In a paper published by the Levy Institute, Brazilian economist, New School alum, and SCEPA Senior Fellow Laura Carvalho worked with Luiza Nassif Pires—also a New School alum— and Eduardo Rawet, to develop an index to assess a family’s ‘social vulnerability’ to the virus. The index notes the specific living and working conditions which could leave a family at a higher risk of contracting the virus, to analyze how unequal conditions correlate to infection and mortality rates in Brazil. The high vulnerability disproportionately occurring in low-income, less educated, and non-white communities correlates strongly to their increased rate of infection and mortality.
"… it is clear that when COVID-19 reached Brazil it found a structurally unequal country, where certain social groups were more vulnerable to infection, less likely to have access to healthcare, and more likely to develop severe illness…” the authors write.
Race, however, is independent of class. White people at every income level are less vulnerable to the virus than people of color. “Without a strong policy response to support vulnerable groups, the COVID-19 health burden in Brazil will be necessarily higher for racialized, poor, and less-educated populations."
Another main finding, Carvalho says, is that COVID-19 deepens inequality in the absence of government aid. Research shows that early on, inequality was worsening as the virus was first spreading. Once the government’s cash transfer program, “Auxílio Emergencial,” was implemented, people started receiving resources and the gaps shrank to pre-virus levels. However, the authors expect deepening inequalities to return once the program ends this January and, job insecurity and healthcare costs, etc. continue to disproportionately plague low-income, non-white, less-educated groups.
Carvalho’s policy recommendations include increasing social programs; at a minimum she hopes for some middle ground between the current cash relief program and the harsh austerity measures coming this winter. Ideally, the authors recommend expanding the current cash assistance program as well as implementing policies to address other dimensions of inequality, particularly those rooted in structural racism.
Guests
Teresa Ghilarducci, SCEPA Director and Professor of Economics
Teresa Ghilarducci is the Director of the Schwartz Center for Economic Policy Analysis (SCEPA) at The New School. She joined The New School after 25 years as a professor of economics at the University of Notre Dame and 10 years as director of the Higgins Labor Research Center at the university. Her latest book, co-authored with the Blackstone Group’s Tony James, argues our financialized pension system destabilizes the macro economy and fails to provide equitable, adequate and efficiently delivered retirement income. It outlines a bold policy vision to create Guaranteed Retirement Accounts (GRAs) for all American workers. Her research areas concern automatic stabilizers, financialization, and labor market dynamics. Ghilarducci holds a PhD from the University of California Berkeley.
Laura Carvalho, SCPEA Senior Fellow and Asst. Professor of Economics
Laura Barbosa de Carvalho is a Brazilian economist, associate professor at the Faculty of Economics and Administration at the University of São Paulo. Carvalho has a master's degree from the Federal University of Rio de Janeiro and a doctorate from the New School. Her main research area is macroeconomics of inequality, focusing on economic development, income redistribution, and private debt. Her 2018 book Valsa Brasileira: Do Boom ao Caos Econômico, which analyzes the growth and subsequent crisis of the Brazilian economy starting in 2014, became one of the country's best sellers that year. Laura has recently worked on the distributive impacts of fiscal policy, multiplier effects of social benefits and the relationship between wage inequality, employment composition and consumption patterns.
Full Episode Transcript
— INTRO —
Teresa: Laura. I am so happy to see you again. And so glad that you've decided to be interviewed for our super website and our super community.
You have been called the Paul Krugman of Brazil and so I'd like to hear a little bit more about this, but today I want to talk about your very important, really pathbreaking paper on how cold it is affecting Brazil.
You have pointed out that it has caused a lot of inequality and we're spotlighting the same trends in the United States. We're seeing that there's severe disparity and how the SARS CO-VE2 affects the disease path of based on race, class, and gender and it seems as though you have found the same thing in Brazil. Can you tell us about how COVID- 19 disease is affecting people in Brazil?
— FINDINGS —
Laura: Yes. Well, first of all, thank you. Teresa, for inviting me for the interview and to join SEPA again as Senior Fellow. Well Brazil, such as the U.S. has very deep structural inequalities, even deeper than the U.S., even though the U.S. has been heading there in the past few decades.
And also, to make it worse, Brazil was coming, before the pandemic, from a long period of economic crisis and basically austerity since a deep 2015 and 2016 recession. So, Brazil was basically under stagnation and inequality was already increasing in the country before the COVID-19 crisis actually hit us.
So, unemployment was very high, above 11%. That's maybe a difference between what happened in the U.S. and what happened in Brazil. Informality in the labor market was basically touching half, almost half of the labor force. So, this of course left us in a very fragile environment, both structural issues and more short term, say in the past few years, path that we were taking, right?
