The COVID-19 shock on the labour market: poverty and inequality effects across Spanish regions

The necessary social distancing to limit the spread of COVID-19 during the recent pandemic implies that regions with higher essentiality and teleworking levels have lower vulnerability to poverty and inequality, the opposite occurring in regions intensive in closed activities. Using the latest 2020 European Union Statistics on Income and Living Conditions, we estimate that in the absence of compensating measures, this shock can result in sizable but unequal increases in poverty (between 8.3 and 20.7 percentage points (p.p.)) and wage inequality (between 2.6 and 6.0 Gini points) across Spanish regions. Moreover, inequality between regions can rise, which would erode regional cohesion in Spain.