13/07/2021

Labour markets in the rich world are recovering from covid-19

NEARLY A YEAR and a half ago, covid-19 was spreading rapidly across the rich world and countries were starting to lock down. Millions were left unable to work as everything from factories and building sites to shops and restaurants closed. The number of hours worked in the mostly rich economies in the OECD fell by 15%; in the biggest, America, the unemployment rate rocketed from 3.5% in February 2020 to 14.8% in April. Governments elsewhere hurriedly cobbled together furlough and short-time work schemes, which held down unemployment in many other countries. At their peak these supported fully 60m workers—equivalent to the population of Italy. The bulk of the burden fell on the young, the poorly educated and the low-paid.

Since then, vaccines have been administered, economies have largely reopened and various aspects of pre-pandemic life have returned (see The Economist’s global normalcy index). The labour market, too, is recovering. In America the peak in unemployment is receding in the rear-view mirror: the rate in June was 5.9% and the number of vacancies posted by employers is surging. About half of the shortfall in hours across the OECD has been made up. But in its annual “Employment Outlook”, published on July 7th, the OECD argues that it has also become clearer who is in the “eye of the storm”—those for whom the pain has been worst and the recovery will be most prolonged.

They include those who have been out of work for much of the pandemic. According to the OECD, the number of people who have been unemployed for between six and 12 months has more than doubled across the rich world. Economists argue that the longer someone is out of a job the harder it is for them to find a new one, as their skills and know-how depreciate. Many employees are also still on short-time work schemes, and yet to return to full-time work. The OECD estimates that 10-15% of employees in France and Britain were on such programmes in March. That is bound to have fallen a little as restrictions have been lifted. But the danger is that some companies will fail to reopen and temporary layoffs will become permanent.

Because covid-19 has hit “customer-facing” industries such as retail and hospitality the hardest, the low-paid and the young have borne the brunt of the crisis, and are more likely to be among the long-term unemployed and the partially employed. For these groups to benefit from the economic recovery, advises the OECD, governments will need to turn their attention away from furlough schemes and towards training and re-skilling programmes. The end of the pandemic should not mean an end to all state support for workers whose lives and livelihoods have been upended.