And so of course when we, when we combine these issues with also a policy response that was very ineffective, both in the health front and in the economic, social spheres. So, both Brazil and the US have presidents who denied scientific recommendations, who clashed with state and local authorities, who were trying to implement lockdown measures. So, all of this of course made us one of the global leaders and one of the global epicenters in the number of cases and in the number of deaths, right at the beginning. I mean, after a few months, the pandemic started here.
Brazil is still in a plateau, that is basically a permanent plateau in which we get close every day to 1000 people per day who died reportedly from COVID-19. This number may be even more underestimated here in Brazil than in the U.S., given the lack of testing and other issues that have affected this.
So, of course, the situation is tragic and dramatic and what we decided to do in this paper was look into one of the dimensions there. Basically, how inequality has affected, in different aspects, how inequality has affected the number of infections and cases, and also the other way around. So how did the pandemic affect inequality and how did the policy responses neutralize some aspects of these pressures on inequality and poverty that the crisis has provoked? And so, this was basically the idea.
Teresa: Um, well, I really liked the paper. It was very easy to read. I recommend it to everybody. And by the way, we're speaking today, today is September 10 2020. So, we're talking about the beginning of the fall of 2020.
What I liked about the paper is the efficiency of all the information you packed into your social vulnerability index. And I guess every household in your sample is assigned a vulnerability index. What question were you trying to answer when you constructed the index and what did you find?
— METHODS AND CORRELATIONS —
Laura: Okay, well, so basically the first idea was to look into the factors that may leave people more vulnerable to infections by the virus. So before entering the other side of the story — which is how access to health and other issues which may lead to more severe cases of the disease — here we started by saying, “Okay what are the things that make people more subject to be infected and less able to stay at home and things that may make people at the top of the distribution more protected in a situation like this?’ Right?
So, what we did was to look into two dimensions of that. On the one side, working conditions. So for instance, how far do you need to travel and what is the mode of transportation to your work? The type of occupation that you have, is it considered by the government officially an essential service that had to continue during the first stage of the pandemic? So that already entered in the index as something that increases vulnerability.
And then the second part looks into living conditions. So basically, what is the number of people that share a bedroom in your house, right? Do you have access to piped water and sewage systems? Because this is a big issue in Brazil. We started with a problem. We started with all these recommendations, you should wash your hands, etc. And then in the northeast of the country you have states — and even in the southeast when you go to poor neighborhoods and peripheries in large metropolitan areas — you have a lot of houses that do not have access to clean water, to piped water and, of course, that increases a lot the likelihood of being infected.
So, the index basically synthesizes this information into just one number. And what we were able to find is that this index correlates strongly with the number of cases and death in Brazilian states. And we also show that this correlation has increased over time in Brazil, as these factors have played a large role, given that the pandemic actually started with the elites who were traveling abroad, etc. And then it was spreading and while it was spreading, social vulnerability started to play even more of a role, at least when we look at these correlations.
Right, so this was an interesting finding. And it happens up to a certain point, after the certain point the correlation starts to fall. Which can also be due to the fact that the most vulnerable people had such a large rate of infection that, of course, the rate of infection started to fall over time. So, this was really striking and then of course we have another part of the paper, another section that actually looks at access to health and things that also play the role, but that are not related to this risk of infection. But also play a role in terms of inequality and the COVID-19 effects.
Right, and so we looked into this data as well. We then start to look into how the crisis has affected this data and we found very strong racial and regional aspects into social vulnerability and the number of cases and deaths. Also, the hospitalizations and the use of ventilators as you move into the most severe cases of the disease, you see how these inequalities play an even—
Teresa: —more right, right with a with a rationing of medical supplies and care. You know there's something in the paper that I didn't see quite at first, but what you said which makes me quite alarmed, and that is that scientists and even the Center for Disease Control, have really emphasized that we're going to have more of these kinds of diseases because elites are traveling and coming back home. So, your paper and your index seem very valuable for the next pandemic and the next Zoonotic disease. So, it looks like it's going to be a workhorse of an index. Do you expect it to be?
— RACE AND GENDER —
Laura: Yes, I actually, we were interested in looking at how these correlations between our index and the current pandemic evolves over time, we can update that. It's also true that we have observed something that is quite surprising for us, which is average vulnerability, as measured by this index is higher for non-whites than for whites in Brazil, even when we moved towards the top of the income distribution. So, of course, these differences fall as you move from the bottom to the top, but they're still very high at the top. Meaning that race still matters even for say ‘rich people’ when it comes to income, right.
