Did the UK policy response to Covid-19 protect household incomes?

We analyse the UK policy response to Covid-19 and its impact on household incomes in the UK in April and May 2020, using microsimulation methods. We estimate that households lost a substantial share of their net income of 6.9% on average. But policies protected household incomes to a substantial degree: compared to the drop in net income, GDP per capita fell by 18.9% between the first and second quarter of 2020. Earnings subsidies (the Coronavirus Job Retention Scheme) protected household finances and provided the main insurance mechanism during the crisis. Besides subsidies, Covid-related increases to state benefits, as well as the automatic stabilisers in the tax and benefit system, played an important role in mitigating the income losses. However, analysing the impact of a near-decade of austerity on the UK safety net, we find that, compared to 2011 policies, the 2020 pre-Covid tax-benefit policies would have been less effective in insuring incomes against the shocks. We also assess the potential distributional impact of introducing a Universal Basic Income (UBI) instead of the Covid emergency measures and find that a UBI would have supported the incomes of different vulnerable groups but would have provided less protection to those hit hardest by the labour market shocks. Supplementary Information: The online version contains supplementary material available at 10.1007/s10888-021-09491-w.

Income Source Confusion Using the SILC.

We use a unique panel of household survey data-the Austrian version of the European Union Statistics on Income and Living Conditions (SILC) for 2008-2011-which have been linked to individual administrative records on both state unemployment benefits and earnings. We assess the extent and structure of misreporting across similar benefits and between benefits and earnings. We document that many respondents fail to report participation in one or more of the unemployment programs. Moreover, they inflate earnings for periods when they are unemployed but receiving unemployment compensation. To demonstrate the impact of income source confusion on estimators, we estimate standard Mincer wage equations. Since unemployment is associated with lower education, the reports of unemployment benefits as earnings bias downward the returns to education. Failure to report unemployment benefits also leads to substantial sample bias when selecting on these benefits, as one might in estimating the returns to job training.

The Role of Automatic Stabilizers and Emergency Tax-Benefit Policies During the COVID-19 Pandemic: Evidence from Ecuador.

By combining household survey data before and during the COVID-19 pandemic with detailed tax-benefit simulations, this paper quantifies the distributional effects of COVID-19 in Ecuador and the role of tax-benefit policies in mitigating the immediate impact of the economic shocks. Our results show a dramatic increase in income poverty and inequality between December 2019 and June 2020, the period when the economy was hit the hardest. The national poverty headcount increases from 25.7 to 58.2%, the extreme poverty headcount from 9.2 to 38.6%, and the Gini coefficient from 0.461 to 0.592. On average, household disposable income drops by 41%. The new Family Protection Grant provides income protection for the poorest income decile. However, overall tax-benefit policies do little to mitigate the losses in household incomes due to the pandemic. Informal workers, in particular, are left unprotected due to the lack of income support in the event of unemployment. Supplementary Information: The online version contains supplementary material available at 10.1057/s41287-021-00490-1.

En combinant les données d'enquêtes auprès des ménages avant et pendant la pandémie de COVID-19 avec des simulations détaillées d'impôts et de prestations, cet article quantifie les effets distributifs de la COVID-19 en Équateur et le rôle que jouent les politiques d'impôts et des prestations pour atténuer l'impact immédiat des chocs économiques. Nos résultats montrent une hausse spectaculaire de la pauvreté monétaire et des inégalités entre décembre 2019 et juin 2020, période durant laquelle l'économie a été le plus durement touchée. Le taux national de pauvreté passe de 25,7% à 58,2%, le taux d'extrême pauvreté de 9,2% à 38,6% et le coefficient de Gini de 0,461 à 0,592. En moyenne, le revenu disponible des ménages baisse de 41%. La nouvelle allocation de protection familiale offre une assurance de protection des revenus aux 10% des ménages les plus pauvres. Cependant, de façon générale, les politiques d'impôts et des prestations en font peu pour atténuer les pertes de revenus des ménages en raison de la pandémie. Les travailleurs et travailleuses informel·le·s, en particulier, sont laissé·e·s sans protection en raison de l'absence d'allocation de revenu en cas de chômage.

Welfare Resilience at the Onset of the COVID-19 Pandemic in a Selection of European Countries: Impact on Public Finance and Household Incomes.

This paper assesses the impact on household incomes of the COVID-19 pandemic and governments' policy responses in April 2020 in four large and severely hit EU countries: Belgium, Italy, Spain and the UK. We provide comparative evidence on the level of relative and absolute welfare resilience at the onset of the pandemic, by creating counterfactual scenarios using the European tax-benefit model EUROMOD combined with COVID-19-related household surveys and timely labor market data. We find that income poverty increased in all countries due to the pandemic while inequality remained broadly the same. Differences in the impact of policies across countries arose from four main sources: the asymmetric dimension of the shock by country, the different protection offered by each tax-benefit system, the diverse design of discretionary measures and differences in the household level circumstances and living arrangements of individuals at risk of income loss in each country.