Europe’s social safety net is considered the gold standard. Coronavirus has exposed its holes

“I’ve really had to lower all of my expectations of life,” she said. “If I knew that in a month I’d be working again, or even in spring … but there doesn’t seem to be anything to look forward to.”

Coronavirus has revealed gaping holes in European social safety nets that are often seen as the gold standard. While many countries introduced support programs for workers affected by the pandemic, people are falling through the cracks. Most often, those who were already suffering the effects of inequality are hit the hardest — lower-income workers, those in insecure jobs, young people, women and minority ethnic groups.

“Some of the social security systems in Europe are more extensive, better developed [than in the United States],” Michael Spence, a Nobel Laureate and former dean of Stanford Business School, told CNN Business.

He said that during the 2008 financial crisis, pre-existing programs involving governments and businesses helped many European countries avoid too many layoffs.

“But I think in the pandemic economy, the shock’s so big that they kind of overwhelm the systems,” he said. “The systems weren’t built to withstand nearly overnight contractions of 25% in economies.”

Insecure work

Lockdowns have seen economies come to an abrupt halt, and benefits systems in many countries have not been able to cope, according to Mike Brewer, chief economist at the Resolution Foundation, a British think tank aimed at reducing inequality.

He said the UK welfare state was “inadequate” for this type of crisis, a downturn far beyond the “natural ebbing and flowing of economic activity” of typical recessions.

The British welfare system was “not very generous” and relied on a fast-moving labor market, he said. “So it wasn’t so much the scale of the pandemic, it was the fact that the pandemic just shut down the labor market … that’s destroyed the premise on which the UK welfare system has been designed.”

Since self-employed and casual workers had few protections under pre-crisis systems, many governments have had to come up with emergency measures — but even these programs are inadequate.

The United Kingdom introduced an employee furlough scheme and a self-employment grant. But many workers who are partly or recently self-employed, freelance or on zero-hours or flexible contracts are ineligible for either.

The programs were “designed in a hurry,” Brewer said; as the pandemic drags on, the gaps are becoming more evident, and more of a problem.

Hospitality, retail and leisure have been worst affected by lockdowns, sectors in which many informal jobs are held by young, low-income or migrant workers.

The disproportionate impact on these workers, coupled with a lack of government support, means the gap between rich and poor is only widening. Members of low-income households are more likely to be out of work and running down their savings, while those in higher-income households, who are more likely to be in secure jobs that can be done from home, grow wealthier as they spend less, said Brewer.

The people worst affected

Brewer says it is “harmful to be out of work for long periods” and can have a long-term impact on future employment prospects so “young people now are going to be carrying that scar as they grow older.”

Abigail Adams-Prassl, an associate professor in economics at the University of Oxford, told CNN Business that women and Black, Asian and other minority ethnic workers were also more likely to slip through the cracks.

Adams-Prassl said the ability to work from home also depends on domestic duties.

Childcare falls disproportionately on women, and the virus has often meant that children cannot attend school or childcare, says Adams-Prassl. She said the pandemic has exacerbated the financial shortfall for many UK childcare providers and there had been “nothing in terms of a targeted package of support for that sector or thinking about how to really support the employment of caregivers.”

Women’s groups have repeatedly raised the issue that social security systems can be problematic for those in abusive relationships, she added. “If you’ve got a partner who didn’t lose their job, or who might have savings of their own, that can mean that you’re ineligible for these forms of government support,” said Adams-Prassl, adding that these patterns were also seen in France and Italy.

“All of these things existed beforehand,” she said. “It’s the fact that I guess it has affected many more people over the pandemic and it’s just been so stark has made many, many more people aware of these issues. I think there’s still a very long way to go in terms of thinking about what the policy response is.”

Increasing existing inequalities

“Government interventions worked in the formal sector but less so with informal sector workers,” she said, citing the examples of the tourism sector and migrant workers. “The problem is that it is very difficult to catch these people because they do not show up at all in the statistics.”

She said Italy was already a “quite divided country” with the North and the center on one side, and the Mezzogiorno (south) on the other.

Meliciani said the southern regions “will suffer the most” in the long term. She said that to stop poverty increasing after the pandemic, government policies must address structural problems in the south, including the digital divide.

She said companies in the south needed incentives or tax relief to allow them to invest in digital technologies or other areas that could help them survive the crisis.

“There is considerable inequality in Cyprus in terms of income, wealth, employment, opportunities, and what I would call intergenerational gaps,” Leslie Manison, a former senior economist at the International Monetary Fund and ex-advisor in the Cyprus Ministry of Finance, told CNN Business.

He said the government had introduced measures such as subsidizing salaries of employees in companies that had suspended their operations, and people in the informal sector often weren’t eligible despite being worse affected by Covid.

“The subsidies haven’t been connected, you could say, with active labor policies on retraining and so on, compared with a country like Germany,” he added.