Poverty, Inequality and Social Security during the Covid-19 Pandemic: Evidence from Linked Swiss Tax Data

This paper examines the impact of the COVID-19 pandemic on income and wealth inequality in Switzerland, with a particular focus on poverty dynamics and the role of the social security system. Using newly linked administrative tax data for four cantons covering over a third of the Swiss population, we track changes in household income and liquid assets from 2019 to 2021. We find that average net household income increased during the pandemic. However, households at the bottom and top of the income distribution experienced income declines, and a substantial share of households across all income groups faced losses in income or liquid assets. These effects were especially pronounced in the lower deciles. Despite this, relative and absolute poverty rates declined, largely due to the stabilizing effect of existing and newly introduced social security measures. Our results suggest that the Swiss social safety net—including extensions to unemployment benefits, short-time work compensation, and targeted COVID-19 support—effectively mitigated the immediate economic impact of the crisis. The findings underscore the importance of timely and well-targeted state interventions to prevent increases in poverty during large-scale economic shocks.