1. COVID-19: From a health to a jobs crisis

Abstract

The COVID-19 outbreak and its rapid diffusion across the globe have turned into the worst public health crisis in living memory. The pandemic forced countries to impose strict containment and mitigation policies and severely affected social and economic activities, driving the global economy to a major recession. Most countries responded quickly and put in place, from the very first stages of the crisis, an unprecedented package of labour market and social policies aiming at reducing the economic shock and supporting workers, their families and companies. This chapter provides a first assessment of the initial labour market impact of the COVID-19 crisis and a review of countries’ wide set of policy responses. It also provides some reflections on how countries could adapt the measures taken in the first months of the crisis as they start softening mitigation policies.

In Brief

Key findings

In a matter of a few months, the COVID-19 pandemic has turned from a public health crisis with no parallel in living memory into a major economic and jobs crisis whose full extent is still unfolding. The containment and mitigation strategies rapidly put in place to slow down contagion and avoid the collapse of health care systems succeeded in limiting the spread of the virus and the associated fatalities. Even where such confinement measures were not adopted, citizens largely assumed similar practices; working from home where possible, while avoiding large gatherings, public transport and in-store shopping. The unfolding pandemic led to a major “supply shock” as international supply chains were interrupted, workers got sick, were quarantined or subject to lockdowns and companies found themselves unable and, in some cases, forbidden to operate. Despite an unprecedented policy response by governments and central banks, increased uncertainty, the decline in household incomes and mandated or self-imposed physical-distancing measures led to a drop in investment and consumption. This quickly turned what was initially a “supply shock” into a “demand shock”, putting further pressure on companies. While economic and labour market conditions are evolving rapidly, the available evidence on the initial impact of COVID-19 on OECD labour markets at the time of writing shows that:

Individual mobility to places of work as well as to public-transport hubs decreased drastically in March and April, not only in countries that enforced strict mandatory measures but also where governments relied more on public information and communication to drive changes in individual behaviour (e.g. physical distancing and enhanced hygiene). Hence, the dramatic fall in economic activity is the result not only of mandatory restrictions but also reflects people’s reactions to non-binding recommendations and their greater awareness of the seriousness of the pandemic.
The initial impact of the COVID-19 crisis on OECD labour markets where data are available has been ten times larger than that observed in the first months of the 2008 global financial crisis: taking into account both the drop in employment and the reduction in hours worked among those who remained in work, total hours worked fell by 12.2% in the initial three months compared to 1.2% in 2008. This reflects the special nature of the COVID-19 crisis with many countries having put entire sectors of their economy “on hold” to contain the spread of the virus.
Countries’ initial unemployment response to the COVID-19 crisis has varied starkly. In a few countries, unemployment immediately jumped to record levels, while in others, it increased only modestly so far, or not at all. This striking heterogeneity largely reflects differences in policy responses. Few countries rely almost uniquely on unemployment benefits to secure the incomes of job losers. Others have made massive use of job retention schemes, i.e. public support for cutting the hours of work or furloughing workers, while keeping them employed. Cross-country differences in the classification of “workers not at work” (because of short-time work) and those on “temporary layoff” also contribute to disparities in measured unemployment.
Even in countries with comprehensive job retention schemes and those that banned or restricted dismissals, however, the number of jobseekers increased, as temporary contracts were not renewed and firms’ hiring activities collapsed: online job postings fell by 35% between February and May in the United States and in European OECD countries.
Given the exceptional uncertainties characterising the near-term outlook, the OECD considers two epidemiological scenarios for the coming 18 months: one where the virus continues to recede and remains under control, and one where a second wave of rapid contagion erupts later in 2020. According to OECD projections, unemployment is set to increase to 9.4% on average across the OECD by the end of 2020 (up from 5.3% at the end of 2019). In the event of a second pandemic wave in late 2020, the unemployment rate would increase even further to 12.6%. Moreover, projections point to only a gradual recovery: the unemployment rate is set to remain at or above the peak level observed during the global financial crisis, reaching 7.7% by the end 2021 without a second wave (and 8.9% in case of a second wave), with substantial differences across countries.
Vulnerable workers are bearing the brunt of the crisis. Low-paid workers have been key to ensure the continuation of essential services during lockdowns, often at a substantial risk of exposing themselves to the virus while working. They have also suffered greater job or income losses. Workers who are not in standard (i.e. permanent, full-time dependent) employment, notably the self-employed, have been particularly exposed to the shock. Young people risk being once more among the big losers of the current crisis. This year’s graduates face bleak prospects, with poor chances to secure a job, or even an internship, in the short run; their older peers are experiencing the second heavy crisis in their still young careers. Women have so far experienced greater declines in employment than men, unlike in the previous crisis. Meanwhile, widespread childcare facility and school closures likely amplified their unpaid work burden at home.

OECD countries have responded with unprecedented measures to contain damages and support workers, their families and companies. Beyond providing direct and indirect financial support to companies, the vast majority of OECD countries have strengthened income support to workers losing their jobs or income. Many extended or introduced job retention schemes to preserve jobs at firms suffering from a temporary reduction in business activity. Some also tightened dismissal regulation or facilitated hiring or renewal of workers on temporary contracts. Given workers’ risk of exposure to COVID-19 at the workplace or their need for greater flexibility to work from home as schools and care facilities were closed, many OECD countries also took steps to facilitate teleworking for workers who do not have to be physically present at their workplace. Most of them also strengthened paid sick leave, including, in some cases, to quarantined workers and took measures to address unforeseen care needs for working parents affected by childcare facility or school closures.

As the pandemic started to recede, countries have started loosening containment policies, but solving the health crisis remains the essential precondition for solving the economic and jobs crisis. A vaccine may take time to be developed, produced and distributed. However, a second wave can also be avoided by upscaling testing, tracking and tracing (TTT), enhancing personal hygienic measures and continuing to enforce physical-distancing policies such as banning large gatherings and encouraging people to work from home. During this post-confinement phase, some of the policies taken in the early months of the crisis will need to be adapted and, in some cases, differentiated to account for the large heterogeneity in conditions across sectors, firms and workers. In particular:

About half of all workers are employed in a job that requires significant physical interactions and therefore face a risk of contagion. Strong occupational safety and health standards, defined and enforced by public authorities and/or by social partners, remain a top priority.
Paid sick leave can continue to perform an important role in containing and mitigating the spread of the virus and protecting the incomes, jobs and health of sick workers and their families. Moving forward, countries should consider closing long-known gaps in paid sick-leave regulations while reinforcing work incentives and employment support to facilitate a return to work.
Job retention schemes should be targeted only to those jobs that are at risk of being terminated but viable in the medium/longer term. Requiring firms to carry part of the cost, stricter limits on duration and incentives to look for work and take up training are some policy levers that policy makers and social partners can mobilise in the coming months to this goal.
The coverage and adequacy of income support will need to be reviewed as the crisis evolves. If weak labour market conditions persist, there can be good reasons for extending unemployment benefit durations to prevent jobseekers from sliding too quickly into much less generous minimum-income benefits. The duration, targeting and generosity of emergency income support programmes put in place in the early months of the crisis should be re-assessed to ensure that support goes to the most needy. “Mutual obligations” requirements, which commit jobless benefit recipients to active efforts to find employment, should be progressively re-established where they have been temporarily suspended.
Jobseekers also need assistance in finding new work. Public and private employment services need to scale up their capacities and make larger use of digital services without giving up standard in-person meetings with people with weaker digital skills. Online and offline training can help jobseekers, as well as workers in job retention schemes, find jobs in sectors and occupations more in demand and counter the risk of long-term unemployment. Hiring subsidies, in particular if targeted to low-pay workers, can promote job creation.
Countries need to act quickly and help young people maintain their links with the labour market. Support for companies who offer jobs or work experience to young people have proven effective at promoting job creation. Effective outreach is crucial to re-establish contact with young people who lost their jobs or left school without finding employment. Youth Guarantees, which entitle all young people to a timely employment or training offer, can provide a good framework for ensuring that no jobless young person goes without support in the current crisis.

Introduction

The outbreak in late 2019 of a novel form of coronavirus responsible for the severe respiratory disease COVID-19, and its rapid diffusion across the entire globe, has turned into a public health crisis with no parallel in living memory and has driven the global economy into the deepest recession since the Great Depression. To contain the spread of the virus and its deadly effects, many countries around the world introduced unparalleled – at least in peacetime – limitations to individual mobility and economic activities in first half of 2020. These measures appear to have succeeded at limiting the contagion across OECD countries. However, the combination of great uncertainty, fear of infection, individual restraints following public guidelines and mandatory lockdowns immediately produced a sharp contraction in economic activity and tested the resilience of labour markets, social-protection systems and societies at large.

Unlike during the global financial crisis of 2008, OECD countries reacted quickly to put in place, from the very first stages of the crisis, an unprecedented set of fiscal and monetary policies. These measures were necessary to contain the employment and social effects of the crisis, but also to provide people and companies with the right incentives, and support, to comply with the restrictions that governments mandated or recommended.

Despite these measures, the immediate impact on OECD labour markets has so far been multiple times greater than during the first months of the global financial crisis and much more severe than what unemployment statistics in some countries may suggest so far. Its effects are unlikely to fade away rapidly, as the supply shock has quickly turned into a demand shock, and as economic activity in many sectors remains subdued. Moreover, now that countries started loosening containment policies and moving to a “new normal”, policy makers face the daunting task of moving the economy from “intensive care”, with massive support, to “long-term care”, where support has to be differentiated according to the conditions of sectors, firms and workers.

This chapter provides a first assessment of the initial labour market impact of COVID-19 as well as of OECD countries’ unprecedented policy responses. It also attempts to provide some first reflections on how countries could adapt the measures taken during the first months of the crisis to the gradual post-confinement phase.

The chapter is organised as follows. Section 1.1 briefly describes the outbreak of the virus and the series of restrictions that countries put in place to limit individual mobility and economic activity. Section 1.2 provides a first assessment of the impact of COVID-19 on the labour market in OECD countries, as well as an outlook ahead based on the latest OECD projections. Section 1.3 describes OECD countries’ initial policy response, while Section 1.4 attempts to provide – in a highly uncertain context – a discussion of how the policy mix could evolve during a period of gradual post-confinement. This chapter heavily draws on a series of policy briefs on labour market, social-policy and health issues released since the start of the pandemic. They can be found on the OECD Digital Hub on Tackling the Coronavirus (COVID-19), under http://www.oecd.org/coronavirus/en/.

1.1. The outbreak of the coronavirus

In late 2019, the city of Wuhan, located in the Hubei province of China, experienced an outbreak of pneumonia from a novel coronavirus – the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), which causes the infectious Coronavirus disease 2019 (COVID-19). Since these initial cases, the number of confirmed COVID-19 cases has grown rapidly and spread to most countries and territories across the world. Globally, there are now more than 10 million confirmed cases, and more than 500 000 deaths have been registered.1 On 11 March 2020, the World Health Organization declared a pandemic 2 and countries started to put in place an unprecedented set of measures restricting mobility and economic activity to “flatten the curve”, avoid the collapse of their health care systems and ultimately contain the number of fatalities (OECD, 2020[1]). The containment and mitigation strategies 3 ranged from stronger efforts to detect cases early on and trace contact with other people to severe physical-distancing measures, including full national lockdowns and the shutdown of the economy, except for a number of “essential activities”.

By the first half of April 2020, 90% of OECD countries had imposed some form of non-pharmaceutical interventions (i.e. restrictions to individual mobility as well as economic activities) to contain the spread of the virus (Figure 1.1): most OECD countries closed schools, restricted travel across but also within countries and banned public gatherings. The exact nature and scope of these measures varied substantially (Hale et al., 2020[2]). In some countries, such as Italy, New Zealand and Spain, the restrictions were mandatory and applied to the entire national territory. In others, such as Mexico and Sweden, restrictions were recommended but not imposed and they were limited to specific areas/groups. Restrictions to economic activity also varied: in a few countries all non-essential firms were closed while in others the restrictions applied only to activities or sectors bringing many people together such as entertainment and accommodation.

Containment and mitigation policies have had an immediate effect on mobility patterns in all countries. As governments issued mandatory restrictions and/or invited their citizens to reduce physical contacts, individual mobility began to decline as people started sheltering at home. Figure 1.2 depicts data based on smartphone locations 4 in a group of selected OECD countries (all other OECD countries can be found in Annex Figure 1.A.1). It shows that even in countries where restrictions were more limited, such as Sweden, movements to places of work and to public-transport hubs decreased markedly between the beginning and the end of March. The only notable exception is Korea, which, since the beginning, put in place a strategy of rapid and massive testing, tracking and tracing (TTT) to contain the spread of the virus without stopping economic activity (OECD, 2020[3]). As Figure 1.2 suggests, mandatory measures explain only in part the decline in mobility observed across countries. According to Maloney and Taskin (2020[4]), most of the decrease in mobility reflects the local and national COVID-19 case incidence and the resulting higher awareness, or fear, or social responsibility.

Figure 1.1. Restrictions to individual mobility and economic activities in OECD countries

Figure 1.2. Individual mobility fell in all OECD countries, even where restrictions were relatively milder

1.2. The pandemic took an immediate and heavy toll on the economy and labour markets

The “physical distancing” resulting from voluntary restraint on mobility and/or mandatory containment and mitigation strategies was effective in reducing the spread of the virus and avoiding a collapse of health care systems that, in turn, would have resulted in a much higher death toll (Deb et al., 2020[5]). However, the associated shutdown of entire sectors of the economy or, in some cases, even just the great uncertainty and people’s fear of infection have had an immediate and dramatic effect on OECD economies and labour markets.

At first, the COVID-19 pandemic caused a “supply shock”. The spread of the virus interrupted international supply chains, first with China and then across most countries and regions, and reduced workers’ hours worked as they were quarantined, sick or subject to lockdowns. Companies found themselves forced to suspend or scale down operations, because of mandated shutdowns, because demand dropped as people started sheltering at home or because they could not ensure safety and health conditions for their employees. Many firms started facing liquidity constraints, and some lost capacity to continue paying their employees’ wages. Despite unprecedented government interventions, the uncertainty about the spread of the virus as well as, in many cases, the reduction in households’ disposable income led people and companies to reduce investment and consumption and save more. The “supply shock” quickly turned into a “demand shock”.

The impact on economic growth was immediate and heavy: GDP substantially dropped in the first quarter of 2020 even though most OECD countries put in place their containment measures only in the second half of March. Figure 1.3 shows that between the last quarter of 2019 and the first quarter of 2020, GDP fell by 7% in Iceland, 5.3% in France and Italy, 5.2% in Spain, 3.7% in the Euro area, 2.2% in Germany, 2.1% in Canada and 1.3% in Korea and the United States and 0.6% in Japan. Chile is the only OECD country where GDP increased significantly in the first quarter of 2020 compared to the last quarter of 2019. This likely represents an economic rebound in the first couple of months of the year after the social unrest that had taken place in late 2019. The projections for the second quarter point to a further dramatic fall in all OECD countries for which quarterly estimates are available. On average across the OECD, GDP is projected to have fallen by 13.2% in the second quarter of 2020, with values of -19% in Spain and the United Kingdom and -18% in France and Ireland.

Early evidence available for a number of OECD countries shows a massive economic shock not only in countries that introduced strict mandatory measures. Economic activity also dropped substantially where governments relied more on social conformity and/or social capital. This likely reflects people’s reactions to non-binding recommendations and their greater awareness of the seriousness of the epidemic.

An analysis of the labour market effects of state-wide stay-at-home orders on initial unemployment claims in the United States (Box 1.1) shows that the timing and the extent of state-specific lockdowns in the United States did not play much direct role in limiting or amplifying the extent of the nationwide shock on the labour market and only affected within-firm work organisation (e.g. shifting to teleworking). Moreover, Figure 1.4 and Figure 1.5 show that the largest swing in mobility and unemployment insurance claims took place before all state lockdowns, with the partial exception of California. This suggests that spill-overs across states, in form of reduced product demand or disruption of supply chains, were of secondary importance, at least at the beginning.

Figure 1.3. GDP fell substantially in the first half of 2020

This is in line with the evidence found by other recent analyses for the United States and other OECD countries. Chen et al. (2020[7]), for example, show that both the fall in electricity consumption across 32 European countries as well as the increase in initial unemployment insurance claims across states in the United States are associated with people’s observed mobility. Mandatory restrictions, such as school and business closures and shelter-in-place orders, do not appear to have had much additional impact. Maloney and Taskin (2020[4]) also show that the majority of the fall in restaurant reservations in the United States and of movie spending in Sweden occurred before the imposition of any non-pharmaceutical interventions. Even in May, as US states started reopening, credit card spending did not pick up faster in states that opened quickly than in those that kept confinement measures in place (Chetty et al., 2020[8]). Andersen et al. (2020[9]) also analyse credit card transactions and show that aggregate spending in Denmark, where, significant restrictions on social and economic activities were taken, fell only marginally more than in Sweden where no such measures were taken. Hensvik et al. (2020[10]) show that job postings in Sweden fell as much as in the United States. Finally, Aum et al (2020[11]) compare the employment effects of COVID-19 in Korea, which did not implement a lockdown but relied on testing and contact tracing, with the effects in the United Kingdom and the United States. They find that at most half of the job losses in the United States and the United Kingdom can be attributed to lockdowns.

Box 1.1. The labour market effect of state-wide stay-at-home orders in the United States

Several OECD countries, especially those with federal structures, took non-pharmaceutical interventions (NPIs) both at national and at regional or local level to contain the pandemic. For example, the Australian Commonwealth Government issued a federal order on 29 March limiting gatherings to a maximum of two people, but several states went much further while others opted not to follow the new recommendations. Italy first imposed a strict lockdown on a number of regions and provinces in the northern part of the country, and later extended it to the other regions. In Germany, containment policies differed across Länder.

In the United States, the federal government issued an emergency declaration on 13 March and non-binding physical-distancing guidelines on 16 March. Governors in most states issued binding stay-at-home orders in the following three weeks. However, while a few states and local administrations issued them very early – in California, for example, a few counties already issued stay-at-home orders on 16 March and a state-wide lockdown was established on 19 March – others waited longer out of concerns for the economy. While state lockdowns were effective in curbing the diffusion of the epidemic, their direct impact on the labour market is less obvious – particularly in the context of a rapidly spreading epidemic, federal guidelines that already affected people’s behaviour and a connected economy. The possible impact of state lockdowns has indeed been part of an intense political and scientific debate – see e.g. Gupta et al. (2020[12]); Painter and Qiu (2020[13]); Kahn, Lange and Wiczer (2020[14]); Chetty et al. (2020[8]); Friedson et al. (2020[15]); and Coibion, Gorodnichenko and Weber (2020[16]).

This box assesses the impact of state lockdowns on the labour market with the help of event study techniques, using alternatively a measure of mobility towards workplaces and initial unemployment insurance (UI) claims as dependent variable. The following simple model is estimated

${\log Y}_{s t} = \sum_{o = - τ}^{T} α_{o} D_{o s t} + μ_{s} + μ_{t} + ε_{s t}$

where $Y$ stands for workplace mobility (resp. initial UI claims), the $μ$ stand for state $s$ and time $t$ fixed effects, $D_{o s t}$ are state-specific time dummies indexed by $o$ , which denotes time distance from the date of the stay-at-home order in state s (with $o = 0$ indicating the day or week of the order) and $ε$ is a standard error term. The $α_{o}$ s are the parameters of interest, which capture the effect of orders on the dependent variable, on the day (resp. week) of implementation and each of the subsequent days (resp. weeks), taking other states as a control group. To ensure that “treated” and control states are comparable, the estimated $α_{o}$ s must be insignificantly different from 0 for negative values of $o$ (i.e. between $- τ$ and -1). As standard in the case of absolute numbers, the dependent variable is in logarithm. Estimates are then presented in terms of percentage effects in the figures below.

Model estimates shows that daily cross-state average workplace mobility slumped on the very same day federal guidelines were announced and continued to decline the following days (Figure 1.4, Panel A). Yet, a significant negative trend is visible also the days before. The estimated effect of state lockdowns is smaller, at 5-10% (Panel B) but significant and persistent, remaining approximately constant for about one month (not shown in the chart). Treated and control states appear comparable. This suggests that state lockdowns had a significant effect on the organisation of work over and above the nationwide trend.

Figure 1.4. US stay-at-home orders and workplace mobility

Did the changes in work organisation induced by state-wide stay-at-home orders also lead to an additional burst of unemployment? On the week of the announcement of the federal guidelines, initial UI claims soared by about 1 000% on average relative to the week before and reached about 3 000% after two additional weeks (Figure 1.5, Panel A).1 A moderate increase (of about 15%) is also visible in the week before the announcement, which is the week of the federal declaration of emergency. By contrast, no additional effect of state lockdowns on initial UI claims2 is observable (Panel B).3 This result, which is consistent with those of Kahn, Lange and Wiczer (2020[14]) and Chetty et al. (2020[8]), suggests that mandatory state-wide stay-at-home orders had no discernible additional effect on unemployment over and above aggregate trends.

Figure 1.5. US stay-at-home orders and initial unemployment insurance claims

The results in this box suggest that that the timing and the extent of state-specific lockdowns in the United States did not play much role in limiting or amplifying the extent of the nationwide shock on unemployment insurance claims and mainly affected within-firm work organisation (e.g. shifting to teleworking).

← 1. It must be underlined, however, that that week is also the week in which the greatest worldwide contraction in mobility is observed (see above).

← 2. A state-wide stay-at-home order is attributed to a week if it took effect at the latest the day before the end of that week. Changing this parameter to zero, two or three days yields qualitatively similar estimates.

← 3. Treated and control states appear comparable. Results are robust to: i) excluding the state that issued only a stay-at-home advisory (Massachusetts); ii) excluding states which had stay-at-home orders in selected counties before state-wide orders; iii) excluding states that never issued stay-at-home orders; iv) controlling for either overall mobility or workplace mobility; and v) replacing the dependent variable with the level of initial claims at time t divided by the state labour force in the week before stay-at-home orders. No significant difference is observed between early- and late-lockdown states, where early stay-at-home orders are identified as those issued no later than a week after the publication of the federal guidelines.

1.2.1. The initial labour market impact

While the COVID-19 crisis has passed the first phase of lockdowns and business closures, the impact on the labour market, while already unprecedented, is likely to deepen significantly going forward. This section provides a first assessment of the initial impact of the crisis mobilising a mix of administrative and survey data available at the time of writing. This first assessment of the initial impact, while already very dramatic and without comparison in the post-war period, has to be considered as partial and preliminary.

The unemployment rate offers only partial guidance on the extent of the jobs crisis

Changes in countries’ unemployment rates since the onset of the COVID-19 crisis have varied starkly (see Figure 1.6) reflecting fundamental differences in policy responses but also the complexity of collecting and comparing labour market statistics in times of a pandemic.

In the United States, the unemployment rate jumped from its 50-year low of 3.5% in February to 14.7% in April 2020, the highest level in the history of the series (i.e. since January 1948). It then fell to 13.3% in May and 11.1% in June. However, 73% of the unemployed in May in the United States were on temporary layoff, and still 59% in June.5 The large share of temporary layoffs suggests that part of the initial increase in unemployment may be reabsorbed if the pandemic is kept under control and the economy restarts at good speed. However, the notable decline in the share from May to June also shows that part of the initial job losses are becoming permanent as some business are not reopening after the lockdown. In Canada, the unemployment rate increased by 7.4 percentage points from 5.6% to 13% between February and April and rose a bit further to 13.7% in May. As in the United States, the initial surge was driven by temporary layoffs, with the vast majority of the newly unemployed expecting to return to their previous job within six months.

In most other OECD countries, where data are available only up to April or May at the time of writing of this chapter, labour market statistics do not identify a notable crisis effect yet. While in Colombia unemployment increased by 10.3 percentage points between February and May, the increases in all other countries are much milder: Lithuania registered the largest increases (+3 percentage points up to May) followed by Latvia (+2.9 percentage points up to May) and Chile (+2.8 percentage points up to April). In Italy and Portugal, decreases in the unemployment rate up to May (by, respectively, -1.2 percentage points and 0.9 percentage points) do not reflect an improvement in the labour market, but a shift towards inactivity as jobless people stopped searching for a job during the pandemic.

