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Economic Inequality Tearing the Middle East Apart

Economic Inequality Tearing the Middle East Apart

Extreme poverty exacerbated as coronavirus buffets region

The struggle to make a living for the world’s poor has been set back by over a decade by the coronavirus pandemic. Globally, an estimated 88 million to 115 million additional people were pushed into extreme poverty last year.

The deep divide between the rich and poor is proving as deadly as the virus. Rigged economies are funneling wealth to a rich elite … while those on the frontline of the pandemic … are struggling to pay the bills and put food on the table

It will take poor people approximately 10.5 years to reach their pre-pandemic economic levels, according to a report by released Monday by Oxfam International, a nongovernmental organization that develops programs to end poverty and injustice.

On the other hand, it took just nine months for the world’s richest 1,000 people (mostly white and male) to reset their fortunes to pre-pandemic levels, the study, titled The Inequality Virus, reported.

“The deep divide between the rich and poor is proving as deadly as the virus. Rigged economies are funneling wealth to a rich elite … while those on the frontline of the pandemic … are struggling to pay the bills and put food on the table,” Gabriela Bucher, executive director of Oxfam, said in a statement.

The Middle East is no exception.

“The Middle East suffers from a weak private sector with, for example, [many] small, family-owned businesses and from an informal economic employment arrangement,” Prof. Wifag Adnan, a professor of economics specializing in labor markets at NYU Abu Dhabi, told the Media Line.

The informal economy is not the underground economy. Rather, those working in it are remunerated with wages only, without social benefits or protection such as health care or unemployment insurance. It is not illegal; it is a less formal economic sector employing family members, youth, transients and other laborers with little control over their labor conditions.

In the region as in the world in general, gender inequality plays a major role, because women face greater obstacles in accessing economic opportunities.

“Women are much more likely to be in an informal economy such as working long hours for a family-run business and not getting ‘officially’ paid. There really is no way to track this informal economy; it is like a black box. It really is a key element of the MENA [Middle East and North Africa] region economies,” Adnan remarked.

The pandemic has only widened the gaps.

In Jordan, for example, almost 48% of the labor force works in the informal economy and is not covered by any type of social protection such as health care or social benefits.

“Paying these benefits is too costly for many businesses. To enact coverage, businesses pay 14.25% of the wages while the employee contributes 7.5% of the paycheck toward the benefits,” reported Ahmad M. Awad, director of the Phenix Center for Economic and Informatics Studies in Amman.

For instance, Jordan’s whole agricultural sector is informal. According to Awad, it employs 7-8% of the labor force, or some 150,000 people. In addition, he told The Media Line, practically all of the kingdom’s transportation industry employees – some 100,000 people – are part of the informal economy, as are close to 60% of those in the construction sector.

All those working in the informal economy do so without benefits. Likewise, the government coffers do not receive any of the potential social contributions, shearing off huge chunks of revenue that could go to enhancing fiscal policy.

Women comprise only 15% of the official workforce in Jordan, noted Awad.

“Whereas they do hold 44% of public sector jobs, there are unfortunately many constraints which make it hard for women to reach higher posts, and thus better wages,” he commented.

Nothing is going to change for Jordan in 2021, Awad posited.

Last week, the government submitted its budget for the year with the same fiscal and economic policies as before. There were no changes to anything, he said.

“Unfortunately, inequality will be increased in the future,” said Awad.

Ten percent of the county’s population controls 50% of the income, whereas the bottom 50% of Lebanon’s population has approximately 10% of the income

In Lebanon, economic inequality is a way of life, according to Nabil Abdo, a senior policy adviser at Oxfam covering the MENA region.

Despite an economic contraction of just over 19% of GDP in 2020, which itself followed a contraction of 6.7% in 2019, the country’s six dollar billionaires increased their bank accounts by a total of approximately $400 million during the pandemic, Abdo told The Media Line.

“Ten percent of the county’s population controls 50% of the income, whereas the bottom 50% of Lebanon’s population has approximately 10% of the income,” he reported.

Some 70% of wealth in Lebanon is owned by the top 10% of the population, he said.

“Whereas before we have had extreme inequality and it is really not new to Lebanon, today there is even more inequality in the country,” Abdo lamented.

The World Bank is predicting that Lebanon’s economy will take another hit in 2021, with a sharp decline of 13.2% that is above and beyond the past two years’ combined contraction of 25%.

The national currency fell in value in 2020 by close to 80%. Whereas one dollar equaled 1,500 Lebanese pounds in 2019, by the end of last year, the dollar rate fluctuated between 8,000 and 9,000 Lebanese pounds.

The people most affected are those who are paid in local currency, Abdo noted. This is because the country relies heavily on imports, and importers price their goods according to the black market exchange rate.

Women, who are more often found working in the informal sector, are among those drastically damaged by the pandemic in Lebanon. Abdo noted that there is no universal protection such as social security and when the economy grinds to a halt, they are the ones most hurt in the family businesses and in the private sector.

In addition, he said, “Soon we will witness austerity measures in the public sector. Women who work there will be negatively affected.”

It must be said that the rich are getting richer, and the poor are getting better services, whereas the middle class is being squashed in between

In Egypt, economic indicators show an unequal picture.

“Relative to the global scale, we are doing OK,” said Tarek H. Selim, a professor of economics at the School of Business, American University in Cairo. “Egypt’s GDP has grown by 3.6% during the coronavirus pandemic, and its currency is being stabilized.”

However, Selim told The Media Line, “It must be said that the rich are getting richer, and the poor are getting better services, whereas the middle class is being squashed in between, especially the lower middle class that are traditionally the intellectuals in our society.”

The most negative economic impacts of the pandemic, he said, are reflected in double-digit inflation, unemployment of just over 10%, fewer private investments, and reduced quality of life.

Inflationary pressures on the quality of life for average Egyptians are a big challenge. While wages have increased 7-11% annually, consumer prices have risen 11-36% annually during the same period.

This, Selim said, creates such a wide gap that it induces an accumulation of economic and financial stress on the typical Egyptian household.

The Middle East will be facing economic inequality for years to come.

For Prof. Adnan, this means the region’s inhabitants will have much to fear.

“For the elites, the fears will be political issues, while for regular people, they will be stress and social issues,” she said.

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