The COVID-19 pandemic and polarisation of income distribution in South Africa

Abstract

A number of reports have shown that workers with certain characteristics are disproportionately affected by the COVID-19 pandemic. Since these characteristics are associated with vulnerable workers, we hypothesise that the income distribution in the pandemic era will be polarised compared to the pre-pandemic period. This article compares the pre-COVID income distribution (February 2020) with the one that prevailed just after the hard lockdown (April 2020). Consistent with the hypothesis, the result shows evidence of polarisation. Disaggregating the analysis by worker characteristics, we find that the polarisation was stronger in vulnerable groups. Our decomposition result suggests that, apart from job losses, returns to gender and job characteristics explain the location and shape differences in the COVID-19 era income distribution. Although this analysis only looks at the short-term effect of the pandemic on income distribution, the result suggests that the structure of labour markets in developing countries is not conducive to a future of work where disruptions (or pandemics) may become more frequent.