Figure 1.6. Unemployment, as measured in national surveys, has increased sharply only in some countries

The striking heterogeneity in the unemployment response across OECD countries reflects fundamental differences in countries’ policy mix to cushion the economic and social effects of the crisis (see Section 1.3) and the way these are reflected in labour market statistics. The United States are strongly relying on unemployment insurance benefits to secure the income of workers who lose their jobs, even in the case of a temporary crisis. Meanwhile, other OECD countries, not just in Europe, are making heavy use of job retention schemes, which allow companies to cut hours of work, or even halt work entirely, while keeping their workers attached.6

There are also other, more technical but important, reasons why unemployment rates at this stage offer only partial guidance on the extent of the labour market crisis across OECD countries and should be read with some caution:

Survey data are not necessarily best suited to account for sudden shocks, such as a pandemic, in terms of their granularity and timing. The specific timing when data are collected may not allow capturing the full shock. The COVID-19 crisis also brought very practical challenges to the production of labour market statistics around the world. Call centres operated at a lower capacity and carrying out face-to-face interviews was not possible. In Italy, for example, the labour force survey sample in March was 20% smaller than usual because of the restrictions imposed to fight the pandemic. In the United States, the household survey response rate in May, at 67%, was about 15 percentage points lower than in months prior to the pandemic.
The unemployment statistics reflect the fact that the lockdowns affected people’s job search behaviour. To be considered “unemployed”, an out-of-work person must actively look for a job. As the restrictions imposed by governments and the fear of infection likely severely hindered job search behaviour, some out-of-work people may in fact be counted as inactive. This will depress the measured number of jobseekers and the unemployment rate. In Canada, for example, 1.1 million people were not in the labour force during the week of 12 April, but had worked in March or April and wanted to work. But because they did not actively look for work, they were not counted as unemployed. The April unemployment rate climbs from 13% to 17.8% when including workers who were not counted as unemployed for reasons specific to the COVID-19 economic shutdown (Statistics Canada, 2020[17]). Also in the United States, the number of people not in the labour force who wanted a job nearly doubled between March and April 2020, from 5.5 to 9.9 million people (U.S. Bureau of Labor Statistics, 2020[18]). Comparable data on total employment and inactivity in OECD countries over the recent months are not yet available.
Unemployment statistics may also be less comparable across countries because countries classify short-time work or temporary layoffs differently in their statistics – see the detailed note in OECD (2020[19]). In European countries, people who report being temporarily absent from work are nevertheless counted as “employed” based on a specific question probing their formal job attachment: respondents are classified as employed if they indicate that (i) the recall date falls within three months from layoff (or more than that, if the return to employment in the same economic unit is guaranteed), or that (ii) workers continue to receive remuneration from their employer, including partial pay, even if they also receive support from other sources, including government schemes. In the United States and Canada, people on temporary layoffs are deemed to have weaker job attachment and they are classified as “unemployed” even if they expect to be recalled to their job within six months.7 Typically, these differences have only a limited impact on broad comparability of employment and unemployment statistics. However, in times of crisis, the cross-country comparability of unemployment statistics can be significantly affected. As an example, since the beginning of the crisis, Ireland’s Central Statistics Office has been publishing an alternative unemployment estimate that includes workers on temporary layoff and in receipt of a new Pandemic Unemployment Payment paid to all: doing so raises the measured unemployment rate in May from 5.6 to 26.1%.

Initial unemployment insurance claims have reached historically high levels

Administrative data on unemployment insurance claims/recipients and social-security contributions can provide more granular and real-time evidence, at least at the onset of a crisis. They can be a complementary and more timely source of information. And yet, they also do not permit an entirely comparable assessment of the labour market situation across countries, as they also reflect institutional differences across countries and the very different role that unemployment insurance plays in cushioning the immediate effect of an economic shock.

The number of unemployment insurance claims soared in many countries as the COVID-19 crisis hit (Figure 1.7), dwarfing the increases observed during the global financial crisis. This reflects an economic shock that is initially much wider and more abrupt than in 2008 and that may well continue to evolve very differently.

Figure 1.7. The number of unemployment insurance claims increased substantially in some OECD countries

Across the United States, more than 40 million workers had filed unemployment insurance claims by the end of May, two months after the beginning of lockdowns. During the global financial crisis, it took 1.5 years to reach that number after the Lehman Brothers bankruptcy. While these numbers made the news around the world, similar increases were registered in other OECD countries when measured relative to the size of workforce. In Israel, the share of workers in the labour force who had filed an unemployment insurance claim by the end of April was seven times higher than before the crisis, at 27.8%. Other OECD countries also registered substantial increases in unemployment claim numbers, but job retention schemes often contributed to cushion the effect of the jobs crisis.

In addition to the observed job losses, the crisis also seems to have led to strong adjustments on the intensive margin. Where available for the recent months, data on hours of work and part-time work for economic reasons (i.e. people who would have preferred full-time employment) show substantial adjustments also in terms of how long employed people worked. In the United States, for example, the number of people who work part time for economic reasons nearly doubled to 10.9 million between March and April.

Job retention schemes are cushioning the impact on open unemployment in a number of OECD countries

Companies also made massive use of job retention schemes to receive public support for cutting the hours of work for their workers, or putting them “on furlough”. About 60 million workers across the OECD have been included in company claims for job retention schemes, such as the German Kurzarbeit or the French Activité partielle. Such schemes allow preserving jobs at firms experiencing a temporary drop in business activity, while providing income support to workers whose hours are reduced due to a shortened workweek or temporary layoffs (see Section 1.3.2 for an in-depth discussion). The use of these instruments plays a major role in explaining why most other OECD countries did not experience the massive surges in open unemployment that were registered in Canada and the United States. In May, companies’ requests for support from job retention schemes summed to 66% of dependent employees in New Zealand, over 50% in France, over 40% in Italy and Switzerland, around 30% in Austria, Germany, Portugal and the United Kingdom (Figure 1.8). The actual use of these schemes may be considerably lower than the initial requests. In France and Germany, for example, the estimated actual use at the time of writing is around 60% of the initial requests.8

Figure 1.8. Participation in job retention schemes has been massive in some countries

When accounting for both the extensive margin of adjustment (fewer employed workers) and the intensive margin (fewer hours worked among remaining workers because of part-time or short-time work), the impact of the COVID-19 crisis on OECD labour markets has been, on average, ten times bigger than that observed in the first months of the global financial crisis in 2008 (Figure 1.9): on average across the countries for which data are available, total hours worked fell by 12.2% in the initial three months of the crisis compared to 1.2% of the first three months of the global financial crisis.

Figure 1.9. The cumulated impact of the COVID-19 crisis on employment and hours of work is ten times greater than during the global financial crisis

Job postings and hirings were frozen

Besides layoffs, a reduction in companies’ hiring activity played an important role in rising unemployment. Even countries with comprehensive job retention schemes and those that banned or strictly regulated dismissals (such as Italy and Spain, see Section 1.3.2) saw their jobseeker numbers increase, though at a much lower scale than in Canada or the United States. Temporary contracts were not renewed, and new jobs were not opened. Recessions are usually characterised by both large increases in the inflow rate into unemployment (i.e. more layoffs) and large reductions in the unemployment outflow rate (i.e. fewer hirings and longer unemployment spells (OECD, 2009[21]), and this crisis is no exception.

Comparable data on hirings or job vacancies for all OECD countries are not yet available. However, high-frequency data on online job postings can provide real-time information on labour demand, and often with a high level of granularity in sectoral, occupational and regional information. By relying only on information posted online, these data necessarily portray a partial picture of the overall economy, with different degrees of representativeness across countries. Within country, they generally over-represent high-skilled occupations and industries.

These shortcomings notwithstanding, online job postings data 9 bear witness of the recent labour market collapse in a similar way as other figures proposed above. The number of job advertisements posted online on a given day decreased by 35% from 1 February to 1 May, on average across the 18 OECD countries for which data are available (Figure 1.10). Some countries experienced larger falls, such as Canada (43%), Ireland (45%), and the United Kingdom (52%), while others experienced more moderate declines, such as Germany (16%), Belgium, Japan and Switzerland (all 20%). The freeze in vacancy postings did not materialise until March in most countries, and had increased 3.5 times in size by the end of April on average across countries.10 The job posting freeze continued until 1 June despite the partial re-opening of the economic activities in several OECD countries.

Figure 1.10. Online job postings have declined massively

Aggregate figures hide significant heterogeneity in the impact of the COVID-19 crisis on online job openings across sectors and occupations. Some services considered “essential” were operating even at the peak of the health crisis, while non-essential businesses had to suspend activities. Furthermore, some sectors are naturally more exposed to contagion, either because production cannot occur off company premises, or because they rely more heavily on inter-personal contacts among workers or between workers and customers (Barbieri, Basso and Scicchitano, 2020[22]). Lastly, some sectors have suffered and will continue to suffer more of the reduction in demand driven by job displacements and lower incomes, and by disruptions in supply chains (Barrot, Grassi and Sauvagnat, 2020[23]).

On average across the five OECD countries for which detailed data are available, the largest contributions to the aggregate decline in job postings is attributable to what are here defined as “public services”11, and business services, followed by trade and transportation, and the accommodation and food industries (Figure 1.11, Panel A). These sectors need not correspond to those where postings fell the most in percentage terms, as long as the latter accounted for a relatively small share of country-wide online postings before the crisis. Unreported figures from the same five countries show that the arts and entertainment, accommodation and food, transport and storage and private sector administration industries experienced the largest declines in percentage terms in outstanding job postings between February and April 2020 on average across countries (-60 to -80%), while health and social work, manufacturing, and information services experienced minor declines.

Figure 1.11. The decline in online job postings by industry and skill group

Lastly, the crisis had heterogeneous effects on the hiring activity for different occupations. Demand for so-called essential workers, such as hospital workers, employees of food retailers, and warehouse personnel held up or even increased during the lockdown. While many of these occupations are usually classified as low-skilled, workers in high-skilled occupations were also relatively less affected by the labour market shock, insofar as they could keep on working safely from home through distance work.12

Between February and April 2020, middle-skill occupations experienced a significantly larger fall in online job advertisements than high- or low-skill occupations, on average across the five countries for which data are available (Figure 1.11, Panel B). In the United Kingdom, where this phenomenon is especially pronounced, new online job postings for middle-skill occupations contracted twice as much as for low-skill occupations, and 40% more than for high-skill occupations. While the persistence over time of such patterns will need further investigation, these results point to the possibility that the COVID-19 shock will reinforce the existing trend of employment polarisation in OECD countries (see Chapter 4).

Within countries, some regions were hit more than others

Despite the shock’s symmetric origin and its global extent, the impact of COVID-19 within countries differed across regions. In many OECD countries, the outbreak has been worse in cities than in rural areas and has affected some regions more than others. In Italy, for example, the country’s north was hardest hit, and Lombardy, where the first outbreak of COVID-19 took place, registered the highest number of cases. In France, the regions of Île-de-France and Grand Est were the most affected. In the United States, in early June, the state of New York alone accounted for 20% of the country’s confirmed COVID-19 cases. Regions or states where the outbreak was more sizeable experience significantly more severe economic losses (Chen et al., 2020[7]). The economic impact across regions will also vary according to their sectoral specialisation: some sectors are more exposed to confinement measures or to disruptions in the supply chain or are structurally more volatile as they rely more on temporary and seasonal work.

Official estimates of job losses by sector, regions and groups of workers are not yet available in a consistent manner. However, an analysis of the sectors most directly affected by containment measures, such as those that involve travelling and direct contact between consumers and service providers (OECD, 2020[24]), can provide a first estimate of the heterogeneous effects across regions and group of workers. Differences in the share of regional employment at risk are very wide, ranging from less than 15% to more than 35% across 314 regions 13 in 34 OECD countries (OECD, 2020[25]). In Greece, for example, they range from 55% of jobs at risk in South Aegean Islands to 22% in Central Greece. Regional differences are particularly stark also in Slovak Republic and France. Touristic places often show the highest shares of jobs at risk of disruption. In Europe, several major tourist destinations, such as Crete, the South Aegean and Ionian islands (Greece), Balearic and Canary Islands (Spain) as well as the Algarve region in Portugal may lose 40% or more of jobs. In Korea, the highest risk of job loss is in Jeju-do, where tourism is an important pillar of the economy. In North America, Nevada (with the tourist hub Las Vegas as its largest city) stands out as the most affected state, followed by Hawaii. Regions in Northern and Eastern European countries appear less affected, on average, than those in Southern Europe and North America.

More vulnerable workers are bearing the immediate brunt of this crisis

Already disadvantaged groups of workers often suffer most from economic crises, as they are the first out when the shock hits and last in when the recovery starts. While it is still very early to assess the impact of COVID-19 on different labour market groups, first evidence indeed suggests that the crisis has – at least initially – exacerbated pre-existing labour market inequalities, and that vulnerable workers have so far been paying the brunt of the costs.14

Low-paid, often low-educated workers have been particularly affected during the initial phase of the crisis. On the one hand, many of them ensured the continuation of essential services during the lockdowns, often at a substantial risk of exposing themselves to the virus while working. Granular evidence using smartphone location shows that, in the United States, people living in higher-income neighbourhoods could shelter at home earlier and for longer than people living in lower-income neighbourhoods (see Box 1.2). The so-called “frontline workers”, who work in essential services in jobs that cannot be carried out remotely, are on average less well educated than the overall workforce and more likely to earn low wages (Blau, Koebe and Meyerhofer, 2020[26]; Fana et al., 2020[27]). This includes health care workers, but also cashiers, production and food processing workers, janitors and maintenance workers, agricultural workers, and truck drivers. Low earners are also much more likely to be working in sectors affected by shutdowns and more likely to have suffered job or earnings loss. In the United Kingdom, employees in the bottom decile of weekly earnings are about seven times as likely to work in shutdown sectors as those in the top earnings decile (Joyce and Xu, 2020[28]). Low-income workers are less able to work from home, are more likely to report having lost their job because of COVID-19, and are more pessimistic about their earnings prospects for the next few months. Real-time survey data for a number of OECD countries (Figure 1.12 based on Foucault and Galasso (forthcoming[29])) show that those in the top earnings quartile were on average 50% more likely to work from home in April than those in the bottom quartile. Meanwhile, low-earning workers appear to be have stopped working twice as often. In Canada, labour force survey data show that employment losses between February and April 2020 have been more than twice as high for low-wage employees as for all paid employees (Statistics Canada, 2020[17]).15

Figure 1.12. While higher-earning workers often worked from home, lower-earning workers often had to stop working

Box 1.2. Staying at home during the pandemic is harder for poorer people

While containment and mitigation policies formally applied to the entire population, not all population groups adapted (or could adapt) with the same speed and depth. Very fine-grained data collected from the smartphone location company Cuebiq show that before the COVID-19 outbreak in the United States, people living in higher-income neighbourhoods used to move more (Figure 1.13, Panel A) and stay at home less (Figure 1.13, Panel B). When the White House released its guidelines asking people to shelter at home, mobility decreased and the share of people staying home increased. Also the mobility patterns across higher- and lower-income neighbourhoods inverted: people living in poorer neighbourhoods started sheltering at home later and less (especially during the workweek) than people living in higher-income neighbourhoods. This may reflect differences in awareness and access to information. However, they are also indicative of structural divides in the access to jobs (people in higher-income neighbourhoods may be more likely to be employed in jobs that can be done at home), in the ability to weather a sudden shock (people in higher-income neighbourhoods more likely have enough savings to pass a period of unemployment) and in housing conditions (poor housing conditions may make it more difficult for people to self-isolate and can make effective teleworking impossible).

Figure 1.13. In the United States, people living in higher-income neighbourhoods sheltered at home earlier and longer than people living in poorer neighbourhoods

Also workers in non-standard jobs – i.e. self-employed workers and those in temporary or part-time dependent employment – were highly exposed to job and income losses. They may represent up to 40% of total employment in sectors most affected by containment measures across European OECD countries (OECD, 2020[30]). Some self-employed workers are overrepresented in some of the industries that have been restricted or shut down because of quarantine, e.g. in the hospitality and culture sectors, but also in personal services such as hairdressers. Early surveys carried out after the start of lockdowns document this effect: 48% of self-employed workers in the Netherlands experienced an hours reduction, compared to only 27% of employees (Von Gaudecker et al., 2020[31]); 75% of the self-employed in the United Kingdom report having experienced a drop in earnings in the previous week, compared to less than 25% of salaried workers (Adams-Prassl et al., 2020[32]). Meanwhile, workers on temporary contracts were among the first to lose their job during the crisis as contracts are not being renewed when coming to an end. Canada saw sharp declines in employment among workers with a temporary job and those with a job tenure of one year or less – -30% for each group (Statistics Canada, 2020[17]). Administrative data from France and Italy confirm these patterns. In France, the increase in new unemployment claims in March and April 2020 was entirely driven by temporary agency workers and workers with temporary jobs which saw their contracts not renewed (DARES, 2020[33]). Administrative data on job flows in Italy show that the decrease in the number of jobs between the end of February and the end of April compared to the same period in 2019 was largely driven by reduced hiring on temporary contracts (Bovini et al., 2020[34]; Baronio and Linfante, 2020[35]; Veneto Lavoro, 2020[36]). People who were counting on getting a new job could not find one. The heavy job or income losses of workers in non-standard forms of employment are particularly concerning as these workers often do not have access to job retention schemes and unemployment benefits – see Sections 1.3.2 and 1.3.3 and OECD (2020[30]; 2020[37]).

The same applies for many informal workers, including undocumented migrants. Many of them are likely employed in sectors severely hit by confinement measures, such as in accommodation and food services but also as domestic workers, and they often have no access to any income support. Workers in “partial informality”, whose employment is registered but who receive some of their remuneration in cash (“envelope wages”), may receive compensation only for part of their lost earnings from job retention schemes or unemployment benefits – see Section 1.3.3 and OECD (2020[37]).

The COVID-19 crisis has also exposed the vulnerabilities of many platform jobs. While, some platform jobs offered opportunities to workers and business to reinvent themselves during the confinement and respond to arising needs (for example by delivering food, pharmaceuticals and other goods), they were also among those most exposed to the shock. According to a survey carried out by AppJobs (AppJobs Institute, 2020[38]) – an online platform to search for app-based jobs around the world – over half of gig workers said they had lost their jobs; more than a quarter had seen their hours cut. Yet, at the same time, these workers often do not benefit from employment protection legislation; they often have no access to short-time work schemes, unemployment benefits or paid sick leave; and, in some countries, they may not even have health insurance (OECD, 2019[39]).

Young people risk being once more among the big losers of the current crisis, much like they suffered heavily during the global financial crisis (Carcillo et al., 2015[40]; OECD, 2016[41]). This year’s graduates, sometimes referred to as the “Class of Corona”, are leaving schools and universities with often very poor chances of finding employment or work experience in the short run. Meanwhile, their older peers are already experiencing the second heavy economic crisis in their still young careers. The initial labour market experience has a profound influence on the later working life, and a crisis can have long-lasting scarring effects on employment and earnings perspectives (Bell and Blanchflower, 2011[42]; Schmillen and Umkehrer, 2017[43]). First evidence of labour market data from the current crisis suggest that young workers have been heavily affected, as they generally hold less secure jobs and are overrepresented among workers in hard-hit industries such as accommodation and food services. In the United Kingdom, below-25-year-olds were about 2.5 times as likely as other employees to work in shut-down sectors, a figure that still excludes students in part-time jobs (Joyce and Xu, 2020[28]). Youth employment numbers quickly took a dive: in Canada, the number of employed youth dropped by 33% from February to May 2020. In the United States, the teenage unemployment rate more than tripled from 7.7 to 25.2% in between February and May. During the global financial crisis, across the OECD, almost one-in-ten jobs held by under-30-year-olds had been destroyed, and the recovery was very slow, particularly for the disadvantaged. It took a whole decade, until 2017, before the youth unemployment rate had gone back to its pre-2008 level. Even so, young people have seen a general decline in their labour market fortunes, with increases in the incidence of non-employment, low-pay and underemployment (OECD, 2019[39]).

Evidence on the differential employment impact of the current crisis on women and men is still weaker. However, this crisis, unlike the previous one, appears so far to have affected the labour market prospects of women more strongly than men. In Canada women accounted for a disproportionate share of job losses in March, though men experienced larger employment losses in April. However, there remains a small gender gap in employment losses (-16.9% for women vs. -14.6% for men between February and April). Also in the United States, unemployment rates increased more sharply for women than men. In the European Union, the unemployment rate in March 2020 increased by 4.5% for women against 1.6% for men. Women’s labour market attachment tends to be weaker than men’s, leaving them more exposed and easier to lay off. Moreover, many of the industries most directly affected by COVID-19 are major employers of women, while the global financial crisis had been characterised by greater job losses in male-dominated sectors (notably construction and manufacturing) and an increase in hours worked by women, especially in the early years (Sahin, Song and Hobijn, 2010[44]; OECD, 2012[45]). The widespread school and childcare facility closures during the current crisis likely also amplified women’s unpaid work burden at home (see Box 1.3).

Box 1.3. Women on all fronts during the COVID-19 crisis

Women have been serving on the frontlines in the fight against COVID-19, and the crisis impact on women has been stark. Leading much of the wider social and health response, they have been facing compounding burdens:

Women are playing a key role in the health care response to the pandemic. They make up two-thirds of the health workforce worldwide, including 85% of nurses and midwives (Boniol et al., 2019[46]), and account for 90% of long-term care workers across OECD countries (OECD, 2020[47]). Health and social care workers have been facing exceptional demands, and considerable risks, through the crisis. The strain has often been particularly acute for mothers, who also had to cope with the implications of school and childcare facility closures during confinement.

The crisis likely amplified women’s unpaid work burden, as women picked up much of the additional unpaid work caused by widespread school and childcare facility closures. Women provided most unpaid work at home before the crisis, spending around two hours per day more on it than men across the OECD on average (OECD, 2020[48]). The crisis increased the amount of time that parents spent on care and child supervision and home schooling, with much of this additional burden likely having fallen on women. According to a German online survey carried out in March/April 2020, in about half of all households with children the female partner alone cared for the children (Möhring et al., 2020[49]). Online survey data collected in the United Kingdom in April/May 2020 indicate widening disparities in paid work patterns between mothers and fathers (Andrew et al., 2020[50]).

Women face higher risks of economic insecurity. Despite the remarkable progress made over the past half-century or so, women’s labour market attachment remains weaker than men’s, especially around parenthood. Gender gaps in hours worked, seniority and pay, leave women more vulnerable than men and easier to lay off. The short-term economic fallout from COVID-19 particularly affected sectors that rely on physical customer interaction, many of which are major employers of women. On average across OECD countries, women make up about 53% of employment in food and beverage services (e.g. cafés, restaurants and catering), 60% in accommodation services (e.g. hotels) and 62% in the retail sector (ILO, 2020[51]). For some women workers, the public sector may offer some protection, at least in the short term, as women make up a disproportionate share of public-sector employees across the OECD (OECD, 2019[52]).

Women are often more vulnerable than men to any sharp income loss. Across OECD countries, women’s incomes are, on average, lower than men’s, and their poverty rates are higher (OECD, 2020[53]). Women also often hold less wealth than men that could help cushion temporary income losses (Sierminska, Frick and Grabka, 2010[54]; Schneebaum et al., 2018[55]). And because women tend to hold greater care and domestic responsibilities than men, it is often more difficult for them to find alternative employment and income streams (such as piecemeal work) following layoff. Single parents, most of whom are women, are particularly vulnerable. They were hit much harder by the closure of childcare facilities and schools during confinement. Reliance on a single income also means that job loss can be critical for single parents, especially where public income support is weak or slow to react.

Early reports emerging from China and some OECD countries suggest escalating risks of domestic violence against women during the pandemic, confirming a pattern seen in past lockdown and confinement situations (UNDP, 2015[56]).

Source: OECD (2020[57]), “Women at the core of the fight against COVID-19 crisis”, https://www.oecd.org/coronavirus/policy-responses/women-at-the-core-of-the-fight-against-covid-19-crisis-553a8269/.

How strongly the crisis affects different groups of workers and their families ultimately depends not only on their exposure to job or income loss, but also on how well they are able to temporarily absorb such shocks. Unfortunately, the exposure to labour market shocks and the capacity to deal with them are often closely related: analyses for the United Kingdom (Benzeval et al., 2020[58]) and Norway (Alstadsæter et al., 2020[59]) show that the largest job and income losses have fallen on already financially vulnerable workers or parents with younger children. In particular, the UK analysis illustrates that in between those workers experiencing little or no labour market shock and those experiencing a shock but being reasonably well covered by social safety nets, there is a “vulnerable middle” who are hit hard and have little capacity to mitigate those shocks: single parents, the low-educed and ethnic minorities.16

1.2.2. The outlook ahead

The economic outlook is exceptionally uncertain. With the easing of the health emergency, confinement measures have been scaled back gradually and mobility is picking up. The restarting of activities automatically adds to output, even though some containment measures, such as the closure of many international borders, will remain for some time. The recovery is likely to be hesitant, and could be interrupted by renewed outbreaks if targeted containment measures, notably test, track and trace (TTT) programmes, are not put in place or prove ineffective.

Business and consumer confidence surveys indicate substantial pessimism about labour market prospects.17 Across OECD countries, businesses’ employment expectations for the months ahead plummeted in April 2020, while consumers’ unemployment expectations over the next 12 months jumped up (Figure 1.14). These are the strongest monthly changes on record since 1985. In May the indicators partially improved but remained far below (for employment expectations) or above (for unemployment expectations) their long-term averages and very close to the levels registered during the global financial crisis in March 2009. Employment expectations declined for all sectors, but the fall is much larger for services while the outlook for manufacturing was already on the negative side before the COVID-19 hit. Consumers’ unemployment expectations increased to a similar extent for all groups, including for respondents from higher-income households and those with a tertiary degree.

