The direct impact of actual or potential job losses on people’s incomes was offset in most developed countries by unprecedented government support. In the United States, this assistance was provided in the form of checks sent directly to millions of households. In Europe, most governments financed massive short-term plans
BRUSSELS – During the acute phase of the Covid-19 pandemic in the spring of 2020, when much of the population was locked up at home, the economy fell into a deep recession that hit unskilled workers and minorities in particular. . Furthermore, unlike previous recessions, job losses were concentrated in sectors with a high proportion of female workers, which justifies the use of the term “female recession”.
Therefore, the first indications were that the consequences of the pandemic would exacerbate inequality. But the two years since have provided signs that this is not necessarily the case.
To begin with, the direct impact of actual or potential job losses on people’s incomes was offset in most developed countries by unprecedented government support. In the United States, this assistance was provided in the form of checks sent directly to millions of households. In Europe, most governments financed massive short-term plans, under which the state paid the bill in order for companies to retain workers who were to be temporarily suspended.
These measures meant that the initial job losses induced by the pandemic did not lead to a reduction in income. And those most likely to lose their jobs were also the most likely to receive generous government support.
As a result, the inequality indicators that are based on disposable income (that is, total income after accounting for taxes and government transfers received) did not deteriorate, and even improved slightly in some cases. The most widely accepted indicator of income inequality is the so-called Gini coefficient, which measures the extent to which the observed income distribution diverges from perfect egalitarianism. In the United States, the coefficient remained very high in 2020, but did not increase further.
The pattern is similar in Europe, and one study even concluded that income inequality fell in the four largest economies in the European Union (Germany, France, Italy and Spain) between January 2020 and January 2021. Another study indicates that despite the fact that inequality would have increased considerably without the actions of governments, both the Gini index and the official indicator of the risk of poverty of the EU show that specific state support programs neutralized this initial impact. .
This result highlights how the state can play its role as the insurer of last resort by protecting vulnerable groups from an unexpected economic shock of unprecedented magnitude. However, governments are now scaling back Covid-19 support schemes as the recovery progresses, albeit somewhat more gradually in Europe than in the United States, where the rebound in the economy is more complete. Does this mean that the pre-pandemic trend leading to rising inequality will resume?
Once again, initial indications indicate that the opposite may be true and that previous patterns of inequality could be reversed in the post-pandemic world. The “female recession” turned out to be a short-lived phenomenon, as most of the job losses affecting women only lasted a quarter or two. Another encouraging sign is that the share of wages – the share of total output paid to employees – increased in 2020 and 2021.
The share of wages has been falling for a long time, prompting a number of explanations. But the recent recovery seems natural: There are currently too few workers to run the existing capital stock. “Build back better” is a misnomer. The lockdowns from the Covid-19 pandemic did not destroy any capital, but simply left it idle for a brief period. Therefore, the recovery does not require new capital, but only a redistribution of the capital that was already available.
However, there is now less workforce available than before due to what American commentators have called the “Great Resignation”, which has effectively reduced the workforce, or rather, the proportion of the adult population willing to work at the previous salary levels. Companies must offer higher wages to attract the workers they need to increase production.
In Europe, labor markets are less dynamic, but resignations are increasing in most EU member countries, although there are still significant pockets of unemployment. And the increased need for workers is likely to persist for some time. The pandemic has accelerated pre-existing trends that, in the very long term, could reduce the demand for low-skilled workers in particular, but which in the short and medium term are likely to have the opposite effect.
For example, online shopping, which used to be marginal in most parts of Europe, is now rapidly gaining popularity everywhere. As a result, many of the products that we previously put in physical shopping carts, bagged, and brought home are now collected, packaged, transported, and delivered by others, who must be paid for their time and effort.
Most of these new roles are low-skilled and could be filled in the distant future by robots, autonomously driven delivery vans, or drones. But because last-mile delivery still requires human involvement for now, the job prospects for the unskilled look much better than before.
Also, a few years ago, some experts predicted a world in which robots would do much of the work. Truck drivers, for example, are reportedly made unemployed by autonomous vehicles. But today, the lack of drivers is one of the factors that slows the recovery of the industrial sector from the effects of the pandemic.
Therefore, it can be said that from an economic point of view for the most vulnerable segments of society, the Covid-19 crisis has evolved, so far, much better than was feared, the initial losses of jobs and income they were dampened by generous state support, and the vigorous recovery is leading to much better job prospects for many. As the pandemic enters its third year, this, at the very least, should provide some reason for optimism.
The author
is a board member and distinguished member of the Center for European Policy Studies.
Copyright: Project Syndicate, 2020
Reference-www.eleconomista.com.mx