Vulnerability to poverty: Public, private, and community responses

1 Introduction

During the most difficult times of the COVID-19 lockdown in Bogotá, Colombia, people would hang a red rag on their windows to alert neighbours that they were going hungry. Liliana Perez, 43, a single mother of six in Buenos Aires, Argentina, said to a journalist: ‘My fear isn’t becoming infected. My fear is my children going hungry’.¹

In 2020, Colombia faced one of the most challenging moments in its recent history. The COVID-19 pandemic not only brought a health crisis but also triggered a profound economic and social upheaval. To contain the virus, the government (like other governments worldwide) implemented strict lockdown measures, including mandatory quarantines, restrictions on movement, and the shutting down of commerce and businesses. While these measures saved lives, they also came at a high economic cost. The economy slowed dramatically, and millions of Colombians saw their livelihoods disrupted. By the end of the year, 2.4 million jobs had been lost, and the unemployment rate had risen sharply from 10.5% in 2019 to 15.9% in 2020.²

informal employment

Employment without written contracts or benefits, meaning workers often lack access to benefits such as health insurance, pensions, or unemployment protection.

poverty

Lacking the basic income needed to maintain a pre-specified minimum standard of living. The minimum standard of living can be defined in absolute terms (such as having the basic necessities for survival) or relative terms (such as having income below a certain percentage of the median income in that country).

The pandemic exposed deep vulnerabilities in Colombia’s labour market, where informal employment is a defining characteristic. Informality refers to jobs that are not regulated by the government, meaning workers often lack access to benefits such as health insurance, pensions, or unemployment protection. Without legal labour contracts, informal workers are usually the first to lose their jobs during economic downturns. Before the pandemic, 60.8% of the Colombian workforce was employed in informal jobs³, with the proportion even higher among low-income households. For these workers, the lockdowns meant an almost immediate loss of income, leaving millions of families without a safety net, which pushed many families into poverty or worsened their already precarious living conditions.

The pandemic was a devastating blow that erased years of progress in reducing poverty and inequality. Before the pandemic, the proportion of people living in conditions of poverty—defined as lacking the basic income needed to maintain a pre-specified minimum standard of living—had fallen from 40.8% in 2012 to 35.7% in 2019.⁴ But the pandemic reversed this trend. Poverty levels increased by four percentage points nationally, with an additional two million people living in poverty. Income inequality, already a significant challenge, worsened further as the crisis disproportionately affected the most vulnerable households.

To understand the human impact of these numbers, consider the stories of two families living in very different parts of Colombia. The Del Castillo family lives in Bogotá, the country’s largest and wealthiest city. As an upper-middle-income household, they enjoy access to high-quality education, the formal financial system, high-speed internet, and a well-maintained home. Both parents hold formal jobs, which offer them legal contracts, health insurance, and pensions. When the pandemic struck, they were able to transition to remote work, keeping their income steady. Their daughter, who attends a private school, quickly adapted to online learning, ensuring her education continued uninterrupted. The Del Castillo family also had access to formal financial services, like credit, which helped them weather the economic downturn. While the pandemic was a challenge, they had the resources to recover and maintain their standard of living.

In contrast, the Rodriguez family lives in a small, predominantly rural town, where opportunities are scarce. Their community has limited access to high-quality education, formal banks, and high-speed internet. Like 60.8% of the labour force in Colombia before the pandemic, the Rodriguez family relies on informal jobs to make a living. The father works as a street vendor, selling fruit in the local market, while the mother works as a domestic cleaner. Without legal contracts, they have no unemployment benefits, health insurance, or pensions. When the lockdowns began, both parents lost their jobs almost overnight. With no savings or assets to fall back on, the family struggled to provide for its basic needs, including food. Their children, who attend a public school, couldn’t keep up with online classes because they didn’t have internet access or a computer at home. The pandemic pushed the Rodriguez family deeper into poverty, and their children’s future opportunities were severely compromised.

These two families illustrate the stark inequalities that shaped how Colombians experienced the pandemic. The Del Castillo family’s access to formal employment, education, and financial services allowed them to navigate the crisis with resilience. In contrast, the Rodriguez family’s reliance on informal work, lack of assets, and limited access to education and financial services left them highly vulnerable. For the Rodriguez family, the pandemic wasn’t just a temporary setback—it was a life-altering event that could perpetuate a cycle of poverty for generations.

The COVID-19 crisis in Colombia is a powerful reminder of the importance of addressing structural inequalities. It highlighted the fragility of life for millions of people who live without the protection that formal jobs, education, and financial systems offer. While government programmes, such as cash transfers, helped mitigate some of the damage, the high prevalence of informality in the labour market limited their reach.

The events during and after the COVID-19 pandemic illustrate the precarious progress made towards poverty reduction in developing countries. In this Insight, we provide tools to understand better how to approach policies and develop community strategies that make poverty reduction more resilient. We will discuss how vulnerability to income shocks affects households differently depending on their characteristics. Using a modified and simplified version of the income generation model from Unit 19 of The Economy 1.0, we will analyse the mechanisms that make some households more exposed to risks than others. We will then examine how households, governments, and the community cope with and mitigate these risks. Finally, using the COVID-19 crisis as a natural experiment, we will analyse how different governments worldwide reacted to this profound shock and the lessons that can be drawn from this experience.