According to new analysis from EY, GDP is not necessarily a good measure of how well a society is doing – and specifically, how well a country fares after the pandemic. Yannick Cabrol and Simon MacAllister suggest other considerations. Economists and public decision-makers have been relying too long on GDP to measure the health of our society. GDP assesses the overall size of the cake and excludes social indicators, which can lead to mistaken conclusions. After all, if a doctor checks someone’s temperature with the wrong tool, they may not make the proper diagnosis or propose the right treatment. Below are areas that must be considered when thinking about the impact of the pandemic on Ireland. The vulnerable At the onset of the pandemic, particularly during the initial lockdown, there was a great emphasis on the sentiment that “we are all in this together”. However, over the last 12 months, this has ceased to be the case. Instead, the pandemic had a greater impact on those already vulnerable, while others benefitted. Social inequalities The impact of the pandemic is very different to that of the financial crisis of a decade ago. But one area of similarity is that the burden of impact has fallen more acutely on the most economically disadvantaged in society. The health outcomes mimic the economic ones, with people in disadvantaged areas more likely to contract COVID-19 or suffer job loss or severe disruption. The disease itself has disproportionally affected the poorest people in our societies. In Ireland, those considered very disadvantaged are almost 50% more likely than the average citizen to contract the virus, while the most affluent are 30% less likely to contract the virus. Geographical inequalities Residents of Irish cities are 32% more likely to contract COVID-19. This can be explained by higher population densities, increased levels of social interaction, and the prevalence of younger, more mobile communities. This presents significant difficulties for decision-makers. Public health regulations need to be clear and simple to follow, but a centralised approach can sometimes be perceived as unfair and excessive for areas with lower incidence rates. The future will be shaped by diversity – of working patterns, of place, and of individuals. Technology will open new possibilities for towns and rural economies, and cities will become more time fluid with a greater emphasis on entertainment and socialising and less on routine and homogeneity. Sectoral inequalities Economic commentary and policy formation tends to focus on the exporting industries that are key to driving growth. But the pandemic has shone a light on the industries that form the backbone of the labour market: our public services and retail, leisure and entertainment industries. While public services have been among the least disrupted sectors, the accommodation, retail and entertainment sectors have endured a very difficult year. Lower paid jobs have been the most disrupted by COVID-19. The pandemic impacted nearly 90% of jobs in the hospitality sector at some point in 2020. Workers in that sector already had the lowest weekly earnings pre-COVID, at around €376 per week. Financial inequalities Unlike during the last major global recession, the main drivers of wealth – namely, stock prices and housing – have held up very well. The stock market performance reflects the acceleration of digital business models and the success of businesses in sectors such as information and communications technology and healthcare. As a result, COVID-19 has exacerbated the mismatch between the labour market and the stock market. In 2020, stocks increased by 15%, while the number of people employed decreased by 18% (excluding those temporarily supported by the Government). The result is increased financial inequalities. The pandemic is benefitting the few who have financial assets while disadvantaging the many who are struggling to keep or find a job. Those who have been able to work from home also managed to save more money than ever in 2020. The Central Bank of Ireland reports that Irish households saved over €14 billion in the year to December 2020, with total Irish household deposits reaching a record €124.5 billion at the end of the year. This contrast in wealth and labour market outcomes is just another example of disruption causing division and creating a disconnect between winners and losers. International inequalities Interestingly, more equal societies appear to be doing better in their fight against COVID-19. This may be linked to a greater willingness to invest in public health infrastructure as well as a commitment to delivering better living conditions for disadvantaged people. A fairer society is a goal sought by almost every economy in the world. However, the rewards for achieving such a goal have often been the subject of heated debate. Does a greater redistribution of wealth curtail an economy’s ability to grow or enhance it? Perhaps the impact of the pandemic will provide another reason, if one was needed, to strive for a fairer society. Yannick Cabrol is EY-DKM Economic Advisory Services Assistant Director in EY. Simon MacAllister is Strategy and Transactions Partner and Head of Valuation, Modelling and Economics in EY.