Reflecting the unusual degree of uncertainty, the OECD Economic Outlook (2020[60]), published on 10 June, presented two equally likely scenarios for the months ahead:

A single-hit scenario in which countries successfully overcome the current outbreak due to the containment measures put in place in the first half of 2020, with the effective reproduction rate assumed to decline and stay persistently below unity. Higher hospital capacity and the widespread roll-out of effective TTT are assumed to be sufficient to prevent a resurgence in infections and intensive cases later in the year and until a vaccine becomes available.
A double-hit scenario in which the current easing of containment measures is assumed to be followed by a second, but less intensive, virus outbreak taking place in October/November. This could be because of seasonal factors in some countries, particularly in the Northern Hemisphere, or because containment, TTT and isolating are not as efficient as expected. Further outbreaks in 2021 are assumed to be avoided due to pharmaceutical breakthroughs, but these remain a significant downside risk.

Figure 1.14. Labour market expectations deteriorated among businesses and consumers alike

In the “double-hit” scenario, OECD GDP is projected to decline by 9.3% this year; in the “single-hit” scenario, OECD GDP is projected to decline by 7.5% this year. In both scenarios, the recovery will likely be slow and gradual and, despite a rebound, total output by the end of 2021 is expected to still be well short of its pre-crisis level. In many advanced economies, the crisis could destroy the equivalent of five years or more of per capita real income growth by the end of 2021.

In both scenarios, unemployment rates are projected to increase significantly in all OECD countries. According to OECD projections, unemployment in the OECD economies, which had declined to a 50-year low of 5.3% at the end of 2019, is projected to have more than doubled by the end of June 2020 to almost 11.4%. This is well above the level seen during the global financial crisis (Figure 1.15, Panel A). As economies begin to re-open, unemployment is projected to fall gradually but remain above or close to its peak level during the global financial crisis until well into 2021 even in the single-hit scenario. This reflects the scale of immediate job losses in some countries, and the likely declines in employment in others as temporary wage and employment support schemes end in the second half of 2020.

Figure 1.15. Unemployment is projected to increase three times more than during the global financial crisis

In the double-hit scenario, unemployment remains high for even longer in OECD economies, raising the risk of hysteresis as long-term unemployment becomes entrenched and labour force participation falls as workers get discouraged. The OECD-wide unemployment rate is projected to be 8.9% at the end of 2021 in this scenario, near the peak seen during the global financial crisis and 3.6 percentage points above the rate at the end of 2019. In the single-hit scenario, unemployment would reach 7.7% by the end of 2021. Country-specific projections are presented in Annex Table 1.A.1.

Employment is projected to decline significantly in most OECD countries (Figure 1.15, Panel B), with the largest fall in Colombia, the United States and Ireland. The smallest changes are projected in Luxembourg (where employment is projected to increase slightly), Korea, Austria, Mexico, Germany and Japan. The cross-country heterogeneity is explained differences in the GDP shock, but also by institutional factors (e.g. stricter employment protection legislation – see Chapter 3 – and the use of job retention schemes in continental European countries).

1.3. An unprecedented policy response by countries

OECD countries have responded in an unprecedented manner, in speed, breadth and depth, to contain the fallout from the crisis and support workers, their families and companies. While a precise and comparable estimate of the fiscal size of these various measure is not available at this stage 18, Figure 1.16 illustrates the wide range of measures taken across the 37 OECD countries.

At the onset of the crisis, OECD countries have taken a range of measures to reduce workers’ exposure to COVID-19 by encouraging teleworking or introducing stronger occupational safety and health standards. Countries strengthened or extended paid sick leave, including to quarantined workers and took measures to help working parents better deal with unforeseen care needs (Section 1.3.1) and to help ensure that workers and their families could remain in their dwellings (see Box 1.8 below). A large majority of OECD countries has introduced or extended job retention schemes to preserve jobs at firms experiencing a temporary reduction in business activity. Few have also introduced changes to employment protection legislation to either better protect workers with a permanent contract or facilitate hiring or renewal of workers with a temporary contract. A number of measures have been taken to ensure the continuation of essential services during the pandemic (Section 1.3.2). Moreover, almost all OECD countries have strengthened and/or extended the income support to workers who lose their job or income (Section 1.3.3). Finally, all countries have provided some form of financial support to boost companies’ financial liquidity, whether through grants, loans or tax and social-security deferrals, but those measures are not covered in detail in this chapter. On top of such national-level measures, the European Union has taken strong initiatives to provide financial support to companies and member states, in particular to promote the use of short-time work schemes (Box 1.4).

This section provides an overview of the main measures taken, highlights and discusses differences in their design, and offers a first assessment of the benefits and challenges of different approaches, including likely difficulties in their implementation.

Figure 1.16. OECD countries introduced bold new measures or considerably expanded existing ones in response to COVID-19

Box 1.4. The European Union’s employment and social-policy response to COVID-19

In parallel to national policy responses, the European Union (EU) reacted to the economic, employment and social emergency with a multi-tiered initiative to support the workers and firms in its member states:

The EU is providing financial support to enhance member states’ policy responses to the social and employment crisis. Through the “Coronavirus Response Investment Initiative” (CRII) and “Coronavirus Response Investment Initiative Plus” (CRII+) the European Commission (EC) has accelerated the deployment of EUR 37 billion of cohesion funds. These funds can be flexibly redirected towards spending on health care, support to short-time work (STW) schemes and support to small and medium enterprises, in particular in the most affected European regions. EU member states also agreed to create SURE (“Support to Mitigate Unemployment Risks in an Emergency”), a temporary loan instrument to help finance STW schemes and other similar measures supporting the self-employed across the EU. The instrument is backed by EUR 25 billion in member states’ guarantees committed to the EU budget. These guarantees allow the EC to borrow up to EUR 100 billion on financial markets, to be lent to member states on favourable terms. EU member states with existing STW schemes and/ or schemes supporting the self-employed can apply for a loan through SURE to cover the needed expenditures. The EC will verify the application, before the Council approves the loan.
The European Central Bank (ECB) and European Investment Bank (EIB) geared up to prevent a pro-cyclical tightening of financing conditions in the public and private sector and avoid liquidity shortages and credit contraction. The ECB expanded its asset purchase programmes of private and public sector securities by EUR 1 470 billion (including the EUR 1 350 billion Pandemic Emergency Purchase Programme). It also eased the conditions for its targeted and non-targeted longer term refinancing operations, and launched a new series of pandemic emergency longer-term refinancing operations. After initial steps to mobilise up to EUR 40 billion in support to European firms early in the outbreak, the EIB group created a EUR 25 billion guarantee fund to scale up financing for companies by up to additional EUR 200 billion, targeting in particular small and medium enterprises.
The EC amended regulations to give more flexibility to particularly affected sectors (e.g. airline companies) or to member states. This includes using the full flexibility foreseen under state aid rules, and activating the general escape clause of the Stability and Growth Pact to allow countries to depart from the agreed budgetary requirements.
In late May, the EC put forward a proposal for a major recovery plan, Next Generation EU. If approved by EU member states, Next Generation EU would raise money by temporarily lifting the own resources ceiling to 2% of EU Gross National Income, allowing the Commission to borrow EUR 750 billion on the financial markets to be repaid over a long period of time throughout future EU budgets. The EUR 750 billion would be channelled through EU programmes to support member states with investments and reforms, incentivise private investments and reinforce EU health and civil protection programmes.

Beyond these measures designed to mitigate the economic, employment and social consequences of the crisis, the EU also supported countries’ health care responses. Euro area countries can use Pandemic Crisis Support credit lines (created using the framework of the European Stability Mechanism) to borrow up to 2% of their 2019 GDP, as a benchmark, to finance direct and indirect expenses linked to health care, cure and accident prevention-related costs (such expenses could include costs relating to workplace safety and occupational safety and health). The EU Occupational Safety and Health Agency, in partnership with European social partners, has produced elaborated guidelines on how to maintain workplace safety during the pandemic.

1.3.1. Protecting workers from COVID-19 and helping them with unforeseen family care needs

Minimising workers’ exposure to COVID-19

Workplaces and public transport gather large numbers of people and thereby often expose workers to the risk of contracting and spreading the COVID-19 virus. A primary concern for governments, companies and workers alike at the onset of the crisis was therefore to limit physical interaction in the workplace and during the daily commute. Evidence from previous epidemics – see OECD (2020[1]) for a detailed review – shows that workplace physical distancing is the most effective measure for both reducing the share of the population who contract the disease (the “attack rate”) as well as for delaying the disease peak.19 OECD countries therefore extensively promoted teleworking or working from home and continued to encourage its use even when the strictest confinement measures began to be lifted in May 2020.

Most OECD countries had pre-existing teleworking regulations, in law or collective agreements; sometimes relatively restrictive or requiring an ex ante agreement by social partners. However, take-up had remained quite limited and, contrary to widespread belief, without much increase over the years. Across the European Union, only 3% of workers regularly worked from home in 2015, a further 5% were highly mobile, working regularly from several locations (including home) while another 10% teleworked occasionally from various locations but much less often than the highly mobile workers (Eurofound, 2018[61]). Such low take up reflects in part the nature of people’s work (i.e. not every job can be done from home), but also resistance from employers and workers alike.20 During the COVID-19 crisis, it was suddenly in both employers’ and employees’ direct interest to reduce the exposure to the virus to limit sickness and maintain operations.

In order to promote a rapid move to telework for all operations that allow it, countries took a series of measures to simplify its use, including through financial and non-financial support to companies. Italy, for example, simplified the procedure for teleworking by allowing companies and employees to arrange teleworking without a prior agreement with unions, without a written agreement and at the employees’ place of choice. In Hungary, employers were given the possibility to introduce teleworking without their employees’ consent. Japan made available a 50% subsidy (up to JPY 1 million) towards the cost of introducing telework. Korea simplified the application procedures for a subsidy for introducing flexible work arrangements. Belgium gave employers the possibility to grant their teleworking employees a tax- and social-security-free allowance of EUR 170 per month to cover telework-related costs, such as for a desk and office materials. Spain expedited existing programmes to support the digitisation of small and medium-sized enterprises (SMEs). Some large tech companies also stepped in to provide assistance and temporary free-of-charge access to some of their communication and sharing tools to companies and workers.

Surveys conducted in mid-April show a massive surge in the share of workers working from home compared to the pre-crisis levels (Figure 1.17). The share of workers working from home in April ranges from little less than 30% in Sweden, Canada and Poland to around 50% in Australia, the United Kingdom and the United States and 60% in New Zealand.

To minimise the risks of contagion for (the majority of) workers who could not work from home, several OECD countries restricted the continuation of business operations to “essential” services only (see discussion in Section 1.1). They issued stricter sanitary guidelines that ranged from requiring the use of personal protective equipment, such as masks, gloves and other protective clothing, to restricting the maximum number of workers allowed to be physically present on companies’ premises. Israel, for example, limited the share of the workforce who were allowed to physically go to work to 15% at the beginning of the crisis, and then raised the limit to 30% in April.

Figure 1.17. Between 30% and 60% of workers worked from home in mid-April 2020

In several countries, comprehensive occupational safety and health (OSH) standards have been defined in co-operation with social partners or autonomously by employers and unions (see Box 1.5 for a short overview of social dialogue in times of COVID-19). In Italy, for example, the government, employers’ associations and trade unions jointly signed a protocol on OSH measures in the early phases of the crisis and subsequently renewed and updated this protocol. This protocol was then turned into a government decree, making it mandatory for all companies. Italian employers’ associations and trade unions also contributed to define the list of “essential sectors” that were allowed to continue operating. Many company-level agreements (e.g. at Fiat Chrysler Automobiles, Ferrari, etc.) were signed before the reopening of factories in May. In Spain, several sectoral agreements were signed to better protect workers in supermarkets, health care, hotels, restaurants and the tourism sector. The international union UNI Global and the Spanish telecommunication company Telefónica signed a global agreement in May to ensure the safe return to work for the company’s employees across the world.

Box 1.5. Social dialogue in times of COVID-19

Trade unions and employers’ organisations in several OECD countries responded swiftly to the challenges raised by COVID-19 (Business at OECD, 2020[62]; TUAC, 2020[63]). Their initiatives during the first months of the COVID-19 crisis have revolved around four main pillars:

Voicing concerns and demanding rapid government action to mitigate the economic and social impact of COVID-19. Some social partners issued joint statements expressing a commitment to collaborate, such as in Germany or in the French metal industry. At European level, the World Employment Confederation-Europe and UNI-Europa issued joint recommendations on the employment and social aspects of COVID-19 and the recovery. In many countries, unions, but also employers’ organisations, called for stronger action to protect workers, including those in non-standard jobs, students and parents staying at home to care for their children. For example, the Belgian Confédération des Syndicats Chrétiens (CSC) asked for the better protection of workers in temporary unemployment and a benefit increase regardless of their employment status. The Canadian Labour Congress (CLC) called for an increase of the Emergency Support Benefit and Emergency Care Benefit. The US federation of trade unions AFL-CIO called for better protection of frontline workers, 14 days of paid sick leave and no out-of-pocket medical expenses for all workers. The Australian Council of Trade Unions (ACTU) launched a petition calling for additional paid leave for all workers affected by COVID-19. In Sweden and Germany, private employment agencies engaged with the government to ensure agency workers – like all workers – gained access to short-time working schemes.
Informing and advising their members: most employers’ organisations and unions in OECD countries quickly set up websites and hotlines to inform their affiliates about occupational safety and provide advice on the new policies measures. Many have issued guidelines, codes of good conduct and protocols on good practices on teleworking and safety and health at work. The Greek Confederation of employers (SEV) published a series of guides to help companies implementing telework, supporting business continuity and developing e-commerce. The Danish Confederation of Industry (DI), for example, set up a dedicated COVID-19 website with guidance on the measures made available by the government and on infection prevention for office workplaces. The French confederation of employers, the Mouvement des Entreprises de France (MEDEF), published a best practices guide for businesses.
Negotiating new collective agreements: social partners in several European countries signed far-reaching agreements on short-time work, see Section 1.3.2 and Müller and Schulten (2020[64]). In Austria, Denmark, Norway and Sweden, short-time work schemes used during the COVID-19 crisis derive their main features from national-level collective agreements. In Nordic countries, also their implementation is left to company-level agreements. In Germany, sectoral agreements have been key to raise replacement rates. In other countries, social partners have been instrumental in simplifying procedural requirements. Other collective agreements have focused on measures to ensure the safety and health of workers in the workplace (see Section 1.3.1) or, in the United States, on paid sick leave. In Italy, a collective agreement was signed in the agency work sector to allocate EUR 75 million from a solidarity bipartite fund to protect the continuity of employment and pay for agency workers for the month of March. In the Netherlands, the bipartite training fund of the agency work sector has put in place a EUR 500 training voucher for workers displaced because of COVID-19.
Ensuring monitoring and compliance: The Danish trade union confederation (FH), for example, has developed recommendations to step up labour inspectorates’ activities to monitor and sanction any violations of authorities’ provisions, non-compliance with workplace safety rules, or misuse of the force-majeure provision on rest time and days off. The Spanish Confederación Sindical de Comisiones Obreras (CCOO) monitors compliance with safety and health standards and reports potential abuse, including cases where companies declare short-time work but work regular hours.

Such initiatives – many more of which can be found in a recent Global Deal brief (Global Deal, 2020[65]) – illustrate how social dialogue and collective bargaining can be mobilised to complement public action, identify flexible and balanced solutions for both companies and workers and strengthen labour market resilience (OECD, 2019[66]).

Providing paid leave to sick or quarantined workers

Paid sick leave plays a threefold role in supporting workers during a sickness spell, in protecting their incomes, their jobs and their health (OECD, 2020[67]). Almost all OECD countries provide financial compensation during sick leave to employees with a permanent or temporary employment contract. Often, employers cover an initial period in the form of continued wage payment – for a period of 5-15 days in most countries, but up to several weeks or months, e.g. in Austria, Germany, Italy and Switzerland and even for two years in the Netherlands. In addition, most OECD countries provide publicly paid sickness benefits for employees temporarily unable to work that can extend far beyond employers’ liabilities, for up to one year in many OECD countries and even longer than this in some (OECD, 2018[68]). Many countries also provide sickness benefits to those who are self-employed, often with rules that differ considerably from the regulations governing employees (OECD, 2019[39]). However, certain groups of employees, such as casual workers and those with zero-hour contracts, are often not entitled to paid sick leave or only during the times when they actually work. Total spending on paid sick leave prior to the crisis, including employer payments and public sickness benefit, sums to 3% of total employee compensation or more in countries with the most generous systems (OECD, 2020[69]).

During a pandemic, paid sick leave can play several additional important roles in:

Permitting workers exposed to the virus to self-isolate. Providing financial compensation is of major importance in order for workers to self-isolate. Survey data for Israel collected in the lead-up to the COVID-19 outbreak indicate that 97% of adults report they would comply with a government-mandated quarantine if their wage losses were compensated, whilst compliance would drop to 57% without such compensation (Bodas and Peleg, 2020[70]).
Helping contain and mitigate the spread of the virus. Paid sick leave allows workers who are (potentially) infected to stay at home rather than infect others at or on their way to work (OECD, 2020[71]). Access to paid sick leave for employees in the United States reduced influenza-type disease rates by 10% and aggregate work absence by 18% (Pichler and Ziebarth, 2017[72]; Pichler, Wen and Ziebarth, 2020[73]; Stearns and White, 2018[74]).
Absorbing the economic shock. Paid sick leave preserves the jobs of a potentially large number of sick and quarantined workers, who are temporarily not available to work but who are valuable to their employers and society at large in the longer term. By doing so, it can reduce pressure on unemployment benefit systems and short-time work schemes and contribute to stabilising the economy. Job losses in the United States between 8 March and 25 April 2020, measured by the number of initial unemployment insurance claims, were larger in states that did not have statutory paid sick leave policies in place (Chen et al., 2020[7]).

Many OECD countries have resorted to, substantially expanded or even initiated paid sick leave policies during the last weeks and months. Crisis response policies included: first, expanding access to groups of sick workers previously not covered; second, improving the adequacy of paid sick leave support by waiving waiting periods, increasing benefit levels or extending benefit durations; and third, extending paid sick leave to support workers in quarantine – an unprecedented policy in most countries. However, most of these measures remained limited to people actually suffering from COVID-19 or in mandatory quarantine. Those excluded from sick-leave payments because of the nature of their contracts – such as contracts that do not specify a fixed amount of work or hours – remained by and large ineligible.

Better protecting sick employees…

Paid sick leave replaces large parts of earnings of eligible employees in many countries, though cross-country variation is large.21 In the hypothetical case of a four-week sick leave caused by a COVID-19 infection, paid sick leave in most countries replaces around 60-80% of the last wage of a private-sector employee earning an average wage and working with the same employer for one year (Figure 1.18). The replacement rate even reaches 100% in many countries in Northern and Central Europe. In a minority of countries, people would receive less than half of their last wage over this four-week period. Payment rates usually decline over time. Over a sick leave lasting as long as three months the payment rate would fall to on average around 60%, with larger cross-country variation.

In response to the crisis, 16 of the 38 OECD countries increased sick-leave entitlements for people with COVID-19, as illustrated by the vertical distance between the stacked bar and the dash in Figure 1.18. Several of them carried out rather large increases – including Finland, France, Australia, Spain, New Zealand, the United States, Ireland and Korea – often through the introduction of new pandemic-related payments or top-ups. Notably, Korea, which has no mandatory paid sick leave scheme in place, provides exceptional paid sick leave through its 2015 Epidemic Act to workers who are hospitalised or quarantined because of COVID-19. The United States introduced two weeks of mandatory sick pay for workers with COVID-19-related symptoms for companies with up to 500 employees, paid by the employer but fully reimbursed by the federal government. While not all employees benefit, this measure should temporarily raise coverage significantly.22 Seven countries (Estonia, France, Ireland, Latvia, Portugal, Sweden and the United Kingdom) temporarily abolished existing waiting periods, thereby achieving small increases in replacement rates. While most of these waiting periods were only a few days long, waiving them can be an important tool to prevent the spread of the COVID-19 virus, as viral load seems to peak quickly after the onset of symptoms (He et al., 2020[75]). Many OECD countries took additional steps to facilitate access to benefits for all or some workers. More than ten countries eased reporting requirements, by delaying or waiving the need for medical certification or by allowing online benefit applications. This also lessened the burden on and the risk for health workers. Eight countries improved the protection for health workers by recognising, only for this group, COVID-19 as occupational disease, with more generous entitlements from occupational-accident insurance. Only Spain recognises COVID-19 as occupational disease more generally for all employees.

Figure 1.18. Paid sick leave replaces large parts of eligible employees’ wages, with significant recent changes in regulations in a number of OECD countries

… and employees in quarantine

Since the start of the pandemic, many workers across the OECD were required to temporarily shelter at home for a variety of reasons. This may be because they had non-diagnosed mild symptoms; had close contact with people who showed symptoms or had a diagnosis; or were at a higher risk of serious illness in case of contracting COVID-19 because of existing health conditions.

The legal situation of eligible employees in mandated quarantine differs across countries, but they can receive paid sick leave in almost all countries if they have mild symptoms and cannot continue to work from home. Some, like Austria and Germany, have automatic mechanisms in place through their Epidemic Acts that pre-date the COVID-19 pandemic. They treat quarantined employees who cannot work from home as being on sick leave. The situation is similar in Finland and Sweden where quarantined employees are entitled to paid sick leave following the countries’ regulations on infectious diseases. Other countries took deliberate steps to broaden benefit coverage to quarantined workers (the Baltics, most Central European countries, Denmark, Norway, Ireland and the United Kingdom) or introduced new crisis payments for both sick and quarantined employees (Canada, New Zealand and the United States). In Belgium and France, quarantined employees who cannot work from home can draw on short-time work benefits.

Better protecting sick self-employed workers

Paid sick leave can only be an effective tool during the containment, mitigation and post-confinement periods if it is widely available to large parts of the labour force. This was by no means the case in all countries prior to the crisis.

The self-employed stand out as a group of workers in non-standard employment who, prior to the current public health crisis, often had poor or no access to sickness benefits (OECD, 2019[39]).23 However, rules for this group differ substantially across the OECD. Only in a minority of countries, self-employed workers have similar access to sickness benefits as dependent workers (Belgium, Denmark, Estonia, Finland, France, Hungary, Iceland, Latvia, Lithuania, Norway, Slovak Republic, Spain and Sweden). A handful of countries provide partial access to paid sick leave for self-employed workers, because of less advantageous eligibility conditions, benefit amounts or receipt durations (Austria, Germany, Ireland, Portugal and the United Kingdom, OECD (2020[69])).24 Also, waiting periods in many countries are significantly longer for the self-employed than for dependent employees, with the aim to reduce costs and/or moral hazard. In the course of this pandemic, many OECD countries have temporarily expanded access to sickness benefits for self-employed workers who are sick with COVID-19 or quarantined (OECD, 2020[67]). A number of countries have improved access for self-employed workers to (immediate) paid sick leave by lowering or eliminating the (often much longer) waiting periods and providing them with entitlements in case of mandatory quarantine (Denmark, Latvia, Norway, Portugal and Sweden). Several countries temporarily reformed sickness benefits and extended entitlements that affect dependent and self-employed workers alike. For example, Estonia, France, Ireland and the United Kingdom temporarily waived the waiting period that was of similar length for both dependent and self-employed workers, and Ireland and the United Kingdom increased sickness benefit generosity. Some countries have introduced new payments or provided entitlements to a benefit other than a dedicated sickness benefit, which self-employed workers can access much like dependent workers (Australia, Canada, Finland, Korea, New Zealand, Spain, Switzerland and the United States). In almost all cases, however, measures are time-bound and limited to COVID-19 cases only.

Paid sick leave entitlements do not give a full picture of the level of income support available to the self-employed in case of sickness or quarantine in every country. Some countries have chosen to use different tools and benefits to support self-employed workers unable to support themselves during this crisis irrespective of whether they had to scale down or suspend their business operations because of sickness, quarantine or other reasons relating to lockdowns. Indeed, various countries provided hardship funds or other payments to self-employed workers (see Section 1.3.3).

… and easing the costs for employers

Many countries provide strong incentives to employers to prevent sickness and assist sick workers in their return to work by making them financially responsible for sick pay during an initial period of several days, weeks or months (Palme and Persson, 2020[76]). Arguments for employer funding of sick pay, however, do not seem to apply or even risk being counterproductive in the outbreak phase of a pandemic. In the case of a very contagious disease, prevention requires keeping workers at home rather than encouraging them to come to work. Reintegration is not directly relevant in a confinement. It is also not obvious that employers should pay for extensions of existing legislation, especially if they are facing major financial stress already. In such situations, temporarily lifting or reducing employer costs (through direct payments or tax credits) seems justified.

Countries have reacted very swiftly to this new challenge, and many have introduced measures to support employer costs for sick pay. More than half of the OECD countries for which information is available and in which employers have sick-pay obligations have changed their regulation accordingly, or, like Austria and Germany, enforced their Epidemic Acts, which include an automatic adjustment to reduce employer costs. In some countries, employers can seek reimbursement for their sick-pay costs while in others workers sick with COVID-19 can receive a public sickness benefit from the first day. Public funding of the costs of sick pay for quarantined workers is even more common, for good reasons, and more often from the first day of an entitlement. Through the reforms in the funding mechanism taken between March and May 2020, the employer contribution during a four-week sick leave fell from around 50% to around 20% of an employee’s gross wage at average earnings level on average across OECD countries. For a worker entitled to sick leave in two-week mandatory quarantine, the employer contribution is on average less than 10%.

