Income Distribution and Poverty During the Pandemic
Abstract – The outbreak of the Covid-19 pandemic and its aftermath exacerbated labour market inequalities as earnings losses and unemployment were concentrated among those with lower economic resources (Christl et al. 2022, Angelov and Waldenström 2023). Because earnings losses have been partly compensated for by government support, the impact on household income inequalities and poverty is less clear (Daudenstädt 2022). Using different data sources, we analyse the distribution of disposable household incomes and income trajectories during the pandemic in Germany. Using data from the German Socio-Economic Panel (SOEP), we show that the first year of Corona saw an increase in inequality and poverty — defined as a disposable household income below 60 percent of the median. In line with these results, data from six waves of the HBS Erwerbspersonenbefragung (Emmler 2023) for the time between April 2020 and December 2023 indicate that income losses were widespread in the first months of the pandemic, especially for persons with lower incomes. This also increased risks of falling into poverty. While these poverty spells were temporary in many cases as household incomes recovered in subsequent months, some respondents also experienced persistent poverty. We show that the different income trajectories were strongly stratified by incomes levels before the pandemic and especially persistent poverty was concentrated among those who already had low incomes before. Furthermore, using multinomial regression analyses, we find that couples with children, younger respondents, persons with lower education, in lower occupational positions, and the self-employed experienced temporary poverty during the pandemic more frequently. Also, compared to higher-level service employees, both lower-level service employees and manual workers had higher risks of experiencing persistent poverty. Finally, experiences of unemployment strongly increased risks of poverty, whereas short-time work shows a much smaller effect. In sum, our results suggest that the pandemic aggravated existing inequalities in economic positions. At the same time, those with poverty experiences during the pandemic were also hit hardest by the subsequent prize increases since 2022, indicating that for these groups, economic problems have been accumulating over the course of multiple crises.