The Matthew Effect under the epidemic refers to the fact that after each pandemic in history, the wealth of society will be more concentrated at the top, that is, the richer the rich, the poorer they are.
On December 13, 2021, the latest research released by the UK think tank New Economy Foundation (NEF) shows that:
Since Christmas 2019, the annual income of the wealthiest households in the top 5% of the UK has increased by more than £3,300;
In contrast, the disposable income of the poorest households in the bottom 50% of the UK fell by £110 a year.
According to the British media, as a result, another 300,000 people in the UK have been trapped in poverty due to the epidemic (in the UK, poverty is defined as "income less than 60% of the country's median income").
NEF also said that although the UK government has introduced a wage subsidy scheme for the epidemic, which has protected millions of jobs, low-income people with unstable employment are still exposed to the risk of shrinking costs of living.
Relatively speaking, the wealthy have not been affected by the economic downturn caused by the pandemic because they have sufficient primary capital to engage in investment activities and benefit from the continued growth of international equity markets.
In addition, the study also points out that the imbalance in development in the UK region has intensified after the outbreak.
The data shows that incomes in the south-east of the UK, such as London, are growing six times faster than in the north-east of the UK, which has barely grown in the past two years.
What is the reason why the gap between rich and poor in the UK has widened due to the epidemic?
Next, we will also interpret the NEF report mentioned at the beginning of the article in detail to see how the epidemic has caused the gap between the rich and the poor to continue to widen.
The chart below shows how the disposable income of the top 5% of wealthy households and the bottom 50% of poor households in the UK have changed over the past two years (December 2019 to December 2021).
It can be seen that the annual per capita disposable income of the bottom 50% of poor households in the UK has fallen by £110 (1%), while the annual per capita disposable income of the top 5% of wealthier households has increased by more than £3,300 (13%).
The chart below shows how household disposable income has changed across the UK over the past two years (December 2019 to December 2021).
The data shows that household disposable income in south-east Britain, such as London, has grown by an average of 300 to 600 pounds a year, six times that of the north-east region, which has grown almost sporadically (100 pounds) in the past two years.
NEF also compared disposable incomes of unemployed and dual-income families. There is no doubt that the income level of the former has declined sharply, while the income level of the latter has been growing.
The study also found that across all parts of the UK, single-parent households were the only type of household to experience a decline in real income.
Compared to London, real incomes for single-parent households in the north of England (Yorkshire, Humber, North West and Merseyside) have fallen by about 15 times.
Commenting on these worrying results, ALFI Stirling, head of research and chief economist at NEF, said: "This is the UK's Conservative government dealing with the aftermath of the pandemic, with the government making the richest households (and regions) richer and the poorest households (and regions) poorer. ”
"As for the reasons, rising prices are a very critical factor, and as prices for food and consumer goods in the UK continue to rise, the situation is likely to become even more difficult for families who have already suffered huge losses due to the pandemic."
In addition, for those with lower incomes, the epidemic is likely to mean that they have lost their jobs, lost their only source of income, and they do not have enough savings to make it very difficult to maintain food and clothing.
NeF's research director therefore called: "In the long run, addressing these issues will require grasping the underlying drivers of regional, demographic and industry inequality." But in the short term, families in need should be helped through a social security system. ”
After talking about the plight of poor families in the epidemic, let's look at the wealthy families.
In June 2020, three months after the first lockdown was imposed in the UK, a study by The Resolution Foundation predicted that high-income earners in the UK would be the beneficiaries of the lockdown order, with a group of up to two million people becoming richer after the pandemic.
The study notes that more than 50% of the wealthiest people in the UK (top 20% of wealth-owning) have reduced their spending during the pandemic, with 1 in 10 people saving as much as 25%.
In May 2020, statistics from the New Policy Institute also showed that those 20% who stood at the top of the wealth pyramid during the pandemic saved a total of £23 billion compared to the same period in previous years.
As for the reason, it is mainly because during the previous British lockdown, non-essential entertainment facilities, shopping malls and stores were all closed, for the rich, they have enough savings, strong anti-risk ability, basic living needs will not be affected, and the usual spending (shopping malls, entertainment, restaurants, etc.) has nowhere to release, naturally saved.
At the same time, the real estate, stocks and other assets held by these rich people have risen with the great release of water in the West since the epidemic.
British investors write at the end
It is said that since the epidemic, the richer the richer, the poorer the poor. It now appears that this Matthew effect will be further exacerbated by the latest wave of global price and asset price increases.
From another point of view, the Matthew effect can be understood as the strong are stronger and the weaker, and are reflected in job hunting, equity investment, company growth and other aspects.
In the post-pandemic era, if governments do not introduce corresponding policies, resources will only become more and more concentrated in the head.