The impacts of the COVID-19 crisis on total wages have fallen differently on men and women, the latter being disproportionately affected. For women, the total wage bill would have declined by 8.1 per cent, compared to a decline of 5.4 per cent for men. Moreover, reductions in hours worked have impacted lower-skilled occupations more than higher-paying managerial and professional jobs.
In the first half of 2020, as a result of the COVID-19 crisis, a downward pressure on the level or growth rate of average wages was observed in two thirds of the countries for which recent data are available at the recent Global Wage Report 2020-21 of International Labor Organization (ILO); in other countries average wages increased, largely artificially as a reflection of the substantial job losses among lower-paid workers.
Looking at a selection of European countries, the ILO’s report estimates that without the payment of wage subsidies, workers would have lost 6.5 per cent of their total wage bill between the first and second quarters of 2020. For women, the total wage bill would have declined by 8.1 per cent, compared to a decline of 5.4 per cent for men. Such a discrepancy was mainly caused by reduced working hours, more than by the difference in the number of lay-offs. The wage bill lost as a result of the drop in working hours was 6.9 per cent for women compared to 4.7 per cent for men.
The crisis disproportionately affected lower-paid workers, thereby increasing wage inequalities. Studies have shown that in many countries, reductions in hours worked have impacted lower-skilled occupations – in particular those in elementary work – more than higher-paying managerial and professional jobs. For selected European countries, the report estimates that without wage subsidies the lowest-paid 50 per cent of workers would have lost an estimated 17.3 per cent of their wages, which is much more than the estimated 6.5 per cent decline for all workers. Consequently, the share of the total wage bill received by those in the bottom 50 per cent of the wage distribution – a measure of inequality – would have fallen by about 3 percentage points, from 27 to 24 per cent on average of the total wage bill, while the share of the upper half of the distribution would have risen from 73 to 76 per cent.
However, temporary wage subsidies have enabled many countries to compensate part of the wage bill that would have been lost, and to lessen the effect of the crisis on wage inequality. Many countries across the world have either introduced or expanded existing wage subsidies in order to safeguard jobs during the crisis. In a selection of ten European countries for which data are available, the report estimates that wage subsidies have permitted to compensate 40 per cent of the total wage bill loss, including 51 per cent of the wage bill loss caused by the reduction in working hours. Wage subsidies have also permitted to moderate the effects of the crisis on earnings inequalities because the main beneficiaries were those who have been more severely hit by the crisis, namely workers in lower-paying jobs.
