Wage inequality and poverty effects of lockdown and social distancing in Europe

Abstract

Social distancing and lockdown measures taken to contain the spread of COVID-19 may have distributional economic costs beyond the contraction of GDP. Here we evaluate the capacity of individuals to work under a lockdown based on a Lockdown Working Ability index which considers their teleworking capacity and whether their occupation is essential or closed. Our analysis reveals substantial and uneven potential wage losses across the distribution all around Europe and we consistently find that both poverty and wage inequality rise in all European countries. Under four different scenarios (2 months of lockdown and 2 months of lockdown plus 6 months of partial functioning of closed occupations at 80%, 70% and 60% of full capacity) we estimate for 29 European countries an average increase in the headcount poverty index that goes from 4.9 to 9.4 percentage points and a mean loss rate for poor workers between 10% and 16.2%. The average increase in the Gini coefficient ranges between 3.5% to 7.3% depending on the scenario considered. Decomposing overall wage inequality in Europe, we find that lockdown and social distance measures produce a double process of divergence: both inequality within and between countries increase.

COVID: Not a Great Equalizer

“…The share of jobs that, given their nature in terms of work context and of generalized work activities, can plausibly be performed at home is limited—only 37% in the USA ( Dingel and Neiman 2020 ). According to the ‘lockdown working ability’ index of workers, developed by Palomino et al. (2020) , which considers the possibility of working from home for each occupation and whether the occupation is considered essential, this situation is particularly problematic in Southern European countries, such as Italy.…”

COVID-19 Policy Differences across US States: Shutdowns, Reopening, and Mask Mandates

“…Although the shutdowns helped to reduce the COVID-19 infection rate, they also led to a global economic recession [ 20 ]. Poverty and social inequity significantly increased during the social distancing and lockdowns in European countries [ 21 ]. In the US, most states imposed stay-at-home orders in March and April 2020, and the national unemployment rate peaked in April at 14.44% and stayed above 10% through August 2020 [ 22 ].…”

Tourism and Sustainability in Times of COVID-19: The Case of Spain

“…Regarding the effects on education, the UNESCO report [47] has been analyzed, referring to the reasons why learning should be strengthened, and education funding protected, in the current pandemic situation. The interpretation of the situation and its social impact has been considered on the basis of works published in reference journals, some of which are: Palomino, Rodriguez, and Sebastian, [40]; Kanda and Kivimaa, [41]; Donthu and Gustafsson [42]; Lakner et al [46]; and Cenat et al [48].…”

“…Consequences of the pandemic outbreak have caused a negative gross domestic product (GDP) and increased inequality and poverty [ 40 ]. Millions of people have lost their jobs at extremely high rates [ 41 ].…”