{"id":1081,"date":"2020-06-21T14:01:00","date_gmt":"2020-06-21T14:01:00","guid":{"rendered":"https:\/\/blog.uantwerpen.be\/business-economics\/?p=1081"},"modified":"2020-06-22T08:35:12","modified_gmt":"2020-06-22T08:35:12","slug":"cutting-labor-income-taxes-brings-back-jobs-for-those-hit-hard-by-covid-19","status":"publish","type":"post","link":"https:\/\/blog.uantwerpen.be\/business-economics\/cutting-labor-income-taxes-brings-back-jobs-for-those-hit-hard-by-covid-19\/","title":{"rendered":"Cutting labor income taxes brings back jobs for those hit hard by Covid-19"},"content":{"rendered":"\t\t
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Can a fiscal stimulus help bring back jobs for those struck by the Covid-19 recession? Research by Roland Winkler (University of Antwerp), <\/strong>Christian Bredemeier and Falko Juessen (<\/b>University of Wuppertal) indicates<\/span> that it depends on how the stimulus is designed. A cut in the tax rate on labor income performs best in stimulating job creation for those who have borne the brunt of job losses. <\/strong><\/p>\n

Pink-collar recession<\/h2>\n

Job losses in the Covid-19 downturn are enormous and have been unfolding at unprecedented speed. The crisis also stands out because the mix of workers who have been struck is unusual. In a typical recession, blue-collar workers in construction and manufacturing suffer worst. This time, however, workers in sectors with a high worker-client interaction and occupations that are personal-service-oriented bear the brunt of the recession<\/strong>.<\/p>\n

“In the U.S., where the labor market collapse is particularly strong, the crisis has destroyed 10 million jobs in ‘retail trade’ and ‘leisure and hospitality’ industries. One out of three workers in service occupations lost their job. This is why some call the Covid-19 recession a \u201cpink-collar recession\u2019\u2019. However, blue-collar workers have been suffering from heavy job losses too.”<\/em><\/p>\n

Economic recovery<\/h2>\n

During the initial phase of the pandemic, the essential role of governments was to fight infections and to avoid hardship and bankruptcies for households and firms. When infections are under control and restrictions are slowly relaxed, the government will give more focus to supporting demand and helping the economy recover faster.<\/strong><\/p>\n

In this phase, economic policy should not only concentrate on pushing up the total number of jobs but should also be concerned for whom jobs are created during the recovery<\/strong>. After all, an unemployed sales clerk will benefit little if fiscal policy stimulates firms to hire software engineers.<\/p>\n

Stimulus programs<\/h2>\n

The economists from Antwerp and Wuppertal wanted to know how a stimulus package should be designed to promote job creation for those hit hardest by the Covid- 19 recession. To address this question, they used a macroeconomic model of the U.S. economy to simulate several potential stimulus programs<\/strong>, which, if implemented, would help the economy recover faster<\/strong>.  They then investigated how the different stimulus plans would affect employment by industry and occupation.<\/p>\n

The model simulations show the following:<\/p>\n