COVID-19 will have far-reaching impacts on labour market outcomes. Beyond the urgent concerns about the health of workers and their families, the virus and the subsequent economic shocks will impact the world of work across three key dimensions. This article is being reposted here from the source at the ILO and discusses COVID-19 and its effect on employment, worldwide

COVID-19 Impact on Global Jobs and Underemployment

Initial International Labor Organisation estimates point to a significant rise in unemployment and underemployment in the wake of the COVID-19 virus.

International labour organisation

Based on different scenarios for the impact of COVID-19 on global GDP growth, preliminary ILO estimates indicate a rise in global unemployment of between 5.3 million (“low” scenario) and 24.7 million (“high” scenario) from a base level of 188 million in 2019.

The “mid” scenario suggests an increase of 13 million (7.4 million in high-income countries). This global COVID-19 effect on employment is quite an important scenario to watch in the coming months.

Though these estimates remain highly uncertain, all figures indicate a substantial rise in global unemployment.

The global financial crisis of 2008-9 increased unemployment by 22 million.

International labor organisation

Increase in Unemployment – World Estimates

COVID-19 Affect Jobs Worldwide

Increase in Unemployment By Countries Income Groups

Unemployment rates worldwide ILO

Underemployment is also expected to increase on a large scale

As witnessed in previous crises, the shock to labour demand is likely to translate into significant downward adjustments to wages and working hours.

While self-employment does not typically react to economic downturns, it acts as a “default” option for survival or maintaining income – often in the informal economy.

For this reason, informal employment tends to increase during crises. However, the current limitations on the movement of people and goods may restrict this type of coping mechanism.

The decline in economic activity and constraints on people’s movements is impacting both manufacturing and services.

The most recent data shows that the total value added of industrial enterprises in China declined by 13.5 per cent during the first two months of 2020. Importantly, global and regional supply chains have been seriously disrupted. 

The services sector, tourism, travel and retail are especially vulnerable. An initial assessment by the World Trade and Tourism Council forecasts a decline in international arrivals of up to 25 per cent in 2020, which would place millions of jobs at risk.

Implications for labour income and working poverty

Labour supply is declining because of quarantine measures and a fall in economic activity. At this point, a preliminary estimate (up to 10 March) suggests that infected workers have already lost nearly 30,000 work months, with the consequent loss of income (for unprotected workers). 

Employment impacts imply large income losses for workers. Overall losses in labour income are expected in the range of between 860 and 3,440 billion USD.
The loss of labour income will translate into lower consumption of goods and services, which is detrimental to the continuity of businesses and ensuring that economies are resilient.

Table 1: An estimated decline in labour income and an increase in extreme and moderate working poverty (<$US 3.20 per day, PPP), 2020

Source: ILO

Note: Working poverty estimates pertain to an absolute poverty threshold (below US$3.20 at PPP) for 138 low- and middle-income countries. This analysis excludes potential impacts on working poverty in high-income countries. 

Working poverty is also likely to increase significantly. The strain on incomes resulting from the decline in economic activity will devastate workers close to or below the poverty line. 

The growth impacts of the virus used for the unemployment estimates above suggest an additional 8.8 million people in working poverty around the world than originally estimated (i.e. an overall decline of 5.2 million working poor in 2020 compared to a decline of 14 million estimated pre-COVID-19).

Under the mid and high scenarios, there will be between 20.1 million and 35.0 million more people in working poverty than before the pre-COVID-19 estimate for 2020.


Who are particularly vulnerable?

Epidemics and economic crises can have a disproportionate impact on certain segments of the population, which can trigger worsening inequality. 

Based on past experience and current information on the COVID-19 pandemic and insights from previous crises, a number of groups can be identified:

  • Those with underlying health conditions and older people are most at risk of developing serious health issues.
  • Young persons, already facing higher rates of unemployment and underemployment, are more vulnerable to falling labour demand, as witnessed during the global financial crisis. Older workers can also suffer from economic vulnerabilities. After the MERS outbreak, older workers were found to be more likely than prime-age individuals to experience higher unemployment and underemployment rates, as well as decreased working hours.
  • Women are over-represented in more affected sectors (such as services) or in occupations that are at the front line of dealing with the pandemic (e.g. nurses). The ILO estimates that 58.6 per cent of employed women work in the services sector around the world, compared to 45.4 per cent of men. Women also have less access to social protection and will bear a disproportionate burden in the care economy, in the case of closure of schools or care systems (ILO, 2018).
  • Unprotected workers, including the self-employed, casual and gig workers, are likely to be disproportionately hit by the virus as they do not have access to paid or sick leave mechanisms, and are less protected by conventional social protection mechanisms and other forms of income smoothing.
  • Migrant workers are particularly vulnerable to the impact of the COVID-19 crisis, which will constrain both their ability to access their places of work in destination countries and return to their families.

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