TWN Info Service on UN Sustainable Development (Jun21/02)
4 June 2021
Third World Network

Labour: Crisis-induced “jobs gap” to reach 75 million in 2021, says ILO
Published in SUNS #9359 dated 4 June 2021

Geneva, 3 Jun (Kanaga Raja) – The crisis-induced global shortfall in jobs is projected to stand at 75 million in 2021 and at 23 million in 2022, with the corresponding shortfall in working hours in 2021 amounting to 3.5 per cent, or equivalent to 100 million full-time jobs, according to the International Labour Organization (ILO).

In its latest World Employment and Social Outlook released on 2 June, the ILO said the slower-than-anticipated progress of vaccination campaigns, coupled with a resurgence of the pandemic in early 2021, explains its downward revision of the recovery of working-hour losses by 0.5 percentage points since the seventh edition of the ILO Monitor issued in late January 2021.

The new projection suggests that an additional 10 million full-time equivalent jobs will remain lost in 2021, giving a total of 100 million lost jobs, compared with 90 million prior to the revision, it added.

The ILO said a process of globally uneven economic recovery can be expected to begin from the second half of 2021 onwards, driven by progress in vaccination and large-scale fiscal spending.

“These positive effects will mostly remain limited in their geographical scope without concerted international policy action on both vaccine distribution and fiscal support, including debt relief,” said the ILO.

Globally, the recovery is projected to result in the net creation of 100 million jobs in 2021 and an additional 80 million jobs in 2022. However, projected employment in 2021 will still fall short of its pre-crisis level.

The ILO said the projected employment growth will be too weak to provide sufficient employment opportunities for those who became inactive or unemployed during the pandemic and for younger cohorts entering the labour market, who have suffered significant disruptions to their education and training.

As a result, many previously inactive workers will enter the labour force but will not be able to find employment.

“This is expected to cause a sustained and pronounced increase in unemployment: from 187 million in 2019 to 220 million in 2020, 220 million in 2021 and 205 million in 2022.”

Prior to the COVID-19 crisis, the projected unemployment rate of 5.7 per cent in 2022 was last seen in 2013, said the ILO.

In contrast to the situation during that year, unemployment is projected to be high in countries at all income levels in 2022, with middle-income countries being the most affected, it added.

“Recovery from COVID-19 is not just a health issue. The serious damage to economies and societies needs to be overcome too. Without a deliberate effort to accelerate the creation of decent jobs, and support the most vulnerable members of society and the recovery of the hardest-hit economic sectors, the lingering effects of the pandemic could be with us for years in the form of lost human and economic potential and higher poverty and inequality,” said ILO Director-General Guy Ryder.

“We need a comprehensive and co-ordinated strategy, based on human-centred policies, and backed by action and funding. There can be no real recovery without a recovery of decent jobs,” he added.

According to the ILO report, the COVID-19 pandemic has caused unparalleled disruption worldwide through its devastating impact on public health, employment and livelihoods.

Governments and workers’ and employers’ organizations everywhere have taken immediate measures to tackle the crisis, preserve jobs and protect incomes, though these measures have differed in scope and generosity.

The report said while such measures have been crucial in mitigating the crisis, all countries have suffered a sharp deterioration in employment and national income, which has aggravated existing inequalities and risks inflicting longer-term “scarring” effects on workers and enterprises.

In 2020, the world lost an estimated 8.8 per cent of the total number of hours worked owing to the pandemic, which severely affected almost all countries, said the ILO.

By way of comparison, between 2008 and 2009, when the global economic crisis was at its peak, the number of hours worked actually increased globally (by 0.2 per cent), as workers, particularly the self-employed, tried to make up for income losses. Only in high-income countries was there a decrease in hours worked.

The global shortfall in working hours amounts to 4.8 per cent in the first quarter of 2021, and 4.4 per cent in the second quarter, corresponding to the full-time equivalent of 140 million and 127 million jobs, respectively.

The ILO said amidst re-surging case numbers and workplace closures, the Americas and Europe and Central Asia are particularly plagued by continued working-hour losses, estimated at more than 8 per cent in the first and more than 6 per cent in the second quarter of 2021.

In 2020, when the direct labour market effects of the pandemic were at their height, the decline in hours worked corresponded to the equivalent of around 255 million full-time jobs being lost at the global level, assuming a 48- hour working week.

The ILO said that around half of the working-hour loss (corresponding to 144 million jobs) materialized as an actual reduction in employment.

Between 2019 and 2020, global unemployment increased by 33 million, while an additional 44 million people became part of the potential labour force – those individuals who are outside the labour market but are either willing to work or looking for a job.

