COVID-19 leads to massive labour income losses worldwide

The devastating losses in working hours caused by the COVID-19 pandemic have brought a “massive” drop in labour income for workers around the world, says the International Labour Organization (ILO) in its latest assessment of the effects of the pandemic on the world of work.

Global labour income is estimated to have declined by 10.7 percent, or US$ 3.5 trillion, in the first three quarters of 2020, compared with the same period in 2019. This figure excludes income support provided through government measures.

The biggest drop was in lower-middle income countries, where the labour income losses reached 15.1 percent, with the Americas the hardest hit region at 12.1 percent.

The ILO Monitor: COVID-19 and the world of work. Sixth edition, says that the global working hour losses in the first nine months of 2020 have been “considerably larger” than estimated in the previous edition of the Monitor (issued on 30 June).

For example, the revised estimate of global working time lost in the second quarter (Q2) of this year (when compared to Q4 2019) is for 17.3 percent, equivalent to 495 million full-time equivalent (FTE) jobs (based on a 48-hour working week), whereas the earlier estimate was for 14 percent, or 400 million FTE jobs. In Q3 of 2020, global working hour losses of 12.1 percent (345 million FTE jobs) are expected.

The outlook for Q4 has worsened significantly since the last ILO Monitor was issued. Under the ILO’s baseline scenario, global working-hour losses are now projected to amount to 8.6 percent in the fourth quarter of 2020 (compared to Q4 2019), which corresponds to 245 million FTE jobs. This is an increase from the ILO’s previous estimate of 4.9 percent or 140 million FTE jobs.

One reason for the estimated increases in working-hour losses is that workers in developing and emerging economies, especially those in informal employment, have been much more affected than by past crises, the Monitor says.

It also notes that the drop in employment is more attributable to inactivity than to unemployment, with important policy implications.

While many stringent workplace closures have been relaxed, there are significant variations between regions. 94 percent of workers are still in countries with some sort of workplace restrictions, and 32 percent are in countries with closures for all but essential workplaces.

“Just as we need to redouble our efforts to beat the virus, so we need to act urgently and at scale to overcome its economic, social, and employment impacts. That includes sustaining support for jobs, businesses, and incomes,” said ILO Director-General Guy Ryder.

The 6th edition of the Monitor also looks at the effectiveness of fiscal stimulus in alleviating labour market impacts.

In order for developing countries to reach the same ratio of stimulus to working hours lost as in high-income countries, they would need to inject a further US$982 billion (US$45 billion in low-income countries and US$937 billion in lower-middle income countries). The stimulus gap for low-income countries amounts to less than 1 percent of the total value of the fiscal stimulus packages announced by high-income countries.

This huge “fiscal stimulus gap” is even more worrying in light of the social protection deficits in many developing countries. Moreover, some of these countries have also had to redirect public spending from other objectives in order to mitigate the labour market impact of the crisis.

Read the ILO Monitor: COVID-19 and the world of work. Sixth edition.

Original source: ILO