How important has paid sick leave been in the current crisis?

Real-time data on the take-up of sick leave are available less regularly than data for unemployment or other social benefits, partly because of limited reporting requirements in many countries during the period covered by employers. However, preliminary data available for about a dozen OECD countries suggest that take-up of sick leave rose significantly during March and early April, often by between 30% and 100%, with typically between 4% and 6% of the workforce receiving paid leave.25 Data on the change in the composition of paid-leave receivers are even scarcer, but they suggest that a sizable share of the increase could be due to quarantined rather than sick workers. Latest data for late April and May also suggest a sudden decline in sick-leave numbers in a few countries, such as Austria, Germany, Italy and Sweden, largely explained by a lower likelihood of those who are teleworking to take sick leave.

Overall, the increasing use of sick leave to no more than 6% of the workforce may seem small, compared to the massive inflow into short-time work and/or unemployment schemes in many OECD countries. In part, use of sick leave remains low exactly because in this early phase of the crisis, short-time work has become so prevalent. Also, a doubling in sick-leave rates is a very significant change given that at any moment in time, infection rates of COVID-19 are a small proportion of the total population in most countries, and a relatively small share of people with COVID-19 symptoms require sick leave for very long periods.

Helping workers with additional family care needs

The COVID-19 crisis has increased the demands on many workers to provide family care. Some workers have had to provide care for relatives who contracted COVID-19, or who are in quarantine or self-isolation. Many others were affected by the scaling back or closure of childcare facilities, schools and other social care services, including for the elderly and those with disabilities.

The widespread closure of schools and childcare facilities has had a particularly stark effect. Worldwide, more than 190 countries closed their schools at some point since the start of the crisis, affecting, at peak, more than one and a half billion students (UNESCO, 2020[77]). Among OECD countries, only Australia, Iceland, Sweden and the United States have decided against countrywide closures (UNESCO, 2020[77]). School and childcare facility closures have caused considerable difficulties for working parents: many have had to lead or supervise home schooling, and most have had to (arrange) care for their children during the working day.

Working full hours is often very difficult, if not impossible, under such circumstances, notably for single parents and couples where only one partner can telework. Parents with younger children, who require closer attention, report particular difficulties balancing work and family (Eurofound, 2020[78]). Couples where both parents have to be physically present at their workplace have faced an even greater challenge. This includes many workers in essential occupations.

Pre-existing rights to special leave

In most OECD countries, workers have a well-established right to leave to care for sick or injured children (OECD, 2020[79]). In several countries, these (or separate) family care leave rights also extend to other sick dependents and adult relatives (e.g. Australia, Austria, Canada,26 the Czech Republic, Estonia, Israel, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic and Slovenia). Family care leave is usually paid, often at or near full earnings-replacement, either by the government or public social insurance, or through continued payment of salaries. However, except in cases of serious illness, the duration is often limited: in many countries, these rights stretch to only a few days per episode (e.g. Finland, France, Switzerland) or a week or two per year (e.g. Australia, Austria, Germany, Israel, the Netherlands, New Zealand, Norway and the Slovak Republic), which may not be sufficient for a period of quarantine or prolonged infection. Entitlements to longer care leaves are usually only available for critical or terminal illness. In a few countries (e.g. Israel and New Zealand), any days used for family care are deducted from the worker’s own sick leave entitlement.

Parents’ rights to special leave in cases of school or childcare facility closure are less well established. Only a small number of OECD countries provide parents with a pre-existing right to leave in case of school or childcare closure (e.g. the Czech Republic, Lithuania, Poland and the Slovak Republic) or other “unforeseen emergencies” (e.g. Australia and the United Kingdom) or force majeure (e.g. Ireland). Moreover, in some countries (e.g. the United Kingdom), these rights extend only as far as unpaid leave, with the decision to continue payment of salaries typically left to the employer or collective agreement. Many working parents are unable to afford to take unpaid leave for a prolonged period. In several others, the right to paid leave lasts only for a couple of weeks (e.g. Australia, the Czech Republic, Lithuania and the Slovak Republic) or less (e.g. Ireland). These rights would be quickly exhausted in the face of closures spanning months, as seen through this crisis.

In response to the limitations of existing rights, many countries have stepped up support for working parents and those with additional family care needs, usually through temporary emergency measures.

Targeted childcare options for parents in “essential” occupations

Several countries that closed childcare facilities and schools (such as Austria, Denmark, France, Germany, Latvia, the Netherlands, Norway and the United Kingdom) kept some facilities open, with a skeleton staff, to look after children of essential service workers, notably in health, social care and teaching. In France, for example, childcare facilities for such families could host up to ten children, and childminders working out of their homes could exceptionally receive up to six rather than three children. In New Zealand, essential service workers with children aged 5 to 14 could benefit from state funded in-home childcare while schools were closed. Korea introduced a similar in-home childcare scheme that covers all two-earner families with children under age 12. In Australia, the Commonwealth Government is subsidising childcare facilities that remain open during the crisis.

Special paid leave for workers affected by school or childcare closures

A number of countries have introduced or extended special paid leave (or special income support for those on unpaid leave) for working parents who provide care at home while schools or childcare facilities are closed. This includes Austria, Belgium, Canada, the Czech Republic, Finland, France, Germany, Greece, Italy, Japan,27 Korea, Lithuania, Luxembourg, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Sweden, Switzerland, the United Kingdom and the United States. In most of these countries, the right to special paid leave or income support lasts for a fixed number of days or weeks, ranging from 10 days (per parent) in Korea to up to 12 weeks in the United States and four months in Canada. However, in some (e.g. Belgium, the Czech Republic, Finland, France, Luxembourg, Switzerland), it extends for as long as schools and childcare facilities are closed. In almost all countries, the right to paid leave is conditional on no alternative care arrangement being available.

In several countries, workers taking special leave receive either a flat-rate payment (e.g. Belgium, Canada, Finland and Korea) or a fixed part of their salary (e.g. the Czech Republic, France, Germany, Italy, Portugal, Switzerland, the United Kingdom and the United States); in a few (e.g. Austria, Norway), leave-takers continue to receive their salary in full. In a minority of countries (e.g. Austria, Greece, Norway and Portugal), financing is shared between employers, general taxation and/or public social insurance. However, as continued payment of salaries is likely to be difficult for many employers, most countries have looked either to minimise employer contributions or to fund special leave entirely through general taxation or social insurance.

Self-employed workers with care responsibilities can find themselves in a particularly vulnerable position. Most countries exclude them from existing family care leave regulations, and self-employed workers may face substantial income losses if they cannot arrange care or schooling for their children. Some countries 28 have therefore extended special paid care leave (or income support) to self-employed workers. However, the financial compensation they receive can be lower.

1.3.2. Securing jobs, saving companies and maintaining essential service provision

Liquidity relief for firms

Mandatory business restrictions, quarantines and limitations on individual mobility have put companies under severe strain. With sales plummeting, even productive, well-managed firms faced major liquidity shortages in responding to their financial commitments to suppliers, employees, lenders, investors and the state. The large number of simultaneously affected firms limited access to trade credits, an otherwise important source of short-term financing.

OECD (2020[60]) estimates that without public support, 20% of firms would have faced a liquidity crisis after the first month of lockdown, and 40% after three months. Failure to immediately address such liquidity constraints may lead to a corporate solvency crisis as companies with reduced or no revenues for an extended period of time go bankrupt. A series of corporate bankruptcies would severely disrupt not only value chains but also the banking and financial system. Well aware of these risks, all OECD countries adopted a vast range of emergency measures aimed at supporting firms’ liquidity (see Figure 1.16) in addition to the monetary measures taken by central banks. These ranged from deferrals in tax and social-security contributions to liquidity injections through equity participation, direct subsidies based on past sales, subsidies for maintaining employment, grants. Many countries also took specific measures to support SMEs, which usually face stronger liquidity constraints (OECD, 2020[80]).

Job retention schemes

As demand collapsed and supply chains broke, companies also found themselves with excess capacity. This put jobs at risk on a large scale. Job retention schemes (JRS) have been one of the main policy tools for many OECD governments to contain the employment and social fallout of the COVID-19 crisis and avoid massive layoffs (see Section 1.2). They seek to preserve jobs at firms experiencing a temporary reduction in business activity by alleviating firms’ labour costs while supporting the incomes of workers whose hours are reduced. They can take the form of short-time work (STW) or temporary layoff schemes that directly subsidise hours not worked, such as the German Kurzarbeit or the French Activité partielle. They can also take the form of wage subsidy schemes that subsidise hours worked but that can also top up the earnings of workers on reduced hours, such as the Dutch Emergency Bridging Measure (Noodmatregel Overbrugging Werkgelegenheid, NOW) or the Job Keeper Payment in Australia. They differ in their generosity for firms and workers and the requirements that they impose for eligibility (e.g. economic need, agreement by social partners) and on the behaviour of participating firms and workers (e.g. restrictions on economic dismissals, job search by workers) (Hijzen and Venn, 2011[81]).

A crucial aspect of all JRS is that employees keep their contracts with the firm even if their work is suspended. This allows firms to hold on to workers’ talent and experience and quickly ramp up operations once economic activity recovers. They provide the necessary liquidity to permit firms to continue paying at least part of workers’ salaries and to prevent the termination of jobs that have temporarily become unprofitable but that are likely to remain viable in the medium term. Consequently, they prevent layoffs that are inefficient for the firm itself and costly for workers and society at large. Indeed, one of the lessons learned from the global financial crisis was that STW schemes can play an important role in mitigating the economic and social costs of major demand shocks (OECD, 2010[82]; 2018[83]; Hijzen and Martin, 2013[84]; Cahuc and Carcillo, 2011[85]; Hijzen and Venn, 2011[81]). In the current context of a “self-imposed” supply shock, in which governments shut down many activities and imposed severe restrictions, the widespread use of JRS seems even more sensible. Some countries explicitly prohibit companies participating in JRS from dismissing workers while they participate in the scheme (the Netherlands during the first three months of the programme, New Zealand, Poland), and in some cases including a short period after (Austria, France, Hungary and Spain).

In the early stages of the COVID-19 crisis, the overriding concern for governments has been to help firms and workers deal with the sudden and unpredictable decline in business activity resulting from the health crisis and government-imposed restrictions. To this end, many governments have modified existing JRS, or introduced new ones, to maximise take-up (see Box 1.6 for a presentation of four country cases). Concerns over the potential negative effects of JRS, which arise in ordinary times, were initially of second order. In particular, the risk of devoting public resources to support jobs that employers would have retained anyway seemed limited. Restrictions in business activity during confinement heavily reduced sales and hence financial resources in many firms across almost all sectors. In ordinary times, JRS can also impede the reallocation of workers to more productive firms. But also this risk seemed limited during the early phases of the current crisis, given the virtual standstill in hiring and since the government-imposed restrictions and physical-distancing measures affected many firms independently of their pre-crisis performance.

However, as countries move out of the strict confinement phase, policy makers have to strike the right balance between ensuring adequate support for jobs that are temporarily unviable and limiting the extent to which subsidies reach jobs that would be preserved anyway or that are unviable even in the long term – see Section 1.4 and (OECD, 2020[86]). Institutional differences in JRS across countries typically reflect different approaches to addressing this challenge – see OECD (forthcoming[20]), Hijzen and Venn (2011[81]) and Müller and Schulten (2020[64]) for in-depth discussions of the main features of existing and new JRS.

Many countries rapidly expanded their STW schemes in the early weeks of the crisis or introduced new ones…

Twenty-two OECD countries had a STW scheme in place before the crisis erupted (Table 1.1), and a further ten countries introduced new schemes in response to the crisis. All countries with pre-existing schemes rapidly adjusted them to cope with the COVID-19 crisis.29 Countries’ measures to expand existing STW schemes fall into three broad categories:

Simplifying access and extending coverage: Nineteen countries took measures to facilitate and expedite access to STW and boost take-up among the affected firms. Several countries where firms are required to provide an economic justification have adjusted the parameters to allow firms to claim STW if they have experienced a decline in business activity since the start of crisis (e.g. Japan, Korea and Poland). In others, firms can invoke the health crisis as a force majeure by a simple declaration (e.g. Belgium, Czech Republic, France, Italy and Spain). Germany and Norway lowered the minimum permissible reduction in working time for firms to gain access to their STW schemes. Italy, where STW was limited to large firms and certain sectors, extended its scheme to firms of all sizes in all sectors. France and Italy removed the condition that employers must consult with workers’ representatives before applying for the scheme. Countries also simplified and streamlined procedures with widespread use of online applications. The United Kingdom facilitated the fast adoption of the newly introduced Coronavirus Job Retention Scheme by a simple online application procedure that allows retroactive claims.

Table 1.1. Countries have adjusted existing job retention schemes or adopted new ones
	Pre-existing short-time work scheme	Increased access and coverage	Increased benefit generosity	Increased access for workers in non-standard jobs	New short-time work scheme	New wage subsidy scheme
Australia						⚫
Austria	⚫	⚫	⚫
Belgium	⚫	⚫	⚫
Canada	⚫					⚫
Czech Republic	⚫	⚫	⚫
Denmark	⚫	⚫			⚫
Estonia						⚫
Finland	⚫	⚫	⚫	⚫
France	⚫	⚫	⚫	⚫
Germany	⚫	⚫	⚫	⚫
Greece					⚫
Hungary					⚫
Iceland					⚫
Ireland*	⚫					⚫
Italy	⚫	⚫		⚫
Japan	⚫	⚫	⚫	⚫
Korea	⚫	⚫	⚫
Latvia					⚫
Lithuania					⚫
Luxembourg	⚫	⚫	⚫
Netherlands*	⚫					⚫
New Zealand						⚫
Norway	⚫	⚫	⚫
Poland						⚫
Portugal	⚫	⚫		⚫
Slovak Republic	⚫	⚫	⚫
Slovenia					⚫
Spain	⚫	⚫	⚫	⚫
Sweden	⚫	⚫	⚫
Switzerland	⚫	⚫		⚫
Turkey	⚫	⚫		⚫
United Kingdom					⚫
United States	⚫	⚫	⚫
Note: Ireland and the Netherlands replaced their existing STW schemes with temporary wage subsidy schemes.

Extending coverage to non-permanent workers: Nine countries extended eligibility beyond workers in standard forms of employment to include temporary, temporary agency and even certain categories of self-employed workers. In principle, this should reduce the risk that STW schemes reinforce labour market duality (Hijzen and Venn, 2011[81]). However, firms may have weak incentives to hold on to workers in non-standard forms of work during periods of STW, especially if the scheme imposes a direct cost on employers.
Raising generosity: Several countries have increased the generosity of STW schemes by raising the replacement rates for workers and reducing the costs for firms. Sixteen countries increased the effective replacement rate for hours not worked. In several countries where employers were required to pay part of the wages or social-security contributions for the hours not worked these costs were reduced to zero (e.g. France, Germany and Italy). In about half of all countries, this cost was already zero before the crisis. The higher replacement rates and lower employer cost in the early stage of the crisis indicate that countries gave more weight to the need to provide support for workers and businesses than to concerns about the possible disincentive effects of the measures adopted.

While most of these changes are temporary, governments have generally made clear that the schemes will remain in place for as long as necessary to reduce uncertainty.

Box 1.6. Job retention schemes in Germany, Italy, Japan and the United States

Germany

Germany simplified access to Kurzarbeit. Since March 2020, firms can request support if 10% of their workforce are affected by cuts in working hours, compared to 30% before. Employers initially continue to pay their employees any actual hours worked plus 60% of their net earnings losses because of reduced hours (67% for employees with children). The public employment service reimburses employers for these payments as well as for 100% of social-insurance contributions for the lost work hours (compared to a 50% reimbursement of social-insurance contributions during the global financial crisis). The subsidy is normally also available to workers on temporary contracts and apprentices and it was extended to agency workers at the start of the crisis. In April, the government increased the statutory replacement rates for lost earnings to 70% from the fourth month and 80% from the seventh month onwards (and respectively to 77% and 87% for employees with children). In addition, restrictions on taking another job while on STW have been lifted. Workers are allowed to cumulate additional earnings and STW benefits as long as total income does not exceed previous earnings. In some sectors, unions and employers agreed on higher replacement rates of up to 90%.

Italy

Italy greatly extended the reach of its STW scheme by allowing firms of any size and from all sectors to apply. Firms can simply declare that they have been negatively affected by the COVID-19 crisis without having to provide detailed evidence. They can apply within four months of the start of the reduction in activity and the benefits can be paid retroactively from the end of February 2020. Nevertheless, some of the intended new beneficiaries have experienced difficulties in accessing the scheme and receiving prompt support. Employers’ participation in the cost of the scheme has been suspended, while benefit levels for workers remain unchanged. Benefits pay 80% of gross wages and they are capped at EUR 998 for wages up to EUR 2 159 and at EUR 1 199 for wages above that level. For a worker with an average wage this translates into an effective replacement rate of about 45% when hours are reduced to zero (OECD, forthcoming[20]).

Japan

Japan expanded the coverage and eased the requirements for access to the Employment Adjustment Subsidy. Up until the crisis, access to the Employment Adjustment Subsidy required a 10% reduction in production for more than three months. This has been reduced to 5% over one month. Japan increased the subsidy rates for hours not worked to a maximum of 100% for SMEs and to 75% for larger firms. In May 2020 the government announced an increase in the maximum benefit by 80% (from JPY 8 330 to JPY 15 000 a day per employee). The programme has been extended to cover non-regular workers who are not covered by employment insurance. The government further announced a new scheme to cover workers who have remained without support because their small and medium-sized employers have not applied for the subsidy despite reducing hours. These workers will be able to apply to the new scheme directly and will have 80% of their usual earnings covered.

United States

In the United States, 26 States (accounting for about 70% of the population) operate Short-Time Compensation (STC) programmes. Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Federal Government now funds 100% of STC payments in States with an existing programme and 50% in States that introduce a new one. Also, STC recipients qualify for the same weekly USD 600 increase in benefit payments that is being made to all unemployment benefit recipients for the a period of four months (see Section 1.3.3). However, the use of STC remains very limited for a variety of reasons, including administrative bottlenecks, lack of employer awareness, weak financial incentives for employers (employers are liable for their part of social-security contributions for hours not worked) and limits to the maximum reduction in working hours. To bypass such problems, the United States introduced the Paycheck Protection Program (PPP) to provide small businesses1 with loans to pay their employees during the COVID-19 crisis, which are forgiven if employment and compensation levels are maintained. While providing direct and immediate support, PPP is not a STW scheme as it is not conditional on having financial difficulties (a reduction in turnover and/or working time).

← 1. Publicly listed companies may apply but must satisfy, in good faith, that the “current economic uncertainty makes the loan necessary to support ongoing operations”.

… while several others introduced temporary wage subsidy schemes

A number of – mostly English-speaking – countries have introduced new JRS that combine elements of standard wage subsidies (i.e. subsidies for hours actually worked) with elements of STW schemes. These schemes can also provide income support to workers who are temporarily not working or, more generally, top up earnings of workers on reduced hours. Australia, Canada, Ireland and New Zealand introduced temporary wage subsidies to cover part of normal earnings. In Canada, the subsidy covers 75% of gross normal earnings (subject to a cap), whereas in Australia and New Zealand, schemes provide lump-sum transfers to firms. In Ireland, the subsidy level varies with employees’ income reaching a maximum of 85% of net normal earnings for the lowest incomes. The Netherlands replaced its pre-existing STW scheme by a temporary wage subsidy, which is proportional to the reduction in sales and not the reduction in working hours as in traditional STW schemes. The subsidy ranges from 22.5% of earnings in case of a 25% reduction of sales to 90% of earnings when sales fall to zero entirely. Employees continue to receive 100% of their usual earnings.

Wage subsidy schemes may be more flexible than traditional STW schemes, but tend to be less well targeted

Wage subsidy schemes tend to be easier to implement than STW schemes and provide more flexibility to firms, while being less well targeted to firms experiencing financial difficulties. They grant subsidies for workers present in the firm at the start of the programme if these experience a significant decline in business activity, typically in the range of 20-30%. Firms can decide themselves to what extent the subsidy is used to support hours worked (i.e. as a pure wage subsidy) or hours not worked (i.e. as a STW scheme). Since the subsidy is not dependent on the reduction in hours worked, firms do not need to report how the working time reduction is distributed across workers and how it evolves over time.30 Besides, while all wage subsidy schemes considered here target firms experiencing significant declines in business activity, the size of the subsidy per worker is independent of the decline in business activity in Australia, Canada, Ireland and New Zealand. It is more strongly targeted in the Netherlands, where the subsidy per worker is proportional to the decline in firms’ sales.

There may be various reasons for why these countries have opted for introducing temporary wage subsidy, rather than STW, schemes (OECD, forthcoming[20]). First, with the exception of the Netherlands, these countries had no or limited earlier experience with STW schemes: Australia never had a STW scheme; Canada, Ireland and New Zealand operated STW schemes during the global financial crisis, but these were not very widely used. Second, firms in these countries typically face relatively low layoff costs and therefore would have little incentive to participate in a STW scheme that generally involves considerable procedural costs. Finally, by reducing the cost of hours worked, wage subsidies may provide incentives for firms to maintain higher hours and increase them more quickly when conditions improved.

Limiting economic dismissals and protecting workers against unfair dismissal

A number of OECD countries introduced restrictions to collective and individual dismissals during the current crisis (see Chapter 3 for a detailed discussion of employment protection legislation in OECD countries) to limit an immediate rise in layoffs and ensure high take-up of STW schemes. These measures include:

An explicit ban on economic dismissals: Italy made invalid collective or individual dismissals based on economic grounds that were initiated after start of the confinement measures. This includes dismissals for reasons connected to the reduction or the transformation of activities, to the reorganisation of work, and to the closing of the business for total cessation of activities. At the moment of writing, the ban is in force until 17 August 2020. Greece also introduced some limitations to economic dismissals but limited them to companies that benefitted from the COVID-19 support measures.
Increased scrutiny and costs: In Spain, any dismissal related to COVID-19 would be qualified by a judge as either null, resulting with the employee being reinstated, or unfair in which case the employee receives a compensation of 33 days of pay per year of tenure. France announced increased scrutiny of collective dismissals in companies with more than 50 employees by the authority to which these companies must notify the intention to dismiss a worker.

Limiting dismissals of employees with a permanent contract can contribute to maintaining incomes and demand of workers during a period of already strong anxiety, limit opportunistic behaviour of few employers who may use the crisis as an excuse to dismiss “difficult” workers and protect workers from the social stigma of being fired.

However, in particular in case of economic dismissals, a strict ban may also provoke additional company bankruptcies if access to JRS and other liquidity support programmes turns out to be incomplete, impractical, delayed or too costly. A ban on dismissals also risks further shifting the burden of the adjustment on temporary contracts, which can be terminated by simply not renewing them. Also limits on the number of renewals and maximum durations of fixed-term contracts (see Chapter 3) may further limit the possibility of renewal during the pandemic. To limit such risk, Spain allowed the continuation of temporary contracts reaching the legal maximum duration during the crisis. Facing a surge in non-renewal of temporary contracts, Italy relaxed in May the valid cases for renewal of fixed-term contracts beyond the first year.

During post-confinement, and when combined with generous JRS, strict limitations to economic dismissals may inhibit restructuring processes and slow down the recovery (see Section 1.4). Some workers may remain locked in unviable companies instead of being taken care of by public employment services, which could offer re-training and other support. They can also hold back necessary structural change in the labour market, inhibiting mobility from sectors whose activity may remain subdued for some time (such as aviation, tourism and entertainment) to those that may be growing again more quick (such as health care and online and delivery services).

An economic crisis that results from a pandemic also raises important questions on the boundaries of what may or may not qualify as dismissals on personal grounds. As discussed in Section 1.3.1, the current crisis greatly increased the number of work absences by employees who were sick, had to deal with family care needs or could neither come to the office nor effectively work from home. Sick workers are protected against dismissal by sick-leave policies (where such policies exist). However, employers may dismiss their staff for personal or economic reasons during a medical leave provided that the sickness is not the reason for dismissal. Unauthorised absences may also be a reason for fair dismissal in cases where employees have used the totality of leave days and are still unable to return to work. This is an issue in times where schools are closed and family members may be sick. Finally, dismissals on personal grounds may affect employees unable to perform efficiently their work duties from home, and those refusing to come to work because of sanitary concerns at the workplace or on the commute.31

To avoid such risks, Italy and the Slovak Republic also introduced some provisions to limit dismissal on personal grounds. In Italy, parents living with a disabled child cannot be dismissed from work if they are absent to care for their child provided that the absence has been previously communicated and motivated. Parents of children between 12 and 16 years have the right to abstain from work during the period of school closures, and their absence cannot be a cause for dismissal. In the Slovak Republic, employees who have to take care of sick family members or young children following school’ closings are considered to be temporarily unfit for work and therefore protected from dismissal.