In contrast, global unemployment increased by 22 million between 2008 and 2009, while the potential labour force rose by only 6 million over that same period.

The ILO said the present crisis is unique not only in sheer scale, but also in its effect on labour force participation.

The labour force participation rate stood at 58.7 per cent globally in 2020 after a year-on-year decline of 2.2 percentage points. This drop is more than ten times greater than the drop in the labour force participation rate between 2008 and 2009.

The pandemic has accelerated a long-term trend of decreasing labour force participation at the global level, said the ILO.

“The drop in labour force participation in 2020 alone is roughly equal to the aggregate decline observed over the entire decade leading to 2019.”

This mirrors the trends in the evolution of working hours, pointing to the risk of a “lost decade” in terms of labour market progress if the recovery from the crisis is delayed, said the ILO.

Overall, labour under-utilization increased massively, adding to the estimated 471 million people worldwide who were already experiencing some form of labour under-utilization in 2019.

According to the ILO report, the crisis has severely disrupted labour markets around the world, but its impact has not been uniform.

“While considerable differences emerge across regions, in general, the groups hit the hardest within countries have been women, young people and informal workers, who have experienced the sharpest deterioration in labour market indicators.”

They started from an already unfavourable position in the labour market before the pandemic. As a result, the crisis is exacerbating long-lasting inequalities, said the ILO.

It added that the crisis has had devastating consequences for both men and women, but women have been affected disproportionately.

Women’s employment declined by 5 per cent as a result of the crisis, compared with 3.9 per cent for men.

Additionally, among those who lost their employment, almost nine in ten women have become inactive, compared with seven in ten men.

The report also found that even before the pandemic, unemployment rates were significantly higher for young workers (that is, those aged between 15 and 24 years) than for adult workers (those aged 25 years and above).

Moreover, young people who were employed were more likely to be in less stable working arrangements.

As a result of the crisis, young workers incurred an employment decline that was almost 2.5 times greater than that experienced by adults, said the ILO.

“Young workers who lost their job have been more likely than their adult counterparts to become inactive, which further impairs their labour market prospects,” it added.

In fact, though the number of young unemployed has remained essentially unchanged between 2019 and 2020 worldwide, this is only because many young people without a job stopped looking for one or have delayed their entry into the labour market.

The ILO also said the deterioration of employment outcomes has resulted in a sharp fall in labour income around the world.

In particular, global labour income – referring to any income related to formal or informal employment undertaken for pay or profit, but without considering any government transfers or benefits – decreased by 8.3 per cent in 2020, relative to a no-pandemic scenario without working-hour losses.

This corresponds to a loss of US$3.7 trillion (using 2019 market exchange rates), or 4.4 per cent of global gross domestic product (GDP) in 2019.

The labour income loss is estimated to stand at 5.3 per cent – equal to US$1.3 trillion – in the first two quarters of 2021.

According to the ILO, the estimated number of employed individuals in extreme poverty – that is, earning less than US$1.90 per day in purchasing power parity (PPP) terms – increased by 31 million worldwide between 2019 and 2020, bringing the extreme working poverty rate to 7.8 per cent (up from 6.6 per cent in 2019).

Over the same period, the number of workers who are considered moderately poor – that is, those earning between US$1.90 and US$3.20 per day in PPP terms – has increased by around 77 million, resulting in a moderate working poverty rate of 14.2 per cent (up from 11.3 per cent in 2019).

Reflecting a sharp deterioration in working conditions, these trends have reversed the progress made in reducing poverty, with the current extreme working poverty rate resembling that of 2015, said the ILO.

The increase in working poverty is due to both a reduction in working hours and a fall in earnings, it noted.

LABOUR OUTLOOK IN AFTERMATH OF COVID-19

According to the report, although a process of economic and labour market recovery is expected to begin in 2021, it will be uneven globally and almost certainly insufficient to close the gaps opened up by the crisis.

It said the economic recovery hinges on the availability of vaccines, the extent of any future workplace closures and physical distancing measures, and monetary and fiscal policy.

“Vaccination campaigns and improved health and safety will allow more workplaces to open and will stimulate the consumption of goods and services, with positive effects on job creation and income recovery.”

Yet, said the ILO, there has been a stark imbalance in countries’ ability to access vaccines, which has been heavily skewed towards high-income countries.

In addition, fiscal and monetary policies aimed at increasing investment and spending are essential.

“Unfortunately, many countries, especially low- and middle-income ones, are burdened with high public deficits and debt, limiting their ability to undertake the necessary policy efforts. Concerted international policy action is therefore key to the global labour market recovery,” said the ILO.

