The decline in labour income was limited at 7 percent in the euro area during coronavirus-related lockdowns thanks to short-time work and temporary lay-off schemes introduced in various member states of the monetary union, according to a survey released by the European Central Bank (ECB).
The ECB notes that the initiatives have been “key instruments” in cushioning the economic impact of the pandemic. In the absence of short-time work benefits, the drop in households’ labour income could have amounted to 22 percent during the lockdown.
As labour income accounts for about two-thirds of household disposable income, short-time work schemes could be expected to have provided a buffer of about 10 percent for household disposable income. After the end of the lockdown, the loss in net labour income could diminish to 3 percent, the survey adds.