Supporting essential production and services

At the peak of the pandemic, when large parts of the economy were shut down in many OECD countries, certain sectors, such as health and long-term care, agriculture, food processing and retail and logistics, had to continue operating smoothly. Absences of workers who were sick, quarantined or blocked at home caring for their children, as well as the inability of seasonal workers to travel to their workplaces from abroad, put pressure on some of these sectors. To avoid the risk of disruptions, OECD countries took a number of measures to promote labour mobility. This includes:

Incentives to take up a job while unemployed or on STW. In most OECD countries, workers who receive unemployment or STW benefits cannot – or have little financial incentive – to complement these benefits with other types of income. This may be a source of concern when a large share of the population is not working, and some sectors face labour shortages. To address this issue, Greece, Italy and Spain, for example, have temporarily allowed unemployed people to complement unemployment benefits (as well as minimum income benefits in Italy) with earnings from a job in agriculture. Germany lifted restrictions on taking on part-time work for workers on STW. Additional earnings are not credited against STW benefits as long as total income does not exceed previous earnings. In Belgium and Italy, workers on STW are exceptionally allowed to take up a job in agriculture without losing their benefits. The possibility of complementing income from STW with a new job already existed in France, but it was simplified by giving workers a seven-day notice to be called back in the old job and quit the new one. The new JRS introduced in the United Kingdom also explicitly allows workers to take up another job and cumulate the earnings.
Promoting “loans” of workers across companies. France has actively promoted “loans” of workers across companies (la mise à disposition). With the agreement of the worker and the two companies, an employee can temporarily be loaned to another company while keeping the original employment contract and wage. Loans of employees across companies exist in other countries (e.g. Belgium and Italy) but, in general, they do not appear to be extensively used.
Adjusting working-time regulation. Several countries introduced some flexibility in their working-time regulation. France, for example, granted essential services derogations from the regulation on maximum working hours and weekend work. Between April and May 2020, workers in essential services could work up to 12 hours a day (up from ten hours a day) and 60 hours per week (up from 48 hours). The Slovak Republic also loosened working-time regulation by allowing employers to announce schedules at a shorter notice (two days instead of one week in normal times).
Loosening the use of temporary contracts for essential services. Belgium, for example, extended the maximum permitted number of consecutive temporary contracts for essential-service workers.

1.3.3. Providing income security and employment support to affected workers

Income support for those losing their job or their self-employment income

In spite of governments’ bold efforts to protect jobs by expanding or newly introducing job retention schemes and providing emergency liquidity support to firms (see Section 1.3.2), millions of workers across the OECD have lost their jobs. In the United States alone, over 40 million workers have filed new claims for unemployment insurance benefits between March and May 2020. Many more lost work but did not register as unemployed, or had their hours of work considerably reduced (see Section 1.2). Meanwhile, many self-employed workers saw their incomes collapse because they had to suspend, or substantially downscale, their business operations during lockdown. Unemployment benefits and other out-of-work support programmes cushion income losses for households affected by job loss or by a large fall in self-employment income. They are crucial for reducing economic hardship and contribute to stabilising the economy by bolstering aggregate demand, as experienced during the global financial crisis (OECD, 2014[87]).

Workers in standard jobs can often count on timely income support in case of job loss

In many OECD countries, workers in “standard” (i.e. open-ended, full-time) dependent employment are comparatively well covered in case of job and income loss. Unemployment insurance benefits are typically the first support layer in the initial phase of unemployment, replacing a certain share of previous earnings for a limited time. Some countries also operate unemployment assistance systems, which provide less generous support to jobseekers who lack the required employment or contribution histories, or who have exhausted their benefit entitlements. Jobseekers in low-income households may also qualify for non-contributory, means-tested minimum-income benefits, such as social assistance. The 2019 OECD Employment Outlook (OECD, 2019[88]) showed that in most of the 17 European OECD studied, a large majority of job losers with past continuous full-time employment had access to some sort of income support in 2014/5 (Figure 1.19). However, it also documented substantial coverage gaps: only around 50% of workers in standard jobs in Greece and Italy and around 60% in Poland received any income support following job loss.32 Moreover, even workers who are covered can experience a very substantial drop in income. For example, in about one in two OECD countries, out-of-work support for workers on modest pay amounts to less than two-thirds of past net earnings during the initial phase of unemployment.33

… but substantial coverage gaps exist for those in non-standard and informal employment

Workers in non-standard forms of employment are, on average, significantly less well covered by existing social-protection schemes. The 2019 OECD Employment Outlook (OECD, 2019[88]) illustrated that those engaged in self-employment, short-duration or part-time employment are often less likely to receive any form of income support during an out-of-work spell than those in standard employment (Figure 1.19). In some countries, such as the Czech Republic, Estonia, Latvia, Portugal and the Slovak Republic, the coverage gap relative to workers in standard jobs reaches 40-50%. While gaps tend to be larger for the self-employed, part-time workers and those with frequent transitions between employment and unemployment also find it difficult to access out-of-work support in some countries (see Chapter 2). Already before the COVID-19 crisis, many countries were therefore exploring how to shore up access to out-of-work benefits in the context of a changing world of work.34

Figure 1.19. Workers in non-standard jobs are often less well covered by income support

Informal workers, including undocumented migrants, remain beyond the scope of contributory income support schemes (OECD, 2020[37]). This includes employees who are not registered for mandatory social security, who are paid less than the legal minimum wage, who are employed without a written contract (where this is a legal requirement), and the self-employed who fail to declare some or all of their income for tax purposes (e.g. working “cash in hand”). Workers in “partial informality”, whose employment is registered but who receive some of their remuneration in cash (“envelope wages”) may have some entitlements but will not receive compensation for all of their lost earnings. As a result, the effects of the combined health and economic crisis for households are far more dramatic in emerging and developing countries where informality rates are much higher and the vast majority of the population does not have access to formal social-protection arrangements and cannot afford to shelter at home.

Many OECD countries extended unemployment benefits during the COVID-19 crisis

Nearly two in three OECD countries took steps in the early weeks of the crisis to improve the accessibility and/or the generosity of “first-tier” unemployment insurance or “second-tier” unemployment assistance benefits (see Table 1.2). While those measures primarily benefited workers in standard employment who lost their jobs, some countries temporarily opened up benefits to groups who otherwise would not have qualified, such as workers in non-standard employment. Countries’ early measures can be grouped into three broad categories:

Improving access to and coverage of unemployment benefits. 16 OECD countries widened access to unemployment insurance benefits by reducing or entirely waiving minimum-contribution requirements (Finland, Israel, Norway, Spain and Sweden), extending the qualification period for the employment requirement (France, Switzerland) or covering groups that had previously not been entitled. This includes self-employed workers (in Finland and the United States), workers whose contract was terminated during the trial period (Spain), workers on unpaid leave (Israel) and workers who quit their job for a new job offer that fell through when the crisis hit (Belgium, France, Spain). Canada, Latvia, Ireland, New Zealand and Slovenia introduced new unemployment assistance benefits, Colombia made extraordinary payments to jobseekers who had not received any unemployment benefits in the last three years. Australia temporarily relaxed the means-testing of its unemployment benefit. In addition, a number of countries suspended or relaxed “active job search” conditions and related activity requirements for benefit claimants.
Extending unemployment benefit durations. 12 OECD countries have lengthened the maximum possible duration of unemployment benefit payments. Some automatically extended all expiring benefit claims up to a certain time (until the end of the health crisis / state of emergency in Luxembourg, Portugal and Spain; until the end of June in Norway), others for a specific period of time (by two months in Greece, Italy and the Slovak Republic, by three months in Germany and Switzerland, for the duration of the health crisis in Denmark and France). In the United States, the Federal Government extended the maximum unemployment benefit duration to nine months.35 In addition, a number of countries suspended benefit waiting periods to make support available from the first day of unemployment.
Raising unemployment benefit generosity. Ten OECD countries temporarily increased benefit levels: Australia introduced a coronavirus supplement of AUD 550 per fortnight for recipients of the main out-of-work benefits and for a duration of six months. The United States raised benefits by USD 600 per week for all recipients for a maximum period of four months. As a result of this lump-sum increase, an estimated two-thirds of eligible unemployed workers will receive unemployment insurance benefits that exceed their lost earnings (Ganong, Noel and Vavra, 2020[90]). Norway increased replacement rates to 80% or 62.5% depending on previous income. Sweden raised the unemployment benefit floor (by about 30%) and ceiling (by about 40%) for 100 days. Austria, New Zealand and the United Kingdom raised benefit levels of their unemployment assistance programmes, Colombia made extraordinary benefit payments. Belgium froze the automatic decline in replacement rates over benefit spells for three months. Finland raised earnings disregards for unemployment benefit recipients. France postponed part of a reform that changes the calculation of unemployment benefit levels.

A major concern in the early weeks of the crisis in March and April 2020 was that public employment services in some countries lacked capacity to deal with the soaring jobseeker numbers (Edwards, 2020[91]) and in some cases failed to ensure the timely pay-out of unemployment benefits. For example, an online survey conducted in the United States in mid-April suggests that for every ten people who had filed for unemployment benefits in the previous four weeks, three to four additional people applied but could not get through the system while two more chose not to apply because they perceived doing so as too difficult (Zipperer and Gould, 2020[92]). According to US media reports (Rugaber, 2020[93]), newly covered self-employed and gig workers experienced long delays in receiving unemployment benefits, as most States first had to establish a system to process these new claims.

Table 1.2. Nearly two in three OECD countries expanded unemployment benefits
	Improved access and coverage	Extended benefit durations	Raised benefit generosity	Details
Australia	⚫		⚫	Coronavirus Supplement of AUD 550 per fortnight paid for the next six months. Relaxation of the partner income test for JobSeeker Payment and waiving of asset tests for new claims.
Austria			⚫	Unemployment assistance (2^nd tier) raised to the same benefit level as unemployment insurance benefit (1^st tier).
Belgium	⚫		⚫	Exceptional access to unemployment benefits for workers who voluntarily quit their job to take up a new job but whose job offer fell through. Freezing of the automatic decline in replacement rates over benefit spells for 3 months.
Canada	⚫			Introduction of new Canada Emergency Response Benefit of CAD 500 per week for up to 24 weeks for workers who have lost their income during the COVID-19 crisis.
Colombia	⚫		⚫	Extraordinary payment of 2 minimum wages (stretched over 3 months) for job losers who have contributed to the UB system for at least 1 out of the last 5 years. Payment of COL 160 000 per month for 3 months for job losers who have not received any UB during the last 3 years.
Denmark		⚫		Freezing of eligibility period for three months.
Finland	⚫		⚫	Temporary extension of unemployment benefits to entrepreneurs and freelancers. Shortening of the minimum contribution period from 26 to 13 weeks for employees. Temporary layoffs are not counted towards the maximum period of eligibility. Increase in earnings disregards for benefit recipients.
France	⚫	⚫		Exceptional access to unemployment benefits for who voluntarily quit their job to take up a new job but whose job offer fell through. The confinement period will not be considered for calculating the unemployment benefit entitlements of new claimants. Freezing of eligibility period by the duration of the confinement.
Germany		⚫		Benefit extension by 3 months for all recipients whose entitlements end between Mai and December.
Greece		⚫		Benefit extension by 2 months for all recipients whose entitlements end in the first quarter of 2020.
Ireland	⚫			New COVID-19 Pandemic Unemployment Payment for people who lost their jobs during the crisis at EUR 350 per week for a period of up to 12 weeks.
Israel	⚫			Reduction in the required employment history from 12 to 6 months. Extension of unemployment benefits to employees on involuntary unpaid leave.
Italy		⚫		Benefit extension by 2 months for all recipients whose entitlement ended in March or April. Unemployment benefit recipients can work in the agricultural sector without losing their benefits (up to EUR 2 000).
Latvia	⚫			Introduction of a new temporary unemployment assistance benefit for unemployment insurance benefit recipients whose entitlements expire. Benefits are payable for up to four months, at the level equal to the unemployment insurance benefits paid during the 8^th and 9^th month (max. EUR 180 per month).
Luxembourg		⚫		Benefit extension for recipients whose entitlements expire during the state of emergency.
New Zealand	⚫		⚫	New COVID-19 Income Relief Payment of up to NZD 490 per week for up to 12 weeks for workers who lose their job or self-employment due to COVID-19 between March and October. Permanent increase of all core benefits, including Jobseeker Support, by NZD 25 per week.
Norway	⚫	⚫	⚫	Reduction in the minimum-income threshold for eligibility to unemployment benefits. Benefit extension until the end of June for recipients with at most 18 weeks of benefit entitlements remaining on 29 February. Increase in replacement rates to 80% or 62.5% depending on previous income.
Portugal		⚫		Benefit extension until the end of the containment measures.
Slovak Republic		⚫		Benefit extension by at least 2 months for recipients whose entitlements expire during the crisis.
Slovenia	⚫			New temporary unemployment benefits of EUR 514 per month for workers who lost their jobs because of COVID-19 or whose fixed-term contracts were not extended.
Spain	⚫	⚫		Suspension of the minimum contribution period, including for temporary workers. Access to unemployment benefits for workers who lost their job during the trial period and workers who voluntarily quit their jobs to take on new employment and whose job offer fell through. Benefit extension until the end of the health crisis.
Sweden	⚫		⚫	Shortening of the required membership period in the unemployment insurance fund from 12 to 3 months. Abolishment of the 6-day waiting period; increase in the minimum benefit amount from SEK 365 to 510 per day and in the maximum benefit amount from SEK 910 to 1 200 per day for the first 100 days.
Switzerland	⚫	⚫		Doubling of the reference period to assess the employment condition to 48 months. Benefit extension by 120 days.
United Kingdom			⚫	Increase in the Universal Credit (2^nd tier) by GBP 20 per week.
United States*	⚫	⚫	⚫	Extension of unemployment benefits to self-employed workers. Extension of maximum benefit duration to 9 months. Benefit increase by USD 600 per week for up to 4 months.
Note: * Information for the United States refers to the federal level.
Source: OECD COVID-19 employment and social policy responses by country, http://oe.cd/covid19tablesocial; OECD COVID-19 country policy tracker, https://www.oecd.org/coronavirus/en/#country-tracker.

The crisis accentuated the problem of social-protection gaps for workers in non-standard employment

The crisis also created an immediate urgency to shore up support for workers and households not covered by earnings-replacement programmes such as unemployment benefits or job retention schemes (OECD, 2020[37]; 2020[60]). It laid bare – or accentuated – existing social-protection gaps for workers in non-standard and informal employment, who are among those most affected by earnings losses so far (see Section 1.2). Without adequate support, many of them face severe and possibly long-lasting income shortfalls and – in the absence of savings – a risk of economic hardship. Limited or irregular working hours may exclude these workers from qualifying for job retention schemes or unemployment benefits. Low-income workers, including many part-time employees who face earnings losses may also lose entitlements to earnings top-ups through in-work benefits, such as Finland, France, the United Kingdom and the United States.

To respond to these challenges, OECD countries have taken measures to improve access to non-contributory income support for vulnerable workers and low-income households, and/or to raise support levels (Table 1.3).

A number of OECD countries reinforced minimum-income benefit schemes

Fourteen countries have facilitated access to existing minimum-income schemes, such as social assistance, as a way of quickly channelling additional support to low-income households.36 Some of them (e.g. Australia, Germany, Italy and the Netherlands) suspended or relaxed income and/or asset tests, both to deliver support more quickly and to widen the circle of potential recipients. Germany, for example, temporarily suspended all asset tests for Unemployment Benefit II, eased the income test, and permitted the reimbursement of all housing costs (as opposed to “reasonable” housing costs before the crisis). This will especially benefit the self-employed. In the Netherlands, recipients of social assistance for self-employed workers no longer have to repay this allowance, unlike before the crisis. As in the case of unemployment benefits, a number of countries have also suspended job search and other activation requirements to account for distancing requirements and to avoid delays in payments.

Spain approved a new means-tested minimum living income (ingreso minimo vital) aimed at alleviating risks of poverty and social exclusion. Since 15 June, this minimum-income benefit applies nationally across Spain and complements existing regional programmes. It is expected to reach 850 000 households, with a maximum monthly payment between EUR 462 and 1 015, depending on family type.

Data on the development benefit receipt numbers for these minimum-income support programmes are still very scarce, also because such programmes are often not centrally administered. In the United Kingdom, daily new claims for Universal Credit increased tenfold in the first weeks of the crisis, but quickly declined again since peaking in late March 2020. At the time of writing, the latest available data indicate that the number of new claims in mid-May remains about twice as high as it was in early March (Office for National Statistics, 2020[94]). In Italy, the total number of households claiming the minimum-income Reddito di Cittadinanza (“Citizenship Income”) has risen by 12% between January and April 2020.37

Most countries also provided targeted cash transfers to self-employed workers and other vulnerable groups

Most OECD countries introduced new, often time-limited, cash support programmes for people in sudden and urgent need. Such schemes can be suitable in emergency situations to help groups who do not have access to existing minimum-income benefits, or where claiming such benefits is time-consuming and unlikely to provide immediate relief.

Several countries introduced new cash transfers for self-employed workers. Often, these transfers are dependent on previous earnings or on income losses incurred during the crisis. In Austria, for example, self-employed workers will receive a benefit replacing 80% of their net income loss compared to the same month in the previous years, up to a limit of EUR 2000 a month.38 In the United Kingdom, the self-employed receive a taxable grant of up to 80% of their previous earnings over the last three years. Entitlements are capped at GBP 2 500 a month and can be claimed by self-employed workers with average annual profits below GBP 50 000. Similar schemes exist in Denmark, Latvia and Switzerland. As determining previous earnings of self-employed workers is complex without a structure in place to do so, several other countries have introduced flat-rate payments (such as Belgium, Canada, Ireland, Italy, Korea, Lithuania, the Netherlands, Poland, Portugal and Slovenia) or lump-sum transfers (Colombia, the Czech Republic, France, Greece and Israel). To speed up payments Italy introduced a tax-free, flat-rate payment of EUR 600 payable to self-employed workers. Germany rolled out a Corona supplement for self-employed workers, providing cash support of up to EUR 15 000 for small firms with up to ten employees.39

New programmes are sometimes specifically targeting informal workers and undocumented migrants, who are among the most difficult to reach in the current situation (Alfers, Moussié and Harvey, 2020[95]). Colombia, for example, is making three transfers of COL 160 000 each for 3 million households who do not benefit from existing programmes. The payment is delivered through bank transfers, for those who have accounts, or by electronic transfers via mobile phone. The State of California in the United States – where undocumented migrants account for 10% of the workforce – has announced that it will support these workers with transfers of USD 500 to 1 000.40

… while a few have offered universal transfers

Three OECD countries have announced cash payments to (nearly) the entire population to help people make ends meet. The appeal of such payments is their simplicity: since universal transfers do not depend upon income, assets, or prior contributions, they avoid costly and time-consuming means tests and can be rolled out quickly. The United States pays a transfer of USD 1 200 to all citizens earning up to USD 75 000 a year (USD 150 000 for couples). Families receive an additional USD 500 per child under 17, households above the income threshold may receive a reduced payment.41 Japan has begun sending a flat-rate payment of JPY 100 000 to all its residents. Korea will make an emergency relief payment to all of its about 22 million households. The payment level depends on household size and amounts to KRW 400 000 for a single person and an additional KRW 200 000 for each further household member (up to a four-person household).

Table 1.3. Countries across the OECD have taken measures to improve support for workers and households not covered by unemployment benefits or job retention schemes
	Extensions to means-tested programmes	New targeted cash transfers to specific groups	New universal transfers	Additional direct help with household expenses
Australia	⚫			⚫
Austria		⚫
Belgium	⚫	⚫		⚫
Canada		⚫		⚫
Chile		⚫		⚫
Columbia	⚫	⚫		⚫
Czech Republic		⚫
Denmark		⚫
Estonia				⚫
Finland	⚫	⚫
France	⚫	⚫		⚫
Germany	⚫	⚫		⚫
Greece		⚫		⚫
Hungary		⚫		⚫
Iceland		⚫
Ireland	⚫	⚫		⚫
Israel		⚫
Italy	⚫	⚫		⚫
Japan		⚫	⚫	⚫
Korea		⚫	⚫	⚫
Latvia	⚫	⚫		⚫
Lithuania		⚫
Luxembourg	⚫	⚫		⚫
Mexico				⚫
Netherlands	⚫	⚫		⚫
New Zealand	⚫	⚫		⚫
Norway		⚫		⚫
Poland		⚫
Portugal		⚫		⚫
Slovak Republic				⚫
Slovenia	⚫	⚫		⚫
Spain		⚫		⚫
Sweden				⚫
Switzerland		⚫
Turkey		⚫
United Kingdom	⚫	⚫		⚫
United States*		⚫	⚫	⚫
Note: * Information for the United States refers to the federal level.
Source: OECD (2020[37]), “Supporting livelihoods during the COVID-19 crisis: closing the gaps in safety nets”, http://www.oecd.org/coronavirus/policy-responses/supporting-livelihoods-during-the-covid-19-crisis-closing-the-gaps-in-safety-nets-17cbb92d/.

While such temporary universal transfers are appealing in the current context to ensure that no-one falls through the cracks of the social protection system, they are – by design – poorly targeted (see Box 1.7). Many households receiving such support will not be in the greatest need. Meanwhile, such unconditional payments should reach a meaningful level to ensure that vulnerable households who have lost most or all of their income in the current crisis can make ends meet. Depending on other, more targeted, benefits that may be available in addition, this may create very large budgetary costs at a time of huge pressures on government spending.

Most countries also provided direct help with household expenses

Most OECD countries have also stepped in to help vulnerable households make ends meet by permitting them to postpone paying bills or by providing in-kind support. A number of them have allowed for delays in big-ticket regular expenditures such as tax and rent, e.g. by extending the deadlines for tax filing (such as in Canada, Finland, Japan, the United Kingdom and the United States) or social-security contributions (Japan, Spain). Several have introduced temporary deferments of mortgage payments, temporarily suspended foreclosures or evictions (see Box 1.8). Colombia has decided to refund Value Added Tax for the most vulnerable households. Other countries have provided direct support with pandemic-related expenditures, notably health care. In the United States, for example, where health insurance is often employer-provided, many workers who lost their job suddenly also found themselves without any health insurance during the pandemic. The Federal Government therefore announced that it will meet the hospital and testing charges incurred by uninsured COVID-19 patients. Various OECD countries have also extended in-kind support, partly to offset the closure of food banks and suspension of schools meals during lockdown. The United Kingdom, for example, launched a national voucher scheme to ensure that the 1.3 million eligible school-aged children will continue to have access to meals during school closures. Spain designated EUR 25 million to provide income support through transfers and vouchers to children who are affected by school closures. France has made available EUR 25 million of funding to support food aid associations, plus a further EUR 14 million to be distributed in emergency food checks.

As countries have grappled to minimise the impact of the containment measures on the livelihoods of their citizens, the usual trade-offs between support and incentives, between generosity and fiscal sustainability, have often, temporarily, been laid aside. Indeed, concerns about undermining incentives to work appear secondary as workers have been asked to stay at home, and worries of fiscal sustainability have been put on pause as policy makers had to move fast in attempts to protect livelihoods and avert a deeper economic and social crisis. These trade-offs will change as economic activity picks up over the next months, such that making corrections to the recent measures will become inevitable (Section 1.4).

Employment services and training for jobseekers and workers

The unprecedented rise in jobseeker numbers in some countries, and companies’ massive use of job retention schemes in others, pose an enormous challenge to benefit administrations and employment services (OECD, 2020[96]). The vast volume of incoming support claims during the first weeks and months of the crisis as well as the management of job retention schemes pushed public and private employment services (PES) to the limits of their capacity. Some countries had to build rapidly the necessary infrastructure and procedures to administer new claims. Meanwhile, liquidity-constrained businesses depended on a fast processing of their claims to be able to cover operating costs, while many workers anxiously awaited their benefit payments to be able to pay for their rent and other living expenses. Many OECD countries therefore took rapid steps to streamline and re-prioritise PES operations, while simultaneously adjusting them to physical-distancing requirements.

Box 1.7. Universal support during a crisis: ad-hoc lump sum transfers vs. a genuine universal basic income?

In some OECD countries, the policy responses to the COVID-19 crisis – in particular, the use of universal cash transfers – have revived discussions on the desirability of a universal basic income (UBI), an ongoing flat-rate transfer to the entire population, irrespective of employment status, income or means. Calls for a UBI in the face of COVID-19 largely relate to two objectives: (i) the need for instantaneous relief for those whose livelihood has suffered during the crisis, and (ii) the need to ensure that no one is left without support.

Two of the key concerns often presented in opposition to providing a UBI as a principal pillar of social protection – that it would undermine work incentives, and that a meaningful cash transfer to the entire population would come at an unrealistically high budgetary cost (and/ or imply eliminating most if not all other well-targeted cash transfers) – may have seemed less urgent during the initial phase of the current crisis. Preserving work incentives, and conditioning benefit receipt on active job search and participation in employment support, have been second-order priorities during the immediate lockdown period, though they will become more important as hiring picks up in some sectors. The fiscal cost of social-spending programmes is currently also not at the forefront of the policy discussion as countries vow to do whatever it takes to protect people and the economy from an unprecedented crisis (Furman, 2020[97]).

