Covid-19 Crisis: No Increase in Income Inequality Expected in Germany in 2020

The Covid-19 pandemic and the measures implemented to contain it have had a significant impact on the labor market. A simulation study conducted by the IAB and the ifo Institute shows that gross incomes are likely to decline noticeably for all income groups this year as a result of the Covid-19 crisis. However, the tax and transfer system and especially the short-time work regulations act as important income stabilizers and greatly reduce the losses in earned income.