The Distributional Short-Term Impact of the COVID-19 Crisis on Wages in the United States

TL;DR

This study analyzes how the COVID-19 crisis worsened wage inequality in the US, showing lower-wage and younger workers faced significantly larger wage declines and layoffs, highlighting increased economic disparities.

Contribution

It provides detailed distributional analysis of wage impacts during COVID-19, revealing exacerbation of existing inequalities across wages, age, and racial groups.

Findings

Lower-wage workers faced 26% wage decline between mid-March and mid-April.

Workers aged 16-24 experienced significantly larger wage decreases.

Hispanic workers' wages decreased 2-3 percentage points more than others.

Abstract

This paper uses Bureau of Labor Statistics employment and wage data to study the distributional impact of the COVID-19 crisis on wages in the United States by mid-April. It answers whether wages of lower-wage workers decreased more than others', and to what extent. We find that the COVID-19 outbreak exacerbates existing inequalities. Workers at the bottom quintile in mid-March were three times more likely to be laid off by mid-April compared to higher-wage workers. Weekly wages of workers at the bottom quintile decreased by 6% on average between mid-February and mid-March and by 26% between mid-March and mid-April. The average decrease for higher quintiles was less than 1% between mid-February and mid-March and about 10% between mid-March and mid-April. We also find that workers aged 16-24 were hit much harder than older workers. Hispanic workers were also hurt more than other racial groups. Their wages decreased by 2-3 percentage points more than other workers' between mid-March and mid-April.