The Effect of the Covid‐19 Pandemic on Inequality

Abstract This paper reviews the economic literature on how the COVID‐19 pandemic and responses to it affected income inequality throughout the world. Inequality had been rising long before the pandemic. The COVID shock affected employment, income, and education differently for various occupations and population groups. The pandemic initially disrupted lower‐paid, service‐sector employment, particularly affecting women and lower‐income groups. Government policies in response to the pandemic mitigated income losses. School and day‐care closures disrupted the work of parents, especially mothers. These effects have generally ended. Lasting changes in work patterns, consumer demand, and production will tend to benefit higher‐income groups and to erode opportunities for some less advantaged workers, increasing income inequality over the long run. Opportunities for remote work, especially for highly paid workers, have increased permanently. School disruptions have particularly affected lower‐income students, which will tend to increase inequality among future workers.