Short-Term Effects of COVID-19 on Wages: Empirical Evidence and Underlying Mechanisms

2025/04/14 by Bo Wu, Wu, Bo
Economics, Econometrics and Finance · Mathematics · #COVID-19 Pandemic Impacts #COVID-19 epidemiological studies #FOS: Economics and business #General Economics (econ.GN) #General Finance (q-fin.GN) #Labor market dynamics and wage inequality

paper · pdf · doi:10.48550/arxiv.2504.10554

openalex publication_date 2025/04/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

This study investigates the causal relationship between the COVID-19 pandemic and wage levels, aiming to provide a quantified assessment of the impact. While no significant evidence is found for long-term effects, the analysis reveals a statistically significant positive influence on wages in the short term, particularly within a one-year horizon. Contrary to common expectations, the results suggest that COVID-19 may have led to short-run wage increases. Several potential mechanisms are proposed to explain this counterintuitive outcome. The findings remain robust when controlling for other macroeconomic indicators such as GDP, considered here as a proxy for aggregate demand. The paper also addresses issues of external validity in the concluding section.

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