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

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.