Who suffers from the COVID-19 shocks? Labor market heterogeneity and welfare consequences in Japan

• Effects of the COVID 19 crisis in the Japanese labor market vary across different groups of individuals. • We use multiple data sources to evaluate heterogeneous effects of the crisis by age groups, genders, employment types, education levels, occupations, and industries. • A life cycle model of heterogeneous agents is built to quantify welfare effects of the COVID 19 shocks • The crisis most severely hurt female, contingent, and low skilled workers, engaged in social and non flexible jobs, and likely exacerba ted income inequality in the short run. Effects of the COVID-19 shocks in the Japanese labor market vary across workers of different age groups, genders, employment types, education levels, occupations, and industries. We document heterogeneous changes in employment and earnings in response to the COVID-19 shocks, observed in various data sources during the initial months after the onset of the pandemic in Japan. We then feed these shocks into a life-cycle model of heterogeneous agents to quantify welfare consequences of the COVID-19 shocks. In each dimension of the heterogeneity, the shocks are amplified for those who earned less prior to the crisis. Contingent workers are hit harder than regular workers, younger workers than older workers, females than males, and workers engaged in social and non-flexible jobs than those in ordinary and flexible jobs. The most severely hurt by the COVID-19 shocks has been a group of female, contingent, low-skilled workers, engaged in social and non-flexible jobs and without a spouse of a different group.