IZA COVID-19 crisis response monitoring: Short-run labor market impacts of COVID-19

The unprecedented COVID-19 pandemic has a severe impact on societies, economies and labor markets. However, not all countries, socio-economic groups and sectors are equally affected. For example, occupational groups working in sectors where value chains have been disrupted and lockdowns have had direct impacts are affected more heavily, while the slowdown of hiring activities mostly affects young labor market entrants. As a result, there has been a steep increase in unemployment rates in many countries, but not everywhere
to the same extent. Part of this difference can be related to the different role and extent of short-time work schemes, which is now being used more widely than during the Great Recession. Some countries have created or expanded these schemes, making coverage less exclusive and benefits more generous, at least temporarily. But short-time work is certainly not a panacea to “flatten the unemployment curve”. Furthermore, next to providing liquidity support to firms, unemployment benefits have been made more generous in many countries. Often, activation principles have also been temporarily reduced. Some countries have increased access to income support to some extent also for non-standard workers, such
as temporary agency workers or self-employed workers, on an ad hoc basis. A major change in working conditions is the broad move towards telework arrangements and work from home. Nonetheless, it appears too early to assess the relative success of national strategies to cope with the pandemic and to revitalize the labor market as well as the medium-term fiscal viability of different support measures. Future monitoring will also have to trace policies to cope with the imminent structural changes that might result from the crisis or might be accelerated by the crisis.