6 June 2020

For decades, Europe’s vaunted welfare states have kept inequality relatively low. The Covid-19 recession threatens that success in three ways. First, it hits badly paid workers harder than well-paid ones. Second, lockdowns create new forms of inequality. Some sectors stay open while others shut down, and some people can work from home while others cannot. Third, the severity of the downturn has revealed holes in Europe’s welfare systems. Some countries are patching them, but others are having trouble.

In some countries inequality was rising before Covid-19, partly because labour regulations have been liberalised... Other countries, such as the Netherlands and Italy, had rising numbers of part-time or gig workers, who enjoy fewer protections and benefits.

Covid-19 has made such gaps painfully visible. Spain’s government realised it had no mechanism to support the incomes of the large percentage of the population that works informally. That prodded the country’s Socialist-led government to introduce a guaranteed minimum income law, which was issued as a decree last week. In Italy, workers in the country’s huge informal sector may have trouble accessing its emergency Covid-19 benefits.