Covid-19 hits European cohesion

Here are the main findings of our report:

• Government support measures kept unemployment and employment relatively stable. However, the numbers of hours worked shows large divergences across eurozone countries. In the eurozone, this number dropped by 17% in 2Q20, but the decline ranged from 7.5% in the Netherlands to 26% in Greece.

• The divergence in hours worked is clearly related to the relative dominance of sectors that were hit hardest by lockdown measures (manufacturing of vehicles and transport material; wholesale and retail trade; hotels, restaurants and air travel; professional and real estate services; arts and entertainment). These represent up to 40% of the national gross value added in Greece, but less than 25% in Ireland.

• These sectors present shared characteristics across countries, making these countries vulnerable to a rise in inequality: the sectors are intensive users of non-standard contracts (where lower-educated and young workers are concentrated) and low-paid jobs. The former represents 30.5% of employment in Covid-vulnerable sectors in the eurozone, the latter, 23%.

• The risks of seeing a surge in inequality due to Covid emerge in two dimensions along which we can map countries: the share of employment covered by either non-standard or low-wage contracts in vulnerable sectors. This shows that vulnerabilities can be different from one country to another: low-wage workers in Germany and Ireland, non-standard contract workers in Portugal and Spain, and both in Greece and the Netherlands.

• The most recent data shows that in 4Q20, vulnerable sectors were still far from recovery, in sharp contrast with the rest of the economy. This confirms that the current slack in the labour market is heavily concentrated and lasting, which increases the need for specific policy actions to hamper any surge in inequality.