The depth of the crisis has left enterprises and workers “scarred”, making a recovery more difficult, it added.

Unemployment, underemployment, inactivity and the rise in poverty have disrupted the work trajectories of millions of workers, possibly resulting in long-term scarring effects on workers, which can persist even as macroeconomic conditions improve, it said.

Enterprises face related challenges, with some having accumulated debts and others even having gone bankrupt.

This reduces the scope for investment and makes it difficult to restore the lost jobs. In addition, new behaviours adopted during the pandemic will negatively affect workers and firms in certain sectors and may persist afterwards to some extent.

For example, the increase in online purchases has disrupted the wholesale and retail sector, while the increase in tele-work arrangements could lead to a decrease in business travel.

“The labour market recovery is expected to occur against the backdrop of a strong but incomplete recovery of economic growth,” said the ILO report.

In January 2021, world GDP growth was projected to be 4.7 per cent in 2021 and 3.4 per cent in 2022, following a collapse of growth in 2020 to -4.3 per cent, which is 6.8 percentage points below the growth rate that had been expected before the crisis.

Projected growth is highest in middle-income countries (around 6 per cent in 2021 and 5 per cent in 2022), while output in low-income countries is expected to grow by 2.8 per cent and 4.0 per cent, respectively.

The massive fiscal stimulus package adopted in January by the United States has led to a strong upward revision in expected GDP growth for that country, which increases the expected average growth of high-income countries to 5.2 per cent and 3.0 per cent in 2021 and 2022, respectively.

In sum, the global labour market recovery will almost certainly be insufficient to close the gaps opened up by the crisis, said the ILO.

It said that by 2022, the ratio of the total weekly hours worked to the population aged between 15 and 64 years, the employment-to-population ratio and the labour force participation rate are all projected to fall well short of their levels in 2019, even when allowance is made for long-term trends in these indicators.

The deficit in jobs caused by the crisis is projected to stand at 23 million in 2022, with unemployment surpassing its 2019 level by 18 million.

Globally, total working hours are expected to fall short by 3.5 per cent in 2021 and by 0.9 per cent in 2022, relative to the no-pandemic scenario.

The full-time equivalent (FTE) of those working-hour losses hence declines from 255 million jobs in 2020 to 100 million jobs in 2021 and to 26 million jobs in 2022, said the ILO.

Slow and unequal vaccination campaigns, combined with recurrent COVID-19 outbreaks, reduce the projected recovery of working hours between 2020 and 2021 by 10 million FTE jobs compared with ILO projections in January 2021, when working-hour losses in 2021 were projected to amount to 90 million FTE jobs.

In absolute terms, the global ratio of total weekly hours worked to the population aged 15-64 is projected to rise to 26.1 hours per week in 2021 and to 26.7 hours per week in 2022, following the low point of 24.7 hours per week in 2020.

Consequently, a substantial loss in paid work activities is expected to persist in 2022, said the ILO.

Under the pessimistic scenario, the remaining gap in working hours in 2022 – relative to the no-pandemic scenario – may be as much as 2.7 per cent, it added.

In that scenario, only half of the working-hour losses experienced in 2020 will be recovered in 2021, and the same recovery will also be limited in 2022.

In the optimistic scenario, global working-hour losses could be recovered by 2022. This would require the absence of pandemic-related restrictions thanks to successful vaccination campaigns, coupled with strong policy support and vibrant job creation by enterprises, it said.

This optimistic scenario would result in total working hours overshooting in high-income countries, meaning that they would exceed the expected level of the no-pandemic scenario, it added.

According to the report, low-income countries are projected to face the largest working-hour losses – with respect to the no-pandemic scenario – in 2022, at 1.4 per cent, whereas such losses are projected to fall to 0.3 per cent in high- income countries.

Following the loss of 114 million jobs in 2020, employment is projected to increase by 100 million in 2021 and a further 80 million in 2022.

This means that total employment in 2022 would surpass its 2019 level by 66 million. However, the catch-up in employment growth would still be insufficient to match the growth of the working-age population between 2019 and 2022, said the ILO.

As a result, the pandemic-induced shortfall in jobs would still amount to 75 million in 2021 and 23 million in 2022, it added.

Unemployment, which accounted for only a small part of total working-hour losses in 2020, is projected to become the principal component of the crisis-induced jobs gap by the end of 2022.

As the overall economic situation starts to improve and pandemic-related restrictions are lifted, large numbers of people who were previously inactive in the labour market will enter the labour force again, said the ILO.

However, owing to the lack of sufficient jobs, the global unemployment headcount will remain elevated throughout 2021 and 2022 – at 220 million and 205 million unemployed, respectively, it added.