Global labor market in the light of COVID-19 lockdown

The novel coronavirus (COVID-19) caused serious consequences on the global economy. In less than one year, COVID-19 made the global economy sliding into a recession which is predicted to be worse than the 2008 financial crisis. Particularly, in the latest World economic outlook, the International Monetary Fund (IMF) estimated the global economy to contract severely by 3% in 2020, and the World Bank predicted global GDP would be negative 5% in 2020 and even negative 7% in advanced economies [1].

This pandemic caused the sharpest decline in global growth since the Great Depression of the 1930s. In terms of the global labor market, compared to the second quarter of 2019, in this period of 2020 ILO shows a sharp reduction in labor demand and the loss of approximately 400 million jobs all over the world [2]. Furthermore, the Organization for Economic Co-operation and Development (OECD) experts estimated the unemployment rate of their member countries in the remainder of 2020 would be twice higher than the one (5.3%) in the first quarter of the year [3].

According to the data of the ILO updated till May 2020, the unemployment rate is increasing in most countries in the world, especially in major economies like the USA, China, and Canada with respective unemployment rates of 13.3%, 5.9%, and 13.7%.

Besides, COVID-19 lockdown affects employment in cutting working hours and job loss. Following that, the global working hours in the second quarter of 2020 dropped 14 % relative to the fourth quarter of 2019 equivalent to 400 million full-time jobs, in which lower-middle-income countries suffered from the most considerable hit with a decline of 16.1 percent [2].

Especially, the ILO (2020c) indicated that countries in Asia and the Pacific experienced the hardest hit with 80% of the global decline in working hours in the first quarter of 2020 and the highest drop accounting for 17.9% occurred in Southern Asia in the second quarter of 2020. On the other hand, Europe only announced a significant drop in hours worked corresponding to 37 million full-time jobs year-over-year [3]. Also, the OECD forecasts the unemployment rates will be far from pre-COVID levels and even much higher than the one during the peak of the Global Financial Crisis 2008.

Particularly, most workers in the UK and Korea only had to suffer from reducing working hours but still keep their jobs [4], which means the working hour’s reduction has no connection with the unemployment rate in these countries. Meanwhile, Gordon et al. (2020) pointed out other consequences in Canada and the United States. Accordingly, approximately 50% and two-thirds of working hour loss in Canada and the United States respectively was due to job loss. Notably, the job loss mostly focuses on sectors of retail, arts, and entertainment, personal services, food services, hospitality [5] in which women, young people, low-educated [6][7][8] and specific vulnerable sectors [9][10] are groups experiencing the hardest hit [11].

Besides, the risk of job loss during the pandemic is much higher for jobs in the workplace than jobs that cannot be done at home [12]. However, it is estimated that 93% of workers in the world facing workplace restrictions, and working from home is more feasible in high-income countries (23%) than in low-income countries (13%) [11]. That is the reason why since the beginning of the COVID-19 lockdown, the unemployment rate keeps rising swiftly, especially in low-income countries.

According to Steven J. Davis, a leading expert on hiring practices and job loss from the School of Business, University of Chicago Booth, 42% of pandemic-induced layoffs is estimated to lead to permanent job loss. The consequences of a job loss are various but one of the most terrible ones is financial shocks for households who would have to deal with numerous difficulties in making ends meet including housing, nutrition, and health of families. This will affect seriously the labor market of each country in particular and the global economy in general. Therefore, it is extremely essential for every country to react quickly through policies to protect jobs and minimize consequences from COVID-19 on employment situations.

From the beginning of the COVID-19 crisis, more than 1000 social protection and employment measures have been implemented in about 200 countries to react against the effect of the outbreak [13]. Accordingly, to mitigate the effect of the pandemic on their labor market, many policies were applied including providing unemployment benefits, social security subsidies, wage subsidies, shorter work time benefits, and adjusting labor market regulation.

Such kinds of policies and programs are divided into two main groups. The first group contains countries like New Zealand, Germany, Denmark, France, and Switzerland providing subsidies to support employers in decreasing labor and other costs while the second group includes the United States, Israel, Norway, Canada, and Ireland concentrating on supporting workers through expanding unemployment insurance systems [14].

Results from data and surveys show that the unemployment rate in the first group is well controlled while the one in the second group rises considerably [3]. Notably, the Danish Government implemented employment subsidies to support businesses to keep their workers through motivating job retention, which contributed to a decrease in layoff by 81,000 jobs and increase furloughs by 285,000 [15]. This is extremely meaningful for households in particular to ensure their costs of living and for the Government in general to balance the labor market and domestic economy.

COVID-19 is still there and all the nations are struggling with its consequences in social health, national economy, and labor market. With the facts of COVID-19 on the labor market, it might provide an overview for employers to balance and consider suitable strategies for their future plans as well as for employees to respect their current opportunities and be stricter with their career path.

Be wise and be calm to overcome this pandemic!

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References:

[1] World Bank (2020) Global economic prospects, World Bank Group Flagship edition, World Bank Group.

[2] ILO (2020c) ILO monitor: Covid-19 and the world of work, 5th edition, International Labour Organization.

[3] OECD (2020) OECD Economic Outlook, 20201st edition, Paris: OECD Publishing.

[4] Gordon, B., Nicholas, G., Ioannis, L., Ioanna, P., Mauro, T. and Giannis, T. (2020) Reacting quickly and protecting jobs: The short-term impacts of the COVID-19 lockdown on the Greek labor market, 613th edition, Essen: Global Labor Organization (GLO).

[5] Bartik, A.W., Bertrand, M., Cullen, Z.B., Glaeser, E.L., Luca, M. and Stanton, C.T. (2020) “How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey, 26989th edition, NBER.

[6] Cho, S.J. and Winters, J.V. (2020) The Distributional Impacts of Early Employment Losses from COVID-19, 13266th edition, IZA.

[7] Montenovo, L., Jiang, X., Rojas, F.L., Schmutte, I.M., Simon, K.I., A., W.B. and Wing, C. (2020) Determinants of disparities in covid-19 job losses, 27132nd edition, NBER.

[8] Aum, S., Lee, S.Y. and Shin, Y. (2020) COVID-19 Doesn’t Need Lockdowns to Destroy Jobs: The Effect of Local Outbreaks in Korea, 27264th edition, NBER.

[9] Béland, L.P., Brodeur, A. and Wright, T. (2020) The Short-Term Economic Consequences of Covid-19: Exposure to Disease, Remote Work and Government Response, 13159th edition, IZA.

[10] Cowan, B.W. (2020) Short-run effects of COVID-19 on U.S. worker transitions, 27315th edition, NBER.

[11] ILO (2020d) Working from home: estimating the worldwide potential, ILO Brief edition, Gevena: International Labour Organization.

[12] Cajner, T., Dod Crane, L., Decker, R., Hamins-Puertolas, A. and Kurz, C.J. (2020) Tracking Labor Market Developments during the COVID-19 Pandemic: A Preliminary Assessment, 2020030th edition, FEDS.

[13] Gentilini, U..A.M., Dale, P., Lopez, A.V., Mujica, I.V., R., Q. and Zafar, u. (2020) Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures (July 10, 2020), 19th edition, Washington, D.C. : World Bank Group.

[14] Rothwell, J. (2020) The effects of COVID-19 on international labor markets: An update, 27 May, [Online], Available: https://www.brookings.edu/research/the-effects-of-covid-19-on-international-labor-markets-an-update/ [11 November 2020].

[15] Bennedsen, M., Larsen, B., Schmutte, I. and Scur, D. (2020) Preserving job matches during the COVID-19 pandemic: Firm-level evidence on the role of government aid, 27th edition.