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

October 22, 2020

By:Juan C. Palomino (University of Oxford (UK), INET and Department of Social Policy and Intervention); Juan G. Rodríguez (Universidad Complutense de Madrid (Spain), EQUALITAS, ICAE and CEDESOG); Raquel Sebastian (Universidad Complutense de Madrid (Spain), EQUALITAS and ICAE)
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.
Keywords:Wage inequality; Teleworking; Social distancing; Europe; COVID.
JEL:D33 E24 J21 J31
Date:
URL:http://d.repec.org/n?u=RePEc:ucm:doicae:2003&r=ltv

The Relationship between Subjective Wellbeing and Subjective Wellbeing Inequality: Taking Ordinality and Skewness Seriously

October 22, 2020

By:Arthur Grimes (Motu Economic and Public Policy Research); Stephen P. Jenkins (London School of Economics and Political Science, and IZA);Florencia Tranquilli (Motu Economic and Public Policy Research, and Victoria University of Wellington)
Abstract:We argue that the relationship between individual satisfaction with life (SWL) and SWL inequality is more complex than described by leading earlier research such as Goff, Helliwell, and Mayraz (Economic Inquiry, 2018). Using inequality indices appropriate for ordinal data, our analysis using the World Values Survey reveals that skewness of the SWL distribution, not only inequality, matters for individual SWL outcomes; so too does whether we look upwards or downwards at the (skewed) distribution. Our results are consistent with there being negative (positive) externalities for an individual’s SWL from seeing people who are low (high) in the SWL distribution.
Keywords:subjective wellbeing, ordinal data, inequality, skewness, WVS