Got used to make less: the lasting earnings losses of COVID-19 short-time work

This study is the first to investigate the impact of short-time work (STW) schemes on earnings during the COVID-19 pandemic. STW schemes have been implemented to preserve employee-employer matches, support workers' incomes and uphold consumption. By construction, affected workers suffer temporary earnings losses, yet an important question is whether negative earnings effects of STW persist beyond the STW period or are limited to the STW spell. Using a dynamic difference-in-difference (DiD) identification strategy on administrative data, this study aims to identify any lasting causal STW effects on earnings, accounting for the factors that influence the selection of workers into STW and testing for heterogeneous effects across subgroups of workers. We find lasting earnings losses that persist beyond the actual STW participation. First and foremost, these earnings losses depend on the duration of STW exposure, with greater negative effects especially in the case of long-term or recurring STW spells. In general, lasting earnings losses post STW tend to be more pronounced in white-collar jobs, where women incur larger losses than men. The largest losses, however, are observed among men in blue-collar jobs with long STW spells of more than one year.