. This represents a year-on-year change of –2.9%, which is approximately the same as the annual declines observed in the years before the pandemic.

This decrease in extreme poverty is somewhat unexpected, given that 2021 has seen some of the largest epidemics in low and middle-income countries. “Would these developments not suggest,” the researchers ask, “that poverty is bound to increase further in 2021?”

So why is poverty projected to decline? The researchers suggest that the lifting of lockdown measures may be a factor. In 2020, many developing countries responded to the pandemic by locking down major parts of their economy.

“These lockdowns decreased incomes and employment, causing an increase in extreme poverty,” say the researchers. Yet in 2021 “the appetite for lockdowns has been smaller”. As a matter of fact, the difference in the policy response between 2020 and 2021 is reflected in the Oxford Blavatnik School’s Stringency Index.

“In May 2020, on average 25 out of 27 low-income countries in OxCGRT had a stringency index value higher than 50, whereas in May 2021, on average 10 low-income countries crossed that threshold.”

Of course, lockdowns may not account for all of the 97 million people pushed into extreme poverty last year. But it’s plausible that they account for some. Even 50 million would be a massive figure to add to the costs side of the ledger.