ABSTRACT
The necessary social distancing to limit the spread of COVID-19 during the recent pandemic implies that regions with higher essentiality and teleworking levels have lower vulnerability to poverty and inequality, the opposite occurring in regions intensive in closed activities. Using the latest 2020 European Union Statistics on Income and Living Conditions, we estimate that in the absence of compensating measures, this shock can result in sizable but unequal increases in poverty (between 8.3 and 20.7 percentage points (p.p.)) and wage inequality (between 2.6 and 6.0 Gini points) across Spanish regions. Moreover, inequality between regions can rise, which would erode regional cohesion in Spain.
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.