What we’