Labor Markets in Crisis: The Double Liability of Low‐Wage Work During COVID‐19

Abstract

We adopt a novel identification strategy to examine the heterogeneous effects of Canada’s COVID‐19 economic shutdown on hours worked across the earnings distribution. Early labor‐market analyses found that workers in the bottom of the earnings distribution experienced a much larger reduction in hours worked than workers in the top of the earnings distribution. Our analysis reveals a double liability of low‐wage work during Canada’s COVID‐19 economic shutdown: while workers in every quintile experienced a large reduction in hours on average, significant increases in hours were only present among workers in the bottom quintile. Implications for crisis income supports are discussed.

Inequalities in the disruption of paid work during the Covid‐19 pandemic: A world systems analysis of core, semi‐periphery, and periphery states

“…The defining feature of the COVID‐19 pandemic is that the economic crisis derives from radical restrictions on economic activity rather than the pandemic itself (Guerrieri et al, 2020 ; Gupta et al, 2020 ; Koebel & Pohler, 2020 ). Thus, any international comparative study of the impacts of COVID‐19 on employment ought to draw theoretical links between nation‐states’ interventions in the labor market and the systemic disadvantage of underdeveloped and developing economies in their capacity to support workers throughout the pandemic.…”

Public Policy in a Time of Crisis: A Framework for Evaluating Canada’s COVID-19 Income Support Programs

“…It soon became apparent to anyone watching long lines of unemployed workers waiting to apply for EI benefits that the program (as designed) did not have the administrative capacity to handle the massive influx of new applications. The bigger problem, however, was that relying primarily on EI would have effectively excluded many low-income workers, who were disproportionately affected by jobs and hours losses during the shutdown (e.g., Koebel and Pohler 2020 ; Lemieux et al 2020 ). EI is a contributory insurance scheme, with eligibility based on hours worked over a certain time period.…”

“…Moreover, the planned increases and one-time payments for the GST-C, CCB, OAS–GIS, and disability tax credit programs were quite small and were not well targeted to low-income workers ( Campion-Smith 2020 ). For these reasons, critics of the early supports argued that additional cash payments for low-income workers would be necessary complements to EI ( Pohler et al 2020 ).…”

“…What these data show is striking: namely, the impact on labour supply has been quite heterogeneous, even among low-income workers. A recent study by Koebel and Pohler (2020) highlights that a significant group of Canadian workers in the bottom quintile of the earnings distribution—those most likely to be in low-paid jobs—were working significantly more hours than usual and relative to workers at the top of the earnings distribution after COVID-19 restrictions were introduced. 10 Preliminary analyses specific to the CERB also suggest a lack of evidence of any short-term work-disincentive effect ( Schirle and Skuterud 2020 ).…”

“…However, the combination of the CERB and CEWS (and all other income-related supports to individuals and households) were ultimately more costly than the combination of TBI and EI. Direct cash transfers such as the CCB, OAS–GIS, and the GST-C were administratively efficient and perhaps helped to address the limitations of the CERB for workers making less than $5,000, but are evaluated less favorably in terms of equity or voice because they are not well targeted to low-income workers—a group that was both more likely to lose their jobs and less likely to be able to work from home ( Koebel and Pohler 2020 ). A basic income scheme targeted toward low-income workers, introduced alongside the pre-existing EI program, can therefore be viewed as optimizing the relative mix of all three objectives—efficiency, equity, and voice—hence its central position in the triangle in Figure 1 .…”