Expert Insight
Published on January 29, 2021

Saint Lucia’s Ministry of Equity, UNICEF and sister UN agencies: lessons on COVID-19 poverty impacts and potential effects

On 16 December, Saint Lucia’s Ministry of Equity, UNICEF and sister UN agencies held a capacity development session and discussion on how to take these lessons on COVID-19 poverty impacts and potential effects of different measures forward over the coming months.

Which effects will COVID-19 have on poverty of households and children in Saint Lucia? To what extent can different social assistance responses help counteract these impacts?

In the summer of 2020, following the first and preceding a second COVID-19 wave affecting the island nation of Saint Lucia, UNICEF and its partners set out to find answers to these two questions by simulating such impacts through an interactive model. The purpose was to inform the country’s social protection response supported by UN agencies.

Saint Lucia, the small Eastern Caribbean island nation of about 180,000 people, was first affected by the Coronavirus mid-March 2020. The first global wave did not have significant health effects on the country, with only sporadic cases between April and October. However, the closure of borders, businesses, schools and movement restrictions significantly impacted households both economically and socially. The second wave affected the island more severely with rising case numbers, starting in mid-October 2020. Throughout the year, the country registered a total of 331 confirmed cases of COVID-19, including 5 deaths.

Modeling the impact of COVID-19 on poverty and of response measures to reduce poverty.

In Saint Lucia, a study under the Joint Programme on the impact of COVID-19 on monetary and multidimensional poverty provides insight into the poverty-increasing impact of the COVID-19 crisis, as well as the poverty-reducing impact of several cash transfer scenarios. The analysis in the report compares the scenarios based on e.g. their poverty reduction effect, total cost, targeting effectiveness (benefit incidence), population coverage and cost effectiveness. The analysis is supported by an interactive microsimulation model to assist policy and decision-makers in determining appropriate measures to reduce poverty during and after such a shock.

Findings of the model: significant increases in poverty and inequality

COVID-19 may impact households in various ways, but most notably a reduced or disrupted income due to reduced hours/job loss (labour demand), inability to work (labour supply) – and potentially increased health expenditures. In Saint Lucia, the simulation of such impacts on poverty showed that when households are affected by all three factors, the overall poverty rate may increase from 25 to 29.3-35.1% depending on the severity of the shock. The overall child poverty rate, currently at 34.5%, could increase to 39 or even 46.1% in the case of a severe shock. These shocks are particularly felt by the middle of the wealth distribution. There are also significant impacts on overall inequality: it would increase the most by a health expenditure shock, as those living in poverty, without health insurance or chronic illness will be particularly affected.

Identifying the most suitable social assistance response

Beyond the immediate COVID-19 relief provided with UN support, the Government of Saint Lucia considered different options for cash transfers to its affected population. Among the options were, for example, continuing existing support to those already on government programmes, increasing the number of people based on existing criteria, and changing the criteria to include the quarter of the population most in need, or all children. The simulation of their impacts showed that a successful poverty reduction effort, in the case of a mild shock, could be achieved through most of the considered options at a transfer value of XCD 400 per household and 200 per child – with the exception of just continuing existing support to beneficiaries. It also became clear that none of the options, at considered transfer values, would be enough to return to the previous poverty rate in the case of a severe shock.

Important Lessons

Across different options, an important lesson emerged; that it would be key to increase the number of people supported with any increase in transfer amounts. The highest poverty reduction effect overall would be achieved by supporting a large number of households (bottom 40%), followed by a universal child grant. Support to all children would also achieve the highest reduction in the child poverty rate. The most cost-effective option (for XCD 400 per household; XCD 200 per child) would be to support the bottom 25% with children, beyond those who are currently eligible. Lower levels of support to a larger number of people might be more cost-effective, but not quite as effective in reducing poverty.