Via Michael Roberts
The pandemic lockdowns will reduce incomes of low-paid workers in Europe by anything between 10% to 22% on average, depending on how long lockdowns last, according to a new study.
Enforced social distancing and lockdown measures to contain COVID-19 restrict economic activity, especially among workers in non-essential jobs who cannot ‘telework’. These have implications for inequality and poverty. This column analyses the capacity of individuals in 29 European countries to work under lockdown and the potential impact of a two-month lockdown on wages and inequality levels. There will be substantial and uneven wage losses across the board and poverty will rise. Inequality within countries will worsen, as it will between countries although to a lesser extent.
"In sum, our analysis reveals that the lockdown and de-escalation periods will potentially increase poverty and inequality sizeably in all European countries, even without accounting for second-round effects.
We find a 10.0% mean loss rate (P) for poor workers − those below 60% of the median wage − for the average of European countries under a lockdown of two months. This mean loss rate for poor workers goes up to 22.5% when an additional 6-month period with partial functioning of closed activities is considered. The mean loss rates are also sizeable by country
Second, the proportion of poor workers (headcount index, H) increases significantly for all European countries. The average increase is 4.9 percentage points under two months of lockdown and 14.5 percentage points with an additional partial closure period of six months.
When comparing wage inequality after the lockdown with the baseline, we observe that inequality increases in all European countries."