Of course, the top of the distribution here is not exactly rich people necessarily, but this shocked us a bit and I think we should probably look into this more. Because as you said this pandemic has this double relationship to inequality, right— it's aggravated by it and it also exacerbates it. And so, it leaves us in a situation in which we're even more vulnerable to another shock and to another pandemic, or to even other types of shocks that may hit us. Right, so, I think this is clearly an ongoing an ongoing project. Yes.
Teresa: Yeah, that's very exciting. We're finding independent racial effects across the board in the United States too which you know of, you know, that wealth and such, cannot overcome [the race factor]. It's a really great paper. So, what I see is that race certainly is independent factor, you know. Besides being poor being correlated with race, what about gender? What about women in this pandemic and Brazil?
Laura: Well, of course, when we look at the number of that I mean, globally, we see that women are not showing as much severity in terms of the number of the cases. The women that are infected are not as vulnerable to dying as men right. This is this is clear everywhere. But if you look at the rates, the vulnerability to infection and other economic effects of the crisis, gender clearly shows up as an important factor for these inequalities. So basically, women are more likely to be employed in services that are both vulnerable to being exposed to the to the virus and also vulnerable to job losses and income losses in the current context, right. So, we have observed an increasing wage inequality, so labor income became more unequally distributed after the shock after the pandemic shock.
Even though a program, a cash relief program that was approved by Congress here in Brazil during the pandemic, a substantial program, it was an income transfer that was able to neutralize the increasing inequality fully during the period in which it was implemented. We know that it won't last. But in any case, wage inequalities have increased and these wage inequalities have to do with the fact that sectors that employ lower skilled workers were exactly the ones most affected by the measures and the responses, and also the crisis itself.
And so of course, women tend to pay a higher price. And that's not even to speak [fully], because we don't treat in our paper — the other effects, [such as] women who are having to deal with care [work], together with their [wage] work [or those who] are exiting the labor force. And this is also clear in Brazil I've seen data on it already. I think this is a global phenomenon. Yes.
Teresa: Yes, it is global it's happening in the United States, we're calling it a She-recession, where women are much more vulnerable to lay off, much more vulnerable to have to do more unpaid work, much more pressure to quit work to take care of the children who are at home who aren't in schools, both in Brazil and the U.S.
— POLICY AND CO-AUTHORS —
Teresa: As the disease progresses in Brazil. You've already told us that you're getting some herd immunity, you know, in some sectors. But I'm gleaning from your comments in your paper that the social inequality caused by the special circumstances of this disease won't go away, that somehow, it's building in some permanent structural inequalities. Can you expand more on that how the disease itself is exacerbating or making worse the inequalities that were already there?
Laura: Yes. Well, basically Brazilian GDP, of course, is falling dramatically as everywhere else. We were able to attenuate a little bit this fall because of the cash relief program. As I said, it's something that basically touched 70 million Brazilians, it's huge. It avoided an income loss for the bottom half of the population. It wasn't an initiative of the government. It was basically pressure of civil society on Congress that was able to approve it.
But then, of course, when we look at the data we have to separate what is the effect on the labor market from the effect on total income, because the cash relief program is helping to prevent the rising inequality at the moment. But the value that people, the amounts, that people are receiving is already being cut by half from September on until December. And then in January, this is over and we're back to austerity. So, of course, this inequality that we're seeing in the labor market will also appear in the total income data in next year for sure.
Poverty levels were also very reduced due to the cash relief program. But then that's also going to show up when this ends, right.
And in fact, the government has already announced its budget for next year and we're back to basically very strict fiscal rules, we have a spending ceiling, they're going to be budget cuts in several important areas, including health. And there's no space whatsoever for expanding social protection, continuing at least an intermediate type of social benefit that could be in between what we have now with the cash relief and what we had before. with the existing programs. Nothing of that is possible, given our prospects in the future budgets. So yes, we will see a rising inequality and of course that rising inequality will have a gender and racial dimension, as it's usually the case.
And what's even more tragic is that the inequality was already increasing in Brazil since 2015. We had a reduction in inequality in the 2000s, when the commodity price boom was there and distributed policies have been made. But this is clearly [far] back and we're basically losing very fast, all the gains in terms, especially in terms of a reduction in wage inequality that we had in the 2000s.
Teresa: Yeah. So, post vaccine. You're going back to pre-disease policies that are creating the inequality. It's not just the condition of Brazil and your population, its policies that are creating the inequality. And nothing about the disease policies have even address those structural issues. Yeah, looks very similar to the United States.
Oh, I would love to know more about your co-authors because you didn't write this paper, like many of us don't write our papers by ourselves. Can you tell me more about your co-authors?
Laura: Of course, yeah. So basically, they're two Brazilian economists, Luiza Nassif Pires, who is also a New School alumnus who I have worked with before. Even before she joined her PhD program at the New School I worked with her in Brazil, both at the University of Rio and when I took my first job as Assistant Professor, she actually worked with me on a research project at the San Paulo School of Economics.
She's now a researcher at the Levy Institute in upstate New York, and she had done work similar work for the U.S. So, she had published a paper on social vulnerability inequality and COVID-19 in the U.S. I read the paper and I said, ‘Okay, Liza, we should probably do that for Brazil. Inequalities are even deeper in Brazil, we may be able to see even stronger results.’ And so that’s basically how the paper came to exist.
And Eduardo Rawet, who is a previous student of mine, he was actually a Master's student I supervised his thesis on wealth inequalities in Brazil. So, someone who worked in the topic, and he is now starting his PhD at the American University in Washington, DC. Well, he's still not in Washington, because he's been prevented because of the crisis, but he's already taking classes there. And we invited him to join.
Teresa: It's just points out how generous and generative you were when you were at the New School as a student, Laura, always generous looking out for people to build them up.
I think you improve the lives of everybody you touch it seems, and I certainly can see it in this dimension, when you work with younger people. How is your own work shaping up? What is your intellectual life look like in the next five years?
Laura: That's a difficult question, I mean what's happened with me since I finished the PhD at the New School is that I went more and more towards this intersection between macroeconomics — which was my basically is my field, my major field— and inequality. Right. And I'm turning more empirical, I would say, than I was before I was doing more theoretical work. So, I mean, this I mean I say that I'm doing macroeconomics of inequality which I'm not even sure it's a field.
Teresa: I think you just made one up, right.
Laura: And this is really where my research has been focused since then. Which includes topics such as the distributive impacts of fiscal policy, the relationship between unemployment and inequality, the impact of inequality on consumption and fiscal multipliers and so on. So, this is really what I want to do in terms of research is get more and more there.
I want to maybe even put together things that include micro econometrics and macroeconomic impact analysis. I'm trying to push my students to go there, too. So, this is where I want to be in terms of research. I've just created a research group at the University that is actually has other two professors. One of them is another New School alum, Fernando Rugitsky.
Teresa: Oh, yeah.
Laura: He is now my colleague, he’s also in this group. Giberto Lima, who is a macroeconomist, is also in this group. We have several students there and we're starting to do some projects. And I’m now doing something for the ILO, on multiplier effects of social benefits. And we're starting other things, we just got a grant from Open Society Foundation for basically proposals for a green and inclusive economic recovery from COVID-19. So, this is really exciting in terms of the work environment to actually get people working with me. I like this team type of work.
— THE ROLE OF AN ECONOMIST —
Laura: But then I mean on the other side, I have also engaged a lot in the public debate in Brazil outside of the university in the past few years. It started when I started to write weekly for the largest resident newspaper. I did that for several years and that sort of brought me to another side of being an economist, which is also trying to communicate economics for a more general audience and I came to like that a lot, which means I'm also writing books. I actually published one during the pandemic on the COVID-19 crisis and the role of the state during this crisis, is my latest book. So, I'm trying to speak to more and more people outside of academia, and I feel that that's also something I'll always be doing.
It's in a way it has a purpose, which is to bring society to the economic debate, which is always so technical and pushes people away and I feel that’s also part of the problem in terms of why our policies are decided behind closed doors and with these apparent technical explanations with no possible alternatives. And communicating, bringing people into the debate is also something that I think may help and that I like to do and I'm learning to do. It's not easy economists we’re trained to speak in a certain way which basically pushes people away and it's a learning process to learn how to even say things and make ourselves understandable.
Teresa: Oh Laura, so exciting. I like the two phrases you said just to wrap up is that you are attempting to almost change your own speech to make sure that society is brought into the technical discussions of economics.
And the other scholarly thing that you said, that I think has a future and I will encourage and help in any way I can, to make the macroeconomics of inequality a sub-code under the Journal of Economic literature code. I mean, that is a how we classify our knowledge is a political process. We have an economist here, Darrick Hamilton — also a Senior Fellow of yours now, a colleague of yours, Darrick Hamilton — who lobbied the economics profession to have a sub-code called economic stratification. So, it's not unreachable and I think it's very important for the profession. So, both you're serving the society and you're also serving our profession, which of course is part of our society.
I really appreciate the time that you've taken to talk about your paper and to the broader project.
Laura: Thank you so much, Teresa, it was great speaking to you.
Teresa: Thank you.
