EQS-News

From zombie companies to urban mobility: Swiss Re's SONAR examines the emerging risks set to shape a post-COVID-19 world - Seite 2

Income inequality and the growing gap between rich and poor
COVID-19 lockdowns widened the gap between rich and poor. While many white-collar workers were able to move to home offices and continue their work, lower-wage face-to-face service sectors such as retail, gastronomy and tourism experienced high unemployment. In the US, for example, leisure and hospitality unemployment rose from 5% at the start of 2020 to 40% in April 2020. In the UK, unemployment in these sectors peaked at 10.9% in the three months to January 2021. This was significantly lower than the US owing to the UK government's job retention scheme.

The income inequality gap is not only an issue for developed economies. According to Pew research, the growth of the global middle classes was 54 million people fewer than projected in 2020, with 60% of that reduction in India alone[i]. In countries where government finances allowed for aid packages, lower-income households fared better. In the US, stimulus measures increased the incomes of low-wage workers during the first few months of the pandemic.

Of particular concern is the disproportionate impact on younger generations already struggling with pressured labour markets and lack of career opportunities. An unemployment rate of 10% for people under 25 remains elevated for the US, while in the UK this figure stands at 12%.[ii]

The reduction in income for many sections of the global community threatens the recent growth in insurance demand seen in many markets. It also places the emphasis on the development of affordable private insurance solutions to fill the protection gap for middle and lower-income segments.

Zombie companies: the dilemma of withdrawing government stimulus

As COVID-19 swept across the globe, many governments enacted financial relief programmes to prevent corporate bankruptcies. In the US company bankruptcies were down by 5% year-on-year in 2020, a reversal of the trend of increasing rates from 2017 to 2019. Government stimulus programmes helped many viable companies stay afloat, however stimulus measures have also propped up non-viable firms: so-called 'zombie companies".