However, as countries move beyond the immediate lockdown period, and perhaps into a more protracted economic crisis, budgetary cost will invariably become a major concern. The question then becomes whether UBI is a cost effective way to provide timely and adequate support. OECD analysis (OECD, 2017[98]; Browne and Immervoll, 2017[99]) shows that financing a budgetary neutral UBI (replacing most working-age benefits by a flat-rate payment to all such that cost remains constant) would require very large tax increases and eliminate most if not all targeted transfers that effectively reduce the risk of falling into poverty. The distributional effects of such a hypothetical UBI would be complex: low-income groups who would normally receive other targeted benefits, and higher-income groups paying most of the tax, would typically lose. Those who currently do not receive any benefits would gain – this includes higher-income groups and those who fall through the gaps of existing social-protection system. The bottom line, however, is that a fiscally realistic UBI would be too low to provide reliable poverty alleviation on its own.

In countries with well-developed social protection in place, replacing existing support measures with a “no questions asked” basic income for everybody would be a highly risky strategy that would provide limited income security and be very expensive. Yet, less comprehensive types of universal transfers, restricted to certain population groups or with some form of mild conditionality, can be valuable complements to more targeted support measures. These include universal child benefits or basic old-age pensions that exist in a number of OECD countries, as well as time-limited emergency measures for groups that are known to be poorly served by the main income protection programmes.

Source: OECD (2020[37]), “Supporting livelihoods during the COVID-19 crisis: closing the gaps in safety nets”, http://www.oecd.org/coronavirus/policy-responses/supporting-livelihoods-during-the-covid-19-crisis-closing-the-gaps-in-safety-nets-17cbb92d/; OECD (2017[98]), Basic income as a policy option: Can it add up?, Policy Brief on the Future of Work, https://www.oecd.org/social/Basic-Income-Policy-Option-2017.pdf.

Box 1.8. Housing and COVID-19: Helping workers stay in their homes

The COVID-19 pandemic has brought to the fore a number of housing challenges and vulnerabilities facing workers in OECD countries.

First, the heightened economic vulnerability generated by the crisis threatens workers’ housing stability. Without assistance, workers who have been laid off, are forced to work reduced hours, or are temporarily unable to work may struggle to cover their monthly rent, mortgage or utilities payments. This is a particular risk for households that are already overburdened by housing costs. Across the OECD, renters and low-income households are, on average, more likely to spend over 40% of their disposable income on housing. More than one in ten renters are overburdened by housing costs in the OECD, compared to less than 5% of mortgage holders; meanwhile, over half of renters in the bottom income quintile are overburdened by housing costs in Chile, Israel, New Zealand and the United Kingdom (OECD, 2019[100]). Moreover, even before the pandemic, many households struggled to pay monthly housing costs: according to Eurostat data, around one in five low-income households (below 60% of the median equivalised income) in the European Union fell behind on their mortgage, rent or utility bills in 2018.

Second, living environments have also facilitated – or hindered – the continuity of employment during the pandemic. The widespread shift to teleworking is not feasible for households who do not have a computer or access to the internet at home, or difficult due to space constraints or because devices need to be shared among household members. On average across the OECD, around 87% of households have access to the internet at home, though the share is less than half in Colombia and Mexico; meanwhile, nearly 81% of households in the OECD have access to a computer at home, with less than 50% of households in Colombia, Mexico and Turkey.1

Third, the pandemic, along with the shelter-in-place orders implemented to manage the crisis, has elevated health and safety risks among workers living in poor quality housing or unsafe living conditions. Overcrowding, which can increase the risk of infectious diseases (World Health Organization, 2018[101]), is a reality for more than a quarter of all households in Latvia, Mexico, Poland and the Slovak Republic (OECD, 2019[100]). Overcrowding makes it harder to effectively self-isolate, putting workers living in overcrowded conditions at greater risk of contracting and spreading the disease.2 Preliminary evidence from England and Wales finds a correlation between the number of COVID-19-related deaths and levels of housing overcrowding in local areas (Barker, 2020[102]).

In response to COVID-19, many OECD countries have introduced emergency housing measures to keep workers in their homes (Table 1.4).3 Emergency measures have largely addressed concerns around housing instability, rather than housing quality gaps, which are hard to overcome in the short-term. Eviction bans are the most common measure to support tenants (in 16 countries), followed by the deferment of rent payments (5 countries), reforms to financial support schemes for renters (5 countries), rent freezes (3 countries), and temporary reductions or suspensions of rent payments (3 countries). For homeowners, 20 countries have introduced more generalised mortgage forbearance in response to COVID-19, and two countries have banned foreclosures due to missed payments for at least some households. In eight countries, at least some households may defer utility payments, and/or are ensured continued service if payments are missed.

While it is too soon to assess the full impacts of the COVID-19 pandemic on housing outcomes, emerging research suggests potential disparities between homeowners and renters – in part due to the employment characteristics of renters in some countries. Researchers in the United Kingdom and the United States suggest that renters face heightened economic vulnerability relative to homeowners, in part because renters are more likely to work in industries most affected by the pandemic (Judge and Pacitti, 2020[103]; Kneebone and Murray, 2020[104]). Further, some countries, such as France, are anticipating that new support measures could be needed in the event of a second COVID-19 wave, particularly during the colder winter months, where issues around housing quality, the affordability of utilities, and homelessness would become even more pertinent.

Table 1.4. Many countries introduced emergency housing measures in response to COVID-19
Types of emergency, temporary housing measures introduced in OECD countries in response to COVID-19
Type of measure or support	Country
For tenants:
Eviction ban due to missed payments	Australia, Austria, Belgium, Canada, France, Germany, Hungary, Ireland, Israel, Luxembourg, the Netherlands, New Zealand, Portugal, Spain, United Kingdom, United States
Deferment of rent payments	Austria, Germany, Mexico, Portugal, Spain
Temporary reduction or suspension of rent payments for some households	Greece, Portugal, Spain
Rent freeze	Ireland, New Zealand, Spain*
Reforms to financial support schemes for renters	Japan, Ireland, Luxembourg, Portugal, Spain
For homeowners:
Mortgage forbearance	Australia, Austria, Belgium, Canada, Colombia, Czech Republic, Germany, Greece, Hungary, Ireland, Israel, Italy, Lithuania, Mexico, Poland, Portugal, Slovak Republic, Spain, United Kingdom, United States
Foreclosure ban due to missed payments	United States*, the Netherlands
For all households:
Deferment of utility payments and/or assured continuity of service even if payment missed	Austria, Belgium, Colombia, Germany, Japan, Korea, Spain, United States
Reforms to housing subsidy schemes	France (planned reform postponed), Spain
For the homeless:
Emergency support to provide shelter and/or services to the homeless	Australia, Austria, Canada, France, Ireland, New Zealand, Spain, United Kingdom, United States
Note: List of measures as of 15 June 2020. * indicates that the measure applies only to some jurisdictions and/or to qualifying households.
Source: OECD COVID-19 employment and social policy responses by country, http://oe.cd/covid19tablesocial.

The COVID-19 pandemic has provided a window into the disparities in workers’ access to quality, affordable housing in the OECD. It will be essential to monitor the housing impacts of COVID-19 on different types of households (homeowners vs. renters) as well as across workers in different sectors in order to assess the extent to which emergency measures were appropriately targeted. Canada, for example, plans to integrate household survey responses on housing quality and affordability during COVID-19 with neighbourhood-level information on population density, dwelling types, and household income to assess the relationships between housing and COVID-19 (Statistics Canada, 2020[105]).

← 1. In households with school-aged children, the digital divide risks deepening educational disparities during a period of extended school closures where many institutions have transitioned to distance learning (OECD, 2020[106]).

← 2. Overcrowding as defined by Eurostat, measures the number of rooms per household member, taking into account different factors of household composition. For a full explanation, see the OECD Affordable Housing Database: http://www.oecd.org/els/family/HC2-1-Living-space.pdf. Shelter-in-place orders have led to an increase in reports of intimate-partner violence or inquiries about emergency shelters for abuse victims in many countries (OECD, 2020[57]).

← 3. Table 1.4 discuses demand-side measures; for a discussion of supply-side measures to support to banks, construction companies, or housing providers, see (OECD, forthcoming[107]).

To secure a timely pay-out of income support benefits and a rapid processing of companies’ job retention scheme claims, several countries simplified claim procedures or prioritised claim processing. Switzerland, for example, doubled the renewal period for its STW scheme from three to six months, hence reducing the number of applications and speeding up the approval process. Belgium and the United Kingdom facilitated online applications. In Germany, where one-in-three companies had applied for STW by the end of April 2020, the PES increased the number of staff processing STW claims 14-fold relative to normal times. PES in several countries also relaxed application procedures for out-of-work support or freed up resources by temporarily scaling down and suspending other, less essential services. Some automatically renewed benefits during the confinement period (e.g. incapacity benefits in Estonia and New Zealand, jobseeker benefits in Greece and Spain, and housing and child allowances in the Czech Republic); others lifted deadlines for registering as unemployed (e.g. Slovenia). Most PES temporarily suspended in-person training, job fairs and caseworkers’ networking activities.

Soaring caseload numbers, physical-distancing requirements and the inability to look for a job during the pandemic also forced PES to adapt their ways of supporting jobseekers and their capacity to monitor job search behaviour. Most OECD countries have explicit job search reporting procedures (Immervoll and Knotz, 2018[108]), aiming to direct jobseekers to look for work more intensively and earlier on. While PES in a number of countries maintained job search and reporting requirements during the crisis, some eased and adjusted these requirements for jobseekers with children at home because of childcare facility or school closures, or for those in quarantine (e.g. Austria, Brussels (Belgium), the Netherlands, and United Kingdom). Many PES temporarily suspended job search requirements and lifted sanctions (e.g. France, Germany, Portugal, Slovenia and Sweden). Others did not apply sanctions, but encouraged jobseekers to continue actively searching for jobs (e.g. Australia, Denmark, Estonia and Latvia).

The current crisis also represents an opportunity for upskilling and reskilling, both for jobseekers and for workers who are idle because they their workplaces are shut down and who cannot work from home. While most OECD PES had to suspend face-to-face training provision to respect physical distancing, many offer training via digital channels. Pre-existing online training solutions enabled many countries to maintain training provision with minimal investment, at least for the type of skills that can be easily taught online (e.g. in Austria, Belgium, Denmark, Estonia, the Netherlands and some regions of Italy). Some countries also quickly boosted online training options. Denmark, for example, amended legislation such as to allow municipalities to offer new digital qualification courses. France made available over 150 new online training courses on the Emploi Store. Sweden will use part of the extra funding allocated to the PES and other key players to strengthen distance learning and internet-based education.

Also other governmental or non-governmental actors in several countries quickly developed training courses to address immediate demand pressures (OECD, forthcoming[109]). This includes resources to support health professionals’ upskill for the pandemic response. Health Education England, for example, offered free e-learning programmes for the UK health workforce on infection prevention and control and the use of personal-protection or ventilator equipment. Other programmes aimed to reskill displaced workers to help temporarily fill roles in essential services, often in the health or social care sectors, but also in manufacturing, logistics and distribution, or retail. In Massachusetts (United States), Partners in Health, a non-profit health care organisation, is training one thousand workers as contact tracers, an occupation now in shortage. The Swedish Sophiahemmet University developed a course for the medical training of laid-off staff in the airline industry, and another one for elderly care training of hospitality workers. Several countries created, strengthened or further advertised their online tools (matching platforms or skill assessment tools) to connect displaced workers from recent business closures and businesses in sectors currently in demand.

1.4. The way ahead – What is the right policy mix for post-confinement?

As the first wave of the pandemic began to subside across many OECD countries in May 2020, restrictions of people’s mobility were eased, economic activities in many sectors re-started and countries began to move to a “new normal”. In the absence of a vaccine and effective treatments, countries are now trying to strike the difficult balance between re-opening for business and social life whilst avoiding a new spike in infections. Some mitigation measures will remain in place, and for people and businesses alike, the challenge will be to ensure the application of high hygienic standards and maintain physical distancing in order to avoid the need for renewed mandatary restrictions. Solving the health crisis is an essential precondition to solving the economic and jobs crisis.

As the understanding of the epidemiological characteristics of COVID-19 remains limited, it is still uncertain how the pandemic will evolve in different parts of the world. The seasonality of the virus is yet to be confirmed, but cannot be excluded. Herd immunity 42 is still far on the horizon, not least since successful containment measures have brought the reproduction number around or below one in many countries. Also the timing of a discovery of a vaccine remains highly uncertain. Based on the most optimistic estimates, it will take at least 12 to 18 months for an effective vaccine for SARS-CoV-2 to become widely available. However, this assumes that one of the candidates currently in clinical trials turns out to be successful; if none are, the wait will be longer (OECD, 2020[110]).

In the absence of a vaccine, countries can avoid a second wave by identifying and putting in place a package of comprehensive public health interventions. They range from a massive upscaling of testing, tracking and tracing (TTT), to enhancing personal hygienic measures and the continuous enforcement of physical-distancing policies such as banning large gatherings and encouraging people to work from home (OECD, 2020[3]). To support countries in their planning, the OECD has developed a microsimulation epidemiological model to assess rigorously the likely effectiveness of different containment measures. The model shows that upscaling TTT, enhancing hygienic measures and ensuring wide use of masks would allow a broader reopening of the economy without a new outbreak (see Box 1.9 for a short presentation of the model’s features and the results for Italy).

Given the exceptional uncertainties characterising the near-term outlook, the OECD considers two epidemiological scenarios for the coming 18 months – see OECD (2020[60]) and the summary in Section 1.2 of this chapter – though a wide range of other outcomes remain possible. In the first scenario, the containment measures taken during the spring 2020 will manage to limit the diffusion of the virus without a second outbreak and the need to re-introduce more drastic lockdown measures. In the second one, these containment measures do not manage to contain the spread of the virus leading to a second infection wave in October/November 2020. In both scenarios, many service sector companies will likely have to continue operating well below full capacity, notably in food services, accommodation, transport and culture. This could cause a wave of company insolvencies with a further round of job and income losses. Even in the more optimistic “single-peak” scenario, the economic recovery will likely be slow and gradual, and the OECD projects unemployment to remain at the level around that observed at the peak of the global financial crisis until well into 2021 (see Section 1.2). In the more pessimistic “double-peak” scenario, countries may have to return to restricting people’s mobility and economic activity. Most businesses will again have to suspend or scale down operations or – where possible – ask their employees to work from their homes. Such a second round of restrictions may even hit businesses and households harder than the first shock as many of them will have run down their savings to absorb the income losses suffered during the first wave. Unemployment will rise further.

Irrespective of which scenario turns out being closer to reality, OECD governments will need to adapt their labour market and social policies in the coming months to respond to the evolving pandemic and the economic developments. During the initial weeks and months of the crisis, countries have rightly focused primarily on providing rapid emergency relief to keep households and companies afloat and prevent the economy from collapsing. In the upcoming months, they will likely need to modify, and adjust the composition and characteristics of their support packages. As countries gradually open up their economies, policies will have to better account for the large existing heterogeneity in workers and companies. Given the cost of the policies put in place, countries will also face difficult decisions about how to target expenditures without risking to prematurely end support for companies or households who still need it.

Box 1.9. Avoiding a second pandemic wave while re-opening activities: key insights from the OECD epidemiological model on COVID-19

To support countries in their planning, the OECD has developed a microsimulation model (Figure 1.20) projecting the key parameters of the COVID-19 pandemic for a set of countries. The key features of the model include:

The model is developed within the OECD SPHeP (Strategic Public Health Planning) framework (OECD, 2019[111]) to ensure consistency with the other OECD epidemiological models
The model is an evolution of the SIR (susceptible-infected-recovered) approach, which is the basic standard to model communicable diseases such as viral infections. More specifically, the model also includes an ‘exposed’ compartment to also account for the incubation period as well as compartments for hospitalisations and access to intensive care units;
The model uses country-specific epidemiological data (e.g. number of deaths) and use of health services as well as evidence on the effectiveness of different containment measures, to generate estimates on the number of infected people and to project the number of hospitalised people and deaths;
All estimates can be produced under different scenarios, hence the model can be used to understand the most effective set of policies to delay, or possibly, to avoid, future lockdowns.

Figure 1.20. Schematic overview of the OECD SPHeP-COVID model

In a first phase, the model is fed with plausible ranges of epidemiological inputs, retrieved from the literature, on measures such as incubation period and length of the disease. The model’s outputs are calibrated to closely match national historical statistics on hospitalisations and deaths due to COVID-19. Cross-country differences in the resulting parameters reflect how different health systems managed the epidemic – for example, depending on whether only seriously affected patients, or the majority of cases, were hospitalised. The model is also cross-validated by comparing projected outputs with other major modelling initiatives. The resulting set of parameters is then used to carry out the scenario analysis, under the following main assumptions:

The country-specific health care system response to COVID-19 and its effectiveness is maintained constant for the rest of the simulation, for example implicitly assuming that there will be no therapeutic breakthrough;
Individuals recovered from the infection acquire immunity to the virus and cannot be infected again for the rest of the simulation (in reality, there is some uncertainty over the extent to which this is true);
Because of inconsistent evidence on how the temperature and humidity may affect the spread of the virus, the model assumes no seasonal effect on the epidemiology of SARS-CoV-2; and
The ‘no-lockdown’ and ‘all containment policies lifted’ scenarios represent the worst case scenarios, with individuals’ behaviours and mobility that are maintained the same as the pre-COVID-19 period, leading to the uncontrolled spread of the virus until herd immunity is achieved.

Findings from the model support countries’ policy decisions in the early phases of the pandemic and can inform the next steps of the policy-making process.

More specifically, the model provides new insights on two key policy issues (see Figure 1.21):

First, by implementing restrictions to social and economic life, countries have prevented the collapse of their health care systems and have avoided hundreds of thousands of deaths. The model simulations suggest that in the absence of any confinement measures the death toll of COVID-19 could have been in the order of 500 000 in Italy, and millions across OECD countries. In addition, under the same scenario, the number of patients requiring advanced care would have been tens of times more numerous, probably causing a full collapse of health care services and, therefore, even a much higher number of deaths than estimated by the model.

Second, countries can prevent a second pandemic wave, and a consequent lockdown, if they implement comprehensive packages of public health interventions to contain the spread of the infection until a vaccine or effective treatment become available. More specifically, they can achieve this objective by implementing a strategy based on the following three pillars:

1. Massive upscaling of testing, tracking and tracing (TTT) to quickly identify and quarantine new cases as well as their contacts that are at a high risk of developing the infection. The risk of new outbreaks is high, but effective TTT keeps these outbreaks at a small and local scale and prevents the further propagation of the infection. In addition, TTT contributes to maintaining a robust surveillance system and helps monitor key dimensions and thresholds for post-confinement;
2. Enhancement of hygienic measures such as frequent handwashing and deep cleaning to decrease the probability of being infected by contaminated objects, and use of masks (to prevent people who may be pre- or asymptomatic from unknowingly spreading the disease);
3. Continuous enforcement of some physical distancing policies such as banning large gatherings, encouraging people to work from home and closing, or regulating access to, some gathering places.

Greater effectiveness in upscaling TTT, enhancing hygienic measures and ensuring wide use of masks, will permit a further loosening of more physical distancing measures and a broader reopening of the economy. For example, other modelling-based studies suggest that in a scenario where half of the population wears masks and a TTT programme successfully tracks about 40% of infected people within four days, countries could reduce physical distancing policies by almost two thirds compared to a full lockdown.

Figure 1.21. Typical impact of COVID-19 across OECD countries under different scenarios: the example of Italy

This section describes some of these policy challenges and discusses potential solutions. These solutions would have to be tailored at country and, sometimes, local and/or sectoral level to account for the specific situation as well as the national institutional settings and traditions, in particular with respect to the involvement of social partners in the definition of labour market policies.

1.4.1. Ensuring workers’ safety

Ensuring workers’ safety is the prime objective in the near term to limit the spread of the virus, avoid a surge in sickness absences and ensure that workers feel secure enough to work effectively.

For workers who do not need to be physically present at the workplace, working from home remains the easiest way to ensure the continuation of work without incurring the risk of contracting an infection while commuting and working (Section 1.3.1). Several studies 43 have tried to quantify the proportion of jobs that could be potentially performed from home, and thus be shielded from contagion. However, beyond those that can be done from home, a number of other jobs come with only a limited risk of infection. This may be because they imply no, little, or infrequently sustained physical contact with customers or colleagues (e.g. for mechanics, plumbers, archivists, or truck drivers).

Estimates by Basso et al. (forthcoming[113]) suggest that, on average across 24 OECD countries, 52% of the workforce is employed in jobs that, without taking into consideration work re-organisation during the current crisis, are relatively safe. About 31% of workers can potentially work from home, while the remaining 21% have at most some physical contact with others to perform their job.

However, these estimates also imply that nearly half of the workforce is employed in jobs that do entail some risks of infection in the current situation, as they require a higher degree of physical proximity with colleagues or more frequent physical interactions with the public. The share of workers employed in jobs “at risk” varies from 39% in Luxembourg to 56% in Spain, reflecting cross-country differences in occupational composition. Women (except in Greece) and younger workers are relatively more likely to work in jobs “at risk” across all OECD countries (Figure 1.22). The same is true for low-income workers, who more frequently take up jobs that, under normal conditions, expose them to physical contact and a higher risk of infection. The estimated share of jobs “at risk” does not vary much with population density at the workers’ place of residence: while urban areas have a higher share of jobs that can be done from home, non-urban areas have a higher share of jobs that cannot be done from home but entail a low level of physical proximity – such as in agriculture (Basso et al., forthcoming[113]).

Figure 1.22. Around half of workers are employed in jobs that entail some risk of infection

Therefore, beyond continuing encouraging telework which does not come without cost,44 occupational safety and health practices that limit the spread of contagion are a top priority in the post-confinement phase. This requires not only defining the appropriate practices – see, for example, the guide by the European Agency for Safety and Health at Work (EU-OSHA, 2020[114]) – but also supporting firms, in particular SMEs, in implementing them (for example, via tax credits). Legal and regulatory enforcement is needed in ensuring the adaptation of practices that limit contagion. In the United States, for example, the Occupational Safety and Health Administration (OSHA) invites workers who believe that their working conditions are unsafe or unhealthful to file a confidential complaint and request an inspection. Whistle-blowers are protected from being fired, demoted, transferred or from suffering other forms of retaliation.45 Beyond what can be defined in government guidance, laws, and regulation, social dialogue and collective bargaining can be mobilised to complement public action in this area. The protocols and agreements recently signed between employers and trade unions in various OECD countries (see Section 1.3.1) are an excellent example of how to find flexible and tailored solutions for both companies and workers.

1.4.2. Maintaining adequate paid sick leave

One way to limit the spread of contagion via workplace exposure, and to make post-confinement safer for everyone, is to allow sick workers to stay away from the workplace. Paid sick leave will continue to perform an important role in containing and mitigating the spread of the virus and protecting the incomes, jobs and health of workers and their families during post-confinement (OECD, 2020[67]). It can prove its value also as part of an effective TTT strategy (OECD, 2020[3]), by allowing (potentially) infected workers to quickly self-isolate. The cost to society of providing paid sick leave to these workers to ensure that they are not financially penalised for isolating themselves is small in comparison to that of them not isolating and spreading the virus further.

To effectively contribute to an orderly post-confinement, countries should consider keeping in place their extraordinary paid sick leave entitlements and extending them to groups of workers who are still not covered, including those with zero-hour contracts. Where applicable, temporary measures to support the cost of sick pay for employers are also justified to the extent that large parts of the economy are still confined or otherwise constrained.

Moving forward, structural considerations and adjustments to paid sick leave will likely gain in prominence on the policy agenda to build more resilient labour markets and societies. The crisis has accentuated long-known gaps in paid sick-leave regulations in a number of OECD countries. These countries, some of which have introduced new mandatory regulations for the first time in history, should consider closing these gaps more permanently and for all groups of workers. Particularly for workers on quarantine, automatic extensions of sick-leave rules through epidemic laws have proven effective in countries where such laws exist; other countries may wish to consider introducing such laws or mechanisms.

At the same time, when workers who have been on paid sick leave can safely return to work, governments will have to reinforce work incentives and employment support for workers and financial incentives for employers in order to facilitate return to work. In particular, governments should prevent paid sick-leave systems from becoming a pathway into disability benefits for the long-term unemployed, as has happened in many OECD countries in the past after a recession (OECD, 2010[115]). This is particularly important now, as some workers currently on sick leave or quarantine may not be able to return to their job, as companies may fail to remain in business when job retention schemes phase out. Connecting these workers quickly with occupational rehabilitation or employment services, as appropriate, will be critical to prevent long-term labour market exit of those among them unable to find new jobs.

1.4.3. Upholding support for workers with caring needs

In most countries, schools and care facilities are reopening gradually and in accordance with the local capacity of municipalities and schools to implement public health instructions and ensure the safety of students and staff. However, the challenge of juggling paid work with additional family care responsibilities may continue for many parents and other within-household caregivers in some form, and potentially for several months.

With this in mind, countries may want to avoid a sharp withdrawal of temporary family care support, and rather consider a gradual scaling back of these measures, fine-tuned to the evolution of the situation. In countries where children are returning to school part-time, working parents may need part-time leave support. Countries should also look at reinforcing workers’ rights to flexible working arrangements, including remote working, but also covering flexible start and finish times, “time-banking”, and the ability to work condensed weeks. Looking further ahead, there may be a need to (re)introduce emergency family care leave during a potential second wave of infection.46 With more time to plan, countries should draw up contingency plans for delivering alternative care services, should further facility closures be needed. One option is to establish plans for delivering temporary in-home or small-group childcare and supervision services, as New Zealand has done for essential service workers, and Korea has done for two-earner families more generally (see Section 1.3.1). Priority could go to essential service workers and those with no access to flexible working. To help staff in these activities, countries could explore options for temporarily redirecting skilled staff from schools and centre-based care facilities, as and where needed.

1.4.4. Adapting job retention schemes

Job retention schemes (JRS), i.e. government-financed STW and wage subsidy schemes, seem to have averted an initial surge in unemployment in a number of countries (Section 1.3.2). However, designed mainly to provide immediate support, they need to be adapted to ensure sufficiently strong incentives for firms to move off JRS support or for workers to move on to more viable jobs. This is particularly important for schemes that provide generous support to firms and workers for relatively extended periods. This would reduce the pressure on public budgets and also the risk that JRS become an obstacle to the recovery by curbing job reallocation towards more viable and productive firms. Concerns about potential abuse, which were already raised in the early phase of the crisis, may also become more prominent as some firms continue to claim support for shortened hours even after workers have resumed their normal schedules.

However, adapting JRS is challenging given the large variation in the continued role of containment measures across sectors and the level of uncertainty about the strength of the recovery and the risk of a second pandemic wave. Indeed, a key question at this point is whether JRS should be differentiated across sectors. While in some, economic activity may pick up again quickly, others will continue to face legally imposed restrictions to their activities or have to deal with long-lasting changes in consumer patterns. Sectors whose activity remains legally curtailed may require continued job retention support in the post-confinement phase.47 In sectors where business can resume, JRS could be adjusted to avoid the risk that JRS support jobs that have become permanently unviable. Moreover, JRS should be adapted with caution and not be withdrawn too quickly to avoid a sudden surge of layoffs. Countries will also need to account for the risk of a second infection wave in the coming months that may result in new restrictions and require another scaling up of job retention support.

The main challenge going forward is to target JRS to jobs at risk of being terminated, but likely to remain viable in the longer term. However, any changes to the schemes must also take account of the evolving economic and health crisis and its varied consequences across sectors. Governments have a number of policy levers that they can use:

Require firms to bear part of the costs of short-time work schemes, depending on the continued impact of containment measures. Requiring firms to participate in the costs of hours not worked increases incentives to limit requests only for jobs that they believe can re-start after the crisis. To avoid reinforcing firms’ financial difficulties, their participation can take the form of delayed-payment or zero-interest loans. This would be similar to experience-rating employer social-security contributions, i.e. making contributions dependent on firms’ use of STW subsidies in the recent past, but would be simpler to implement. As part of the phase-out of the temporary JRS, the United Kingdom is gradually increasing the cost of employers for keeping workers on furlough. France is currently the only country that applies different rules with respect to the cost of firms for STW between sectors that are open for business and sectors that remain subject to government-imposed health restrictions. In open sectors, firms have to contribute 10% of the cost of hours not worked from 1 June. Requiring firms to participate in the costs of reduced working hours is less obvious in the context of wage subsidy schemes.48
Support should be time-bound, but limits on the maximum duration should not be set in stone. Imposing limits on the maximum duration of JRS helps to reduce the risk of supporting jobs that are no longer viable even in the longer term. Maximum limits signal that support is temporary and hence cannot be a solution to permanent problems and reduce the risk of supporting permanently unviable jobs.49 However, limits on the maximum duration should not be set in stone: the duration for which job retention support is provided may need to adjust to the health and economic situation. A number of countries where temporary schemes have been introduced in response to the crisis have recently announced or are considering to extend the maximum duration of support to avoid that it runs out too quickly (e.g. Denmark, United Kingdom). In other countries, where the maximum duration of job retention support is relatively long, it may be appropriate to shorten the maximum duration of job retention subsidies for new applications. In general, governments have been clear that support will remain available as long as government-imposed health restrictions remain in place. However, countries may want to consider providing more information on their intentions to extend or phase out job retention measures or the criteria that they use for making such decisions.
Promote the mobility of workers from subsidised to unsubsidised jobs. This can be achieved by requiring or allowing workers on STW to register with the PES and benefit from their support (e.g. job search assistance, career guidance and training) (OECD, forthcoming[116]). OECD analysis shows that early interventions – including those before displacement takes place – can be very effective in promoting smooth job transitions (OECD, 2018[117]). However, only few countries require workers to register with the PES and to engage in active job search while on STW. Countries may not see this as a priority since many of the workers on reduced working hours will stay with their current employer even after the crisis. It may also not be practical since in most countries STW subsidies are paid to the firm rather than to the worker. Benefit receipt therefore does not provide a natural point of contact between workers on reduced hours and providers of employment services as in the case of unemployment benefits. Indeed, in countries where STW subsidies are paid directly to workers, job search requirements have traditionally been more common (Hijzen and Venn, 2011[81]). Irrespective of whether payments are made to the worker or to the firm, countries could encourage workers to register with the PES on a voluntary basis to allow them to benefit from their services and support their career progression, whether in their current firm or a different one.
Promote training participation of workers on reduced hours. Participation in training while on reduced working hours can help workers improve the viability of their current job or improve the prospect of finding a different job. Several countries encourage training during STW by providing financial incentives to firms or workers (e.g. France and Germany), while in a few others participation in training is a requirement for receiving JRS subsidies. For example, in the Netherlands, employers applying for job retention support have to declare from June 2020 that they actively encourage training, while the government has taken additional measures to make on-line training and development courses freely available). A key challenge is to organise training in such a way that it can be combined with part-time work and irregular work schedules while maintaining physical distancing. This is easiest when training courses are targeted at individuals rather than groups, delivered in a flexible manner through online teaching tools and if their duration is relatively short (OECD, forthcoming[109]). In the present context, training courses that promote the return to work in a way that is consistent with new standards for occupational safety and health could be particularly valuable. The same applies to training courses to promote worker mobility to jobs in expanding firms and industries (e.g. online services).

1.4.5. Ensuring adequate income protection

With OECD unemployment projected to rise well above the level attained during the global financial crisis, and to decline only gradually in 2021, income support systems across OECD countries will face heavy pressure. Income support for jobseekers and their families is provided under various headings, including unemployment insurance and assistance, minimum-income benefits, as well as other transfers that may or may not depend on the family’s income situation. Among these, unemployment benefits are, in principle, best placed to provide an effective combination of income support, job search incentives and access to re-employment services. Some countries already experienced immediate, large inflows into their unemployment benefit systems when the crisis struck (see Section 1.2). In many others, the number of recipients will rise with a delay as some companies will lay off their workers when JRS end, or if a slow recovery – or even a second infection wave – should cause another series of bankruptcies. When weak labour market conditions persist, there can be good arguments for making unemployment benefits more accessible. For example, with reduced job finding rates, and lengthening unemployment spells, extending benefit durations can help to ensure that unemployment compensation systems continue to facilitate a reasonable match between jobseeker and vacancies and provide effective income support during the jobless spell (Immervoll, 2012[118]).

A key question is whether more generous benefits may worsen labour market outcomes and delay a recovery by reducing job search incentives. Policy changes during the aftermath of the global financial crisis provide useful pointers for considering the advantages and drawbacks of different benefit designs in this respect. For example, earlier studies of benefit extensions have found that any adverse effects of benefit generosity on individual job search intensities were indeed about the same during recessions and booms (Schmieder, von Wachter and Bender, 2012[119]). But results also suggest that the intensity of job search makes less of a difference to employment outcomes when there are long queues of jobseekers and a much-reduced number of vacancies. As a result, aggregate unemployment is less sensitive to changes in benefit generosity when labour markets are weak. In countries where this is the case, the efficiency costs of providing support would then be no greater (and perhaps smaller) in recessions (Rothstein, 2011[120]; Lalive, Landais and Zweimüller, 2015[121]; Landais, Michaillat and Saez, 2018[122]). At the same time, the need for benefit support is greater, so the cost/benefit ratio of unemployment support would be more attractive when unemployment is high.

When many unemployed exhaust their benefits without finding employment, countries should review benefit provisions, both for social and for economic reasons. Likewise, where benefit entitlement durations are already generous, an argument that benefit provisions should be responsive to the economic cycle may imply shortening durations once the labour market recovers. Linking automatic changes in the duration of receipt to the overall unemployment rate may be viable in some cases. In all cases, benefit extensions arguably need to be accompanied by changes in related policy areas. For example, extensions can be accompanied by measures such as “soft sanctions” (e.g. requiring claimants to re-apply before any extensions are granted, introducing waiting periods between consecutive claiming periods, or reducing benefit amounts over time). In general, it is important to retain a strong link between benefit receipt and active job search. Changing benefit provisions is, however, much easier and quicker than, say, changing PES staffing levels or intake procedures (see below).

Countries may also want to assess how to adjust or phase out emergency support programmes for self-employed workers (e.g. new earnings replacement schemes in Austria or the United Kingdom) and small businesses (e.g. cash support for costs in Germany) introduced in the initial phase of the crisis. While the need for such programmes will subside as economic activity picks up again, some viable businesses may continue to face restrictions and/or low demand because of the crisis. The trade-offs in deciding whether, and for how long, to support these businesses are similar for small and large businesses, and resemble those for the phase-out of JRS (see above). In any case, governments may need to re-assess programmes that were designed to deliver support quickly, and with limited concern for targeting. Where earnings replacement schemes were set up without a past earnings test, these tests could be introduced now. Similarly, where payments provide very high earnings replacement rates 50, this could be revised. Unlike unemployment benefits, these benefits are not balanced by prior contributions. Effective targeting is therefore not only important out of efficiency but also out of equity concerns. More generally, this crisis has shown the need to let self-employed workers build up rights to the types of out-of-work support available to dependent employees. While including the self-employed in earnings-related social-protection schemes can be fraught with moral hazard and other administrative concerns, several countries have been successful in establishing well-designed policies that work for their circumstances – see OECD (2018[123]; 2019[88]).

As the crisis lasts longer, claimant numbers for “last-resort” minimum-income benefits may rise as workers who lost their jobs and incomes in the initial phase of the crisis exhaust their unemployment benefit entitlements or run down their savings. Even in normal times, the accessibility, reactivity and generosity of these programmes differ markedly across countries (Hyee, Fernández and Immervoll, forthcoming[124]). Many countries have eased entitlement criteria and simplified application procedures to ensure broad-based and prompt access to these schemes during government-imposed restrictions. As they consider rolling back these concessions, countries could review and simplify entitlement criteria and application procedures with a view to making minimum-income benefits more reactive and accessible to encourage take-up. Effective targeting is important as fiscal pressures mount, but countries need to ensure that those in urgent need continue to receive support. For example, countries could gradually phase back in income tests to allow households to adjust their expenditure, while keeping asset tests relaxed (e.g. exempt the family home or any business assets) as long as job opportunities remain scarce. Countries may also want to expand these programmes to cover young adults, where this is not already the case.

To further ease pressure that some workers face because of pandemic-related income loss, countries might consider extending some of the emergency housing support measures introduced during the crisis (see Box 1.8). In the event of a second infection wave, particularly in winter, bans on evictions and foreclosures and targeted financial support to cover utilities could help workers remain in their homes. Even without a second infection wave, many workers likely face an extended period of economic fragility, making it hard to cover mortgage and rent payments in the months to come. Extending mortgage forbearance and eviction bans, which in some OECD countries are set to expire in the fall of 2020, could help workers in the short term, but increase financial fragility in the financial system and further impose financial burdens on landlords. The cost of extending these measures could be shared more evenly, e.g. through partial mortgage and rental payments, and these measures should be gradually phased out as the economic situation improves. Meanwhile, demand for housing allowances, social housing and other forms of support are likely to increase. Unlike the global financial crisis, the current crisis may disproportionately affect renters and call for reinforced rental supports; relative to homeowners, renters faced greater affordability challenges prior to the pandemic and are more likely to work in the most-affected industries. Nevertheless, most emergency support measures remain at best temporary fixes. The pandemic has underscored the need to develop more structural responses to address persistent housing challenges for workers across the OECD, bringing to the fore the need for increased investment in social and affordable housing, as well as upgrades to the existing stock to improve housing quality.

1.4.6. Expanding employment services and training

In addition to adequate income support, workers who have lost their jobs during the current crisis require assistance and encouragement to find new work, increase their long-term employability and avoid falling into long-term unemployment. Many countries temporarily reduced job search support and suspended “mutual obligations” requirements for jobseekers in the initial phase of the crisis to meet physical-distancing requirements and relieve pressure from their PES (see Section 1.3.3). As the health emergency is subsiding, countries should gradually revive their activation regimes making government support again conditional on active job search or participation in programmes that improve their job prospects (OECD, forthcoming[116]). This can support flows into employment, even if job opportunities continue to be depressed in some sectors and as PES have to take into account health and safety considerations when referring jobseekers to vacancies. Some jobseekers may be able to seize up on job opportunities that arise even in times of crisis, including in essential occupations. For others, the crisis may represent an opportunity for up-skilling or re-training, though physical-distancing requirements will reduce the scope of in-person training courses on offer. Young people, as one of the groups hit hardest in the initial phase of this crisis, deserve special attention.

This will require equipping PES with additional resources. As the number of jobseekers and participation in JRS will remain high for the near future, PES will continue to face a much greater demand for their services than before the crisis. PES in many countries will therefore need to build up capacity not to permanently neglect support and services that may have been of secondary importance during the initial phase of the crisis (e.g. career advice, counselling). Countries should scale up active labour market programmes (ALMPs) that have proven effective to ensure effective re-employment support to all unemployed jobseekers, promote job mobility, increase the quality of job matches, reduce unemployment and prevent long-term unemployment. In particular, this includes programmes that support a fast return to the labour market such as job search support and counselling. Moreover, there is a case for supporting job creation by temporarily scaling up easy-to-expand, time-limited hiring subsidies, as many OECD countries did during the global financial crisis (OECD, 2010[82]). Hiring subsidies, in particular if targeted at low-pay workers, can boost job growth and be cost effective after accounting for savings in social benefit payments – e.g. Cahuc, Carcillo and Le Barbanchon (2018[125]) for France and Neumark and Grijalva (2016[126]) for the United States. A number of countries also extended re-employment bonuses for jobseekers (e.g. in form of re-employment allowances) during the global financial crisis to raise the incentives to take up work (OECD, 2009[21]). Past evidence shows that ALMPs tend to have a larger impact in periods of slow growth and higher unemployment (Card, Kluve and Weber, 2018[127]). However, most countries increased ALMP spending only modestly during the global financial crisis. In the OECD on average, a 1% increase in the number of unemployed was associated with a 0.4% increase in ALMP spending (OECD, 2017[128]).

The crisis may also be an occasion for countries to modernise employment services and make them more flexible. PES with well-developed digital services (i.e. e-services for PES users and automated PES back-office systems) and staff teleworking arrangements found themselves much better prepared to respond to the crisis keep their service offers largely intact. In countries where these areas are still less developed, such innovations could contribute to making services available to a large number of jobseekers while respecting physical-distancing requirements. However, PES will also need to develop strategies to identify (e.g. through profiling tools) and support jobseekers without digital skills and those with complex needs in times when the scope for face-to-face interactions may remain limited.

PES, as well as other private and public training providers, have the additional role to enable and encourage jobseekers and workers to move from sectors that operate below capacity to those that picked up again more quickly. Experiences made with the rapid retraining and matching of workers over the last months may prove valuable in this respect. In the short run, job transitions are easiest when the new job either requires little or no specialised training, or has broadly similar skill requirements as the previous job. This may include retraining displaced workforce from “non-essential” retailers to be hired by “essential” retailers, for example. Similarly, ultra-short courses may be sufficient to support the transition of displaced vocational and technical workers into currently in-demand occupations. Most learning activities may have to take place online until gathering in groups is deemed safe, but this may require mastering a certain level of digital skills. Successful programmes therefore include provisions to support participants who may lack the digital skills or the motivation to complete the learning activity, and they prepare teachers and design curricula for online didactics (OECD, forthcoming[109]). To the extent that cross-sectoral imbalances in labour and skill demand persist during post-confinement, countries will also benefit from further developing their skill assessment and anticipation, and skills profiling tools, as well as their career guidance systems, which can guide workers to the most efficient job transition (OECD, forthcoming[129]).

1.4.7. Giving young people the support they need

To prevent the crisis from leaving long-lasting scars on young people’s careers, countries need to act quickly and help young people maintain their links with the labour market and education system. School closures raised the risk of school dropout, temporary contracts are not being renewed, internships and apprenticeships are being cancelled, and new graduates face great uncertainties about their labour market entry. High and persistent youth unemployment in the aftermath of the global financial crisis showed that once young people have lost touch with the labour market, re-connecting them can be very hard (Carcillo et al., 2015[40]; OECD, 2016[130]). The realisation that early action is key is also the basis of the European Union’s Youth Guarantee, a commitment made by all EU Member States in 2013 to ensure that all young people below 25 receive a good-quality employment or training offer within four months of leaving school or becoming unemployed.

Support for companies who offer jobs or work experience to young people have proven an effective tool to promote job creation in times of crisis. Australia and Denmark have introduced wage subsidies to help companies maintain or expand their apprenticeship and in-firm training programmes, while Germany and Scotland are introducing subsidies for employers who take on apprentices who have been made redundant during the crisis (OECD, 2020[131]). Canada expanded its Summer Jobs Program that provides wage subsidies for below-30-year-olds, and France is considering a hiring premium or a reduction in employer contributions for young workers. In times of depressed labour demand, volunteering can be a useful alternative for young people to gain practical experience and acquire new skills, and governments could encourage its use through grants.

Effective outreach strategies are crucial to re-establish contact with young people who recently lost their jobs or left school without finding employment. Particularly the more vulnerable young people often do not get in contact with the PES, because they are not entitled to income support, lack trust in public authorities or are simply not aware of the support they can receive. Rapid and proactive outreach – in collaboration with schools and youth organisations and through social-media campaigns – may be particularly important in the current crisis.

The OECD Action Plan for Youth (OECD, 2013[132]) sets out a toolkit of measures that countries and stakeholders can take to promote better outcomes for young people. This includes cost-effective active labour market measures, such as counselling, job search assistance, entrepreneurship programmes, and intensive support for more disadvantaged young people. Increased use of online support and virtual-learning platforms, including in vocational education and training, can allow the PES and education providers to continue offering their services while meeting physical-distancing requirements (OECD, 2020[131]).

1.5. Concluding remarks

This chapter provides a first assessment of the crisis’ initial labour market impact as well as an overview of the massive policy response that OECD countries quickly put in place. The immediate impact of the crisis on employment and hours worked has been ten times larger than in the first months of the 2008 global financial crisis, even in countries where unemployment rates have so far not increased much. Once more, vulnerable workers are bearing the brunt of the shock, with low-skilled workers and those in non-standard employment having been particularly exposed. Women seem to have suffered greater initial employment losses than men. They have also been playing a key role in the health care response to the pandemic, and the crisis likely amplified their unpaid work burden. Young people have again been hit hard, and some of them are experiencing already the second deep crisis in their still young careers.

OECD countries rapidly took comprehensive and far-reaching measures to contain the economic fallout and support workers, their families and companies. The massive use of job retention schemes in many OECD countries saved jobs and protected the survival of many companies by allowing employers to cut the hours of work for their workers, or putting them “on hold”, without having to lay them off. Countries also increased the coverage and adequacy of income support, including for groups previously poorly covered, or not covered at all, hence cushioning income losses for many of those hit hardest. As countries are now gradually re-opening their economies, they will have to adapt these initial policy packages to better account for the large existing heterogeneity in situations across workers and companies, while fostering incentives to resume work without running the risk to end support prematurely where it is still needed.

Uncertainty about the future labour market developments remains large, and much depends on how the pandemic evolves. The virus has by no means been defeated, and the risk of new outbreaks is still looming until a vaccine is available. The big challenge for countries is, therefore, to find ways of re-starting economic and social life and steering the economy towards recovery while keeping the pandemic in check without having to revert back to strict containment measures. This requires putting in place comprehensive public health interventions, which range from massively upscaling of testing, tracking and tracing (TTT), to enhancing personal hygienic measures and the continuous enforcement of some physical-distancing policies.

While there is no doubt that bold measures were needed to avoid health systems from collapsing and mitigate the economic fallout from the pandemic, the evaluation of these emergency policy packages has only just begun. There is much to be learned about how countries’ strategies and policy packages are affecting various groups of workers and companies across sectors and regions. The heterogeneity in the mix, timing and design of measures across countries provides a strong potential for policy evaluation and mutual learning. Such analysis will provide crucial insights into how OECD labour markets and social-protection systems react in times of extreme pressure, and it is an occasion to learn lessons for strengthening their resilience.

Overview of Chapters 2 to 5: Worker security

Protecting individuals against labour market risks is a key pillar of the OECD Jobs Strategy (OECD, 2018[83]). The unprecedented health and economic crisis that the world is currently experiencing with the COVID-19 pandemic has shone the spotlight on the crucial importance of well-designed worker security strategies to protect workers and households against unforeseeable shocks.

Effective social safety nets are fundamental for cushioning income shocks. And unemployment benefits are among the key instruments providing protection against earnings falls resulting from job losses. Yet a number of workers do not meet the entitlement or eligibility criteria to receive benefits and are therefore at greater risk of facing severe income losses. On average, only about one-quarter of jobseekers receive unemployment benefits (OECD, 2018[133]). The additional evidence provided by OECD (2019[39]) suggests that social safety nets are particularly weak for the self-employed, although a number of countries have extended access to out-of-work support for this category of workers during the current crisis (see Section 1.3.3 above).

Chapter 2 of this volume sheds further light on safety net disparities by looking at the uneven access to unemployment benefits for different types of dependent employees. Even if entitlement rules are usually the same for all dependent employees, conditions on minimum employment durations, working hours or earnings before the unemployment spell, are often harder to meet for those who lose a part-time job or have an employment trajectory involving frequent transitions between employment and unemployment. The same applies to the rules for unused entitlements, which in a number of countries may put workers alternating short spells of employment and unemployment at a disadvantage compared with employees with fewer transitions and longer unemployment spells. Consequently, even when workers are in the same family and income situation, have the same average annual wage and have accumulated the same number of hours of work as dependent employees over a given period, entitlements tend to be smaller for those with non-standard employment trajectories than for those who were previously in long-term, full-time positions. In turn, the risk of falling into poverty tends to be greater for workers in non-standard dependent employment.

Correcting the possible inadequacy of benefit entitlements to provide more income security may be challenging, however. Avoiding trade-offs between benefit generosity and work incentives can be like walking a tightrope, as Chapter 2 shows. Nevertheless, several policy instruments can be used to create a policy mix that strikes the right balance between work incentives and income security: customised extensions of employment reference periods; earnings disregards and withdrawal rates when combining earnings from work and unemployment benefits; waiting periods and tight rules on the retention of unused benefits; differentiated contribution rates by type of contract; integration of in-work and out-of-work benefits; and co-ordination of active and passive labour market policies.

Protecting workers against income shocks following job losses is, however, costly. Yet, individual employers typically do not factor in the social costs of unemployment benefits when they take their decision to dismiss a worker, nor other social costs, such as firm- and sector-specific human capital destruction, negative health effects (particularly psychosocial risks) and possible intergenerational consequences. Experience rating of unemployment and other social security contributions and employment protection legislation (EPL), in particular regulations concerning individual and collective dismissals, are the primary instruments that policy makers can use to induce employers to avoid socially inefficient dismissals (those which are decided without taking account of their social impact).

Chapter 3 provides an up-to-date comparative review of where OECD countries stand as regards employment protection legislation (EPL). To do this, the chapter develops a new version of the OECD EPL indicators, which takes more account of regulations for collective dismissals, enforcement issues and regulations concerning unfair dismissals.

As Chapter 3 underlines, EPL has several dimensions and its effects on worker security may depend on the balance among them. For example, sufficiently long advance notice periods are crucial to allow early interventions by employment services before the dismissal takes effect, thereby facilitating the transition to another job. This suggests that countries with short notice periods and high severance pay could consider reducing severance pay and increasing notice periods, while activating early interventions, to smooth job transitions without increasing costs to employers. Similarly, EPL measures against unfair dismissals play a vital role in preventing abuses, but clear enforcement rules are necessary to avoid creating uncertainty. Moreover, excessively stringent EPL rules harm worker security both directly, by reducing hiring and making jobless spells longer, and indirectly, by slowing growth in productivity and, therefore, wages and incomes. A balanced employment protection framework that provides effective adaptability for firms and adequate protection for workers is thus required.

As stressed by the OECD Jobs Strategy (OECD, 2018[83]), however, one of the best ways of protecting workers and promoting an inclusive labour market is by addressing problems before they arise. This means that preventive policies are at least as important as remedial policies. Preventive measures can enable workers to avoid many of the social and financial costs associated with labour market risks (such as unemployment, sickness and disability) and to enjoy better jobs and careers. Education, training and skills policies play a fundamental role in this context and countries therefore need to develop high-quality education and training systems that enable workers to acquire and develop the skills that are in demand in the labour market. The last two chapters of this volume focus on the demand and supply of skills.

The share of middle-skill jobs – occupations in the middle of the wage distribution – declined in OECD countries over the past two decades due to falling demand for these jobs. At the same time, the shares of both high-skill and low-skill occupations have increased. The causes and consequences of this phenomenon, termed job polarisation, have been the subject of a heated debate in the economics and policy literature. The contribution of Chapter 4 is, first and foremost, to dispel a myth. A popular perception is that the contraction of middle-skill occupations has occurred through firms increasingly dismissing middle-skill workers and forcing mid-career workers to find new employment in other skill groups. While downsizing, especially of manufacturing firms, has obviously played a prominent role in specific situations, such transitions do not appear to explain the aggregate polarisation trend. Rather, the gradual retirement of older middle-skill workers and the different entry patterns of younger workers in other, growing occupations appear to drive job polarisation.

Policy makers consequently have to pay special attention to education choices and the transition between school and work. Vocational Education and Training (VET) programmes lead to market-relevant, vocational qualifications and typically enhance student engagement in education, reduce school dropout rates and facilitate school-to-work transitions. However, there is a growing concern that the increasing polarisation of the labour market may be having a negative impact on the labour market performance of non-tertiary VET graduates, who are typically preparing for middle-skill occupations. The results of Chapter 4 add to this concern, as young generations appear to be bearing the brunt of job polarisation. Chapter 5 therefore re-examines the labour market performance of middle-educated VET graduates. Reassuringly, it finds that these graduates maintain a labour market advantage over their general education peers on labour market entry, although this advantage tends to disappear later in the career and their performance is worse than that of higher education graduates, even at labour market entry. Middle-educated VET graduates have managed to maintain their position in shrinking middle-skill occupations by increasing their share in these occupations relative to other groups. However, in some occupations that have a larger share of VET graduates among their young workers, the supply of labour with the relevant skills exceeds the corresponding demand, and many of these typical VET jobs are at high risk of automation. In a number of countries, to reinforce the positive impact VET systems can have on the labour market outcomes of VET graduates, some re-engineering of VET programmes may be necessary, including reinforcing their foundational skills component and developing closer co-operation between VET institutions and social partners, as occurs in a number of countries with successful VET systems.

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Annex 1.A. Additional material

Annex Figure 1.A.1. Individual mobility fell in all OECD countries, even where restrictions were relatively milder

Annex Table 1.A.1. Projected labour market developments in OECD countries
	A. Real GDP growth Percentage change from previous period					B. Employment growth Percentage change from previous period					C. Unemployment rate Percentage of total labour force
	2019	Projections				2019	Projections				2019	Projections
		Single-hit scenario		Double-hit scenario			Single-hit scenario		Double-hit scenario			Single-hit scenario		Double-hit scenario
		2020	2021	2020	2021		2020	2021	2020	2021		2020	2021	2020	2021
OECD	1.7	-7.5	4.8	-9.3	2.2	1.0	-4.1	1.6	-5.0	0.3	5.4	9.2	8.1	10.0	9.9
Euro area	1.3	-9.1	6.5	-11.5	3.5	1.2	-2.6	0.9	-3.2	-0.6	7.6	9.8	9.5	10.3	11.0
Australia	1.8	-5.0	4.1	-6.3	1.0	2.3	-2.4	0.9	-3.0	-0.6	5.2	7.4	7.6	7.6	8.8
Austria	1.5	-6.2	4.0	-7.5	3.2	0.8	-0.6	1.4	-0.9	1.1	4.5	5.8	5.2	6.0	5.7
Belgium	1.4	-8.9	6.4	-11.2	3.4	1.6	-1.4	1.6	-2.2	-1.0	5.4	7.4	6.5	8.2	9.3
Canada	1.7	-8.0	3.9	-9.4	1.5	2.1	-4.4	1.6	-5.1	0.7	5.7	8.9	8.0	9.4	9.0
Chile	1.0	-5.6	3.4	-7.1	1.9	..	..	..	..	..	7.2	9.5	8.7	10.1	11.0
Colombia	3.3	-6.1	4.3	-7.9	2.8	-0.8	-10.6	2.2	-12.6	-0.7	10.5	18.0	16.0	19.8	19.9
Czech Rep.	2.5	-9.6	7.1	-13.2	1.7	0.2	-1.7	-0.1	-2.0	-1.0	2.0	3.5	3.8	3.8	5.0
Denmark	2.4	-5.8	3.7	-7.1	0.9	1.5	-2.4	0.5	-2.8	-2.5	5.0	6.6	6.5	7.0	9.1
Estonia	4.4	-8.4	4.3	-10.0	1.6	1.0	-4.2	1.1	-5.2	-1.5	4.4	9.2	8.1	10.1	11.2
Finland	0.9	-7.9	3.7	-9.2	2.4	1.0	-2.0	0.9	-2.6	-0.9	6.7	8.7	8.5	9.1	10.3
France	1.5	-11.4	7.7	-14.1	5.2	0.4	-2.7	1.8	-3.1	0.5	8.4	11.0	9.8	11.3	11.2
Germany	0.6	-6.6	5.8	-8.8	1.7	1.1	-0.8	0.0	-0.9	-1.0	3.2	4.5	4.3	4.6	5.3
Greece	1.9	-8.0	4.5	-9.8	2.3	2.2	-3.5	-1.0	-3.8	-1.8	17.3	19.4	19.8	19.6	20.4
Hungary	4.9	-8.0	4.6	-10.0	1.5	0.9	-3.2	1.8	-3.8	1.0	3.4	6.3	4.9	6.9	6.2
Iceland	1.9	-9.9	4.6	-11.2	3.0	1.3	-3.3	2.4	-3.8	1.0	3.5	7.4	6.0	7.8	7.7
Ireland	5.5	-6.8	4.8	-8.7	-0.2	2.9	-6.7	2.0	-8.2	-1.7	4.9	10.8	8.5	12.3	12.9
Israel	3.5	-6.2	5.7	-8.3	2.6	1.6	-3.2	2.4	-3.8	0.5	3.8	7.5	6.6	8.0	8.8
Italy	0.3	-11.3	7.7	-14.0	5.3	0.6	-2.9	-0.4	-3.2	-1.5	9.9	10.1	11.7	10.1	11.9
Japan	0.7	-6.0	2.1	-7.3	-0.5	0.9	-1.0	0.1	-1.2	-0.8	2.4	3.2	3.2	3.4	3.9
Korea	2.0	-1.2	3.1	-2.5	1.4	1.1	-0.6	0.5	-0.7	0.1	3.8	4.5	4.4	4.6	4.7
Latvia	2.2	-8.1	6.3	-10.2	2.0	0.2	-2.9	-0.7	-3.3	-3.0	6.3	9.2	9.3	9.6	11.7
Lithuania	3.9	-8.1	6.4	-10.4	3.4	0.3	-2.6	0.9	-3.2	0.6	6.3	9.1	8.2	9.5	8.7
Luxembourg	2.3	-6.5	3.9	-7.7	0.2	2.7	0.4	1.6	0.2	0.5	5.4	7.1	7.5	7.2	8.6
Mexico	-0.1	-7.5	3.0	-8.6	2.0	2.4	-0.7	1.6	-1.0	1.8	3.5	6.0	5.8	6.3	6.0
Netherlands	1.8	-8.0	6.6	-10.0	3.4	2.0	-3.6	3.3	-4.4	1.1	3.4	5.9	4.9	6.5	6.6
New Zealand	2.2	-8.9	6.6	-10.0	3.6	1.1	-2.8	1.4	-3.0	-0.1	4.1	7.9	7.2	8.1	8.9
Norway	1.2	-6.0	4.7	-7.5	1.3	1.1	-2.0	1.6	-2.5	0.8	3.7	5.9	4.6	6.3	5.6
Poland	4.1	-7.4	4.8	-9.5	2.4	-0.1	-4.6	1.6	-5.3	-1.2	3.3	7.3	5.8	7.9	8.8
Portugal	2.2	-9.4	6.3	-11.3	4.8	1.0	-5.7	2.9	-7.1	2.0	6.5	11.6	9.6	13.0	11.8
Slovak Rep.	2.4	-9.3	6.4	-11.1	2.1	0.9	-3.0	1.7	-3.9	-0.1	5.8	8.9	7.0	9.6	9.2
Slovenia	2.4	-7.8	4.5	-9.1	1.5	0.2	-1.4	1.2	-2.0	-1.0	4.4	6.4	5.4	6.9	8.1
Spain	2.0	-11.1	7.5	-14.4	5.0	2.3	-5.3	1.1	-6.4	-1.6	14.1	19.2	18.7	20.1	21.9
Sweden	1.2	-6.7	1.7	-7.8	0.4	0.6	-3.2	0.3	-3.9	-0.4	6.8	10.0	10.0	10.6	11.1
Switzerland	1.0	-7.7	5.7	-10.0	2.3	0.7	-1.6	-0.3	-1.6	-0.5	4.4	5.7	6.4	5.7	6.6
Turkey	0.9	-4.8	4.3	-8.1	2.0	-2.2	-3.7	2.7	-5.0	0.8	13.7	15.6	14.2	16.8	16.1
United Kingdom	1.4	-11.5	9.0	-14.0	5.0	1.1	-4.6	2.1	-5.9	1.0	3.8	9.1	7.8	10.4	10.0
United States	2.3	-7.3	4.1	-8.5	1.9	1.1	-8.1	3.1	-9.8	1.4	3.7	11.3	8.5	12.9	11.5
Note:..: not available.
Source: OECD (2020), “OECD Economic Outlook – All editions”, OECD Economic Outlook: Statistics and Projections (database), https://doi.org/10.1787/826234be-en (accessed on 10 June 2020).
StatLink https://stat.link/vhre3u

Notes

← 1. The latest info can be found here https://coronavirus.jhu.edu/map.html.

← 2. A pandemic is linked to the geographical spread of a new disease, not its severity. According to the WHO (2010[134]), “a pandemic is the worldwide spread of a new disease. An influenza pandemic occurs when a new influenza virus emerges and spreads around the world, and most people do not have immunity.” According to the United States Centers for Disease Control and Prevention (2012[135]) “a pandemic refers to an epidemic that has spread over several countries or continents, usually affecting a large number of people.” Since the historic “Spanish Influenza” of 1918, the world has witnessed six pandemics: the “Asian flu” of 1957, the “Hong Kong flu” of 1968, the Severe Acute Respiratory Syndrome (SARS) in 2002, the N1H1 influenza in 2009 (“bird flu”), the Middle East Respiratory Syndrome (MERS) in 2012, and Ebola which peaked in 2013-14.

← 3. Containment strategies aim at minimising the risk of transmission from infected to non-infected people in order to stop the outbreak – i.e. reducing the reproduction number to below one (OECD, 2020[1]). This included actions to detect cases early on and trace an infected individual’s contact with other people, or the confinement of affected people. Mitigation strategies, which include physical-distancing, including a full society “lockdown”, and improved personal and environmental hygiene, aim at slowing the disease, and, where the disease has occurred, to lessen its impact or to reduce the peak in health care demand – i.e. getting the reproduction number as close as possible to, or below, one. In practice, containment and mitigation actions largely overlap and are often implemented concurrently. In fact, containment and mitigation policies may even be considered as a continuum with gradual increments of the same strategy; with mitigation that could go to the extreme level of a full lockdown of a city, region or country.

← 4. Google released aggregated, anonymised data to chart movement trends over time by geography, across different high-level categories of places such as retail and recreation, groceries and pharmacies, parks, transit stations, workplaces, and residential areas.

← 5. The U.S. Bureau of Labor Statistics defines workers as unemployed on temporary layoff if they have either been given a date to return to work by their employer or expect to be recalled to their job within 6 months (U.S. Bureau of Labor Statistics, 2020[18]). The term is sometimes used interchangeably with being “furloughed”. The U.S. Bureau of Labor Statistics does not use the term “furlough” in its household and establishment surveys, but includes furloughed workers among those on temporary layoffs.

← 6. The United States also put in place the Paycheck Protection Program (PPP) to provide small businesses with loans to maintain employment levels (see Section 1.3.2 and Box 1.6 for a more detailed discussion).

← 7. If they have not been given a date to return to work by their employer and if they have no expectation to return to work within six months, they need to fulfil the “job search” criteria to be classified as “unemployed”.

← 8. Based on these estimates of actual use for France and Germany, the total number of persons participating in job retention schemes across the OECD would be about 50 million. Yet, actual use in France and Germany is computed here on a shorter period of time (the month of May) than approved applications.

← 9. The analysis leverages information from online job vacancies as collected by two private companies: Indeed (Figure 1.10) and Burning Glass Technologies (Figure 1.11). Indeed is a large job postings search engine aggregating information from thousands of websites including firms’ career websites and job boards. Burning Glass Technologies is an employment analytics company sourcing and coding job postings from hundreds of millions of job postings to provide insight into labour market patterns. Burning Glass Technologies data for the United States have been shown to align well with official data from the U.S. Job Openings and Labor Turnover Survey, e.g. in Carnevale et al. (2014[136]), Hershbein and Kahn (2018[137]), and Kahn, Lange and Wiczer (2020[14]). Knutsson et al. (2020[139]) further show that the regional distribution of Burning Glass Technologies data for Australia, Canada and United States is generally well aligned with official data for the most recent years. To the best of the authors’ knowledge, similar exercises have not been performed on Indeed data, which should be therefore interpreted with greater caution. Nevertheless, for the five countries for which both Burning Glass Technologies and Indeed data are available, the aggregate trends shown by both sources of data are similar. The exact data used in this publication were not benchmarked on official job vacancy data, where already available, and may therefore be misaligned with those. Misalignments may result from the difference between the overall vs online-only market for job postings, and from the data collection technology by Burning Glass Technologies and Indeed, among other factors.

← 10. A first empirical exploration also finds a positive correlation between changes in mobility and in job postings between February and April, similarly to Hensvik et al. (2020[10]). The simultaneous occurrence of the two phenomena, however, makes it impossible to identify causal links at present.

← 11. The label “public services” is attributed for convenience and covers services that can be supplied by private entities, as long as they fall in the education, health care and social work, or public administration and defence sectors.

← 12. The definition of low-, medium- and high-skilled occupations is sourced from Chapter 4, which extends Goos et al. (2014[138]).

← 13. Regions are defined as large subnational regions or as Territorial Level 2 (TL2) regions according to the OECD classification. TL2 regions generally represent the first government layer after the national or federal level.

← 14. If recent pandemics are any guide, the toll on poorer and vulnerable segments of society will be very high. An analysis of the consequences of SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014) and Zika (2016) by Furceri et al. (2020[159]) shows that recent epidemics have led to an increase in income inequality and hurt employment prospects of those with only a basic education while scarcely affecting employment of people with advanced degrees.

← 15. Average hourly wages in April rose by 10.8% year on year in Canada because of the relatively larger employment declines in low-paying industries, notably in accommodation and food services and in wholesale and retail trade. In the United States, in April, average hourly earnings increased also well above the recent average, reflecting the substantial job loss among lower-paid workers. More granular data will be necessary to estimate the wage effect of the crisis conditional on job type.

← 16. The first group includes those in professional jobs able to work from home and those in industries with less human-facing contact. The second group includes those with precarious employment at the bottom of the income distribution but who are potentially well covered by Universal Credit.

← 17. Indicators based on expectations need to be interpreted with care in the current crisis. They are usually a leading indicator of the outlook ahead. However, uncertainty surrounding the duration of lockdown measures has complicated the ability of these data to provide those forward-looking signals and in such a situation they represent more a coincident rather than a leading indicator (OECD, 2020[140]). The magnitude of expectations decline should not be regarded as a measure of the degree of contraction in economic activity, but rather as an indication of the signal strength.

← 18. Current data on spending are subject to frequent revisions and adjustments as not all countries provide precise estimates, in particular for measures such as tax deferrals. Moreover, some policies are still being rolled out and initial estimates may vary depending on the take-up and the actual duration. Also, in some countries, loans to firms may eventually turn into grants, and guarantees on loans may be activated and have a budgetary impact that cannot be foreseen at this stage.

← 19. Workplace physical distancing measures, such as working from home and workplace closures, can reduce the disease attack rate by between 23-73%, with lower values for highly infectious diseases and where there is lower compliance (OECD, 2020[1]).

← 20. Ample empirical evidence exists that working from home or space flexibility increase workers’ effort and motivation (Beckmann, Cornelissen and Kräkel, 2017[146]), and job satisfaction (Bloom et al., 2014[158]; Kröll and Nüesch, 2019[148]). These gains, however, partially rely on workers’ ability to choose whether to work from home or from the office, which is not possible in case of a pandemic. Some workers are indeed found to perform worse at home than in the office and to experience loneliness (Bloom et al., 2014[158]). To be effective, they require adequate equipment and a proper space to work and no concurrent care duties such as during the COVID-19 crisis. Moreover, workers may not be keen on the new flexible arrangements if they are associated with a large pay cut (Mas and Pallais, 2020[142]), or if their tasks may be substituted by software or by “telemigrants”, i.e. equivalent workers sitting abroad where labour costs are lower (Baldwin, 2019[155]). Employers, conversely, may be wary that workers reduce their effort while working from home (a fact for which the economic literature has not found empirical backing, e.g. Beckmann (2015[147])), and offer lower wages as a consequence. Evidence on the effects of telework on productivity is also mixed, with some studies finding a positive effect (Angelici and Profeta, 2020[143]; Bloom et al., 2014[158]) and others a negative or mixed one (Battiston, Blanes i Vidal and Kirchmaier, 2017[144]; Glenn Dutcher, 2012[145]).

← 21. Certain groups of workers in non-standard dependent employment, such as casual workers or workers on zero-hour contracts, often have poor or no access to paid sick leave. For instance, casual workers in Australia (about a quarter of all employees) are not eligible to sick pay and zero-hour contract workers in the Netherlands (about 7% of all employees) only for hours they were called upon by their employer. These two groups did not obtain better access to sick pay, although casual workers in Australia who meet the residence requirements can temporarily access special unemployment benefits in case of sickness from COVID-19 or mandatory quarantine.

← 22. There exist subnational requirements for paid sick leave in the United States. In 2019, a quarter of US workers did not have access to paid sick leave at all (rising to one half for low-wage workers), and two-thirds of them had less than ten days of paid sick leave per year (U.S. Bureau of Labor Statistics, 2019[149]).

← 23. Workers in other hybrid forms of self-employed work, such as freelancers and gig workers, lack access to sickness benefits even more often, and informal workers are not covered by definition (Eurofound, 2020[141]). A few countries have taken initiatives to extend sickness benefits to these workers in case of sickness due to COVID-19. For instance, gig workers in Canada and the United States are now temporarily covered under certain conditions. Colombia introduced a COVID-19 specific flat-rate benefit for low-wage informal workers.

← 24. For instance, sickness benefit coverage may be mandatory for self-employed workers only if they have incomes above a certain threshold.

← 25. Weekly or monthly administrative data from national social-insurance authorities for Austria, Chile, the Czech Republic, Finland, Germany, Italy, Latvia, Portugal and Sweden, or data from special employer surveys in France and the United Kingdom. For more detail, see OECD (2020[67]).

← 26. In Canada, the right to Employment Insurance Caregiving leave and benefits applies only in cases of critical illness or injury or someone in need of end-of-life care. The right covers workers who need to provide this type of care for family members of others who are considered to be like a family member.

← 27. Japan, rather than to establish a statutory right to special paid leave as such, has introduced a subsidy for employers that allow their workers to take paid leave due to school or childcare facility closure. Employers are compensated for the continued payment of salaries while workers are on leave, up to a limit of JPY 8 330 per worker per day.

← 28. This includes Canada, France, Italy, Japan, Luxembourg, New Zealand, Norway, Portugal, Switzerland and the United Kingdom.

← 29. In some countries, such as Denmark, these extensions build on a tripartite agreement between the government, trade unions and employers.

← 30. This also implies that there is no risk that firms continue claiming benefits even once hours have been restored.

← 31. The very large majority of OECD countries have encouraged teleworking but, in practice, the decision has been left to employers in several countries. Employees may, at least on paper, risk disciplinary measures or even dismissal if they do not show up for work out of sanitary concerns.

← 32. Italy has since significantly expanded minimum-income provisions, in 2018 and 2019, and introduced a number of changes to the unemployment benefit system in 2015.

← 33. “Net replacement rate” for a single, childless person with previous earnings of two-thirds of the national average wage in the third month of unemployment (OECD tax-benefit models, http://oe.cd/taxben).

← 34. For instance, Austria, Canada, France and Spain have extended entitlements to unemployment benefits to independent workers. Denmark has strengthened the portability of earned entitlements across different jobs and forms of employment. Italy has facilitated access to means-tested safety-net benefits.

← 35. In addition, automatic benefit extensions can be available at the State level if unemployment in that State exceeds the federally prescribed trigger level.

← 36. In the United States, a court ruling temporarily suspended the tightening of access to the federal Supplemental Nutrition Assistance Program (SNAP, previously “food stamps”) that had initially been foreseen for April 2020.

← 37. Receipt trends for the Universal Credit and the Reddito di Cittadinanza cannot be directly compared because the former measures daily “inflows” and the latter monthly “stocks”.

← 38. Newly self-employed workers who only started their business in 2020 and therefore cannot prove their income with a tax declaration will receive a flat rate payment of EUR 500 per month.

← 39. These payments are meant to cover three months of business operating costs such as rent, wages of employees not covered by short-time work schemes etc.; for their own living costs, self-employed workers will have to rely on the means-tested Unemployment Benefit II, eligibility to which has been temporarily relaxed.

← 40. Personal information from undocumented workers will not be required. Officials estimate that 150 000 undocumented immigrants in the state will benefit.

← 41. Above the income threshold of USD 75 000 per year, payments are reduced by USD 5 for every USD 100 of additional income earned. People classified as “dependent” on another household member’s tax return are excluded from this transfer. This includes many students over the age of 17 and some disabled people living with family members.

← 42. Herd immunity is a form of indirect protection from infectious disease that occurs when a large percentage of a population has become immune to an infection, whether through vaccination or previous infections, thereby providing a measure of protection for individuals who are not immune.

← 43. See, among many, Dingel and Neiman (2020[151]), Espinoza and Reznikova (2020[156]), Gottlieb, Grobovšek and Poschke (2020[157]); Hensvik, Le Barbanchon and Rathelot (2020[10]), Mongey, Philossoph and Weinbger (2020[152]).

← 44. See brief summary of the literature in endnote 23.

← 45. The OSHA keeps a daily record of complaints, referrals and closed cases related to COVID-19 as well as the number of whistle-blower complaints filed. See US OSHA https://www.osha.gov/enforcement/COVID-19-data and https://www.whistleblowers.gov/COVID-19-data.

← 46. This depends largely on whether governments deem widespread childcare facility and school closures necessary on public health grounds. Given the apparent low infection rates among children – see OECD (2020[106]) and Mallapaty (2020[153]) – many countries will likely want to consider options for re-opening and/or keeping schools and childcare centres open during a possible second wave, especially for younger children, also in view of the budgetary costs of funding paid care leave and the risk of lost educational opportunities for children. However, this needs to be done with care. The evidence on whether or not children have a lower risk of transmitting the infection is still inconclusive (Mallapaty, 2020[153]). If, after further study, it is established that children carry similar transmission risks as adults, re-opening schools and childcare facilities – and potentially leaving them open during a possible second wave – could contribute to heightened infection.

← 47. The type of support may nonetheless depend on the timing of expected re-opening, as activities that are potentially viable now may turn unviable with a prolonged shutdown.

← 48. In such schemes, the cost of labour hoarding falls entirely on the government or workers in the form of uncompensated reductions in working time. In principle, firms can be made to share in the cost of labour hoarding by placing limits on the extent to which uncompensated reductions in working time are possible. In New Zealand, total worker earnings in subsidised jobs in principle cannot decline more than 80% of normal earnings. However, it is not clear how binding this requirement is in practice. The wage subsidy scheme operated in the Netherlands mimics STW schemes that require firms to share the cost of labour hoarding. While workers continue to receive 100% of their earnings, employers are not fully compensated for the loss in revenue. This may induce some employers to request support only for workers whose jobs are viable in the longer term.

← 49. Evidence from Switzerland (Kopp and Siegenthaler, 2019[150]) during the global financial crisis shows that workers in viable jobs tended to leave the scheme before the maximum duration, while those firms who did use the scheme for the maximum duration tended to layoff some workers eventually.

← 50. For example, over 100% for some claimants in the Self-employment Income Support Scheme in the United Kingdom (Waters, Miller and Adam, 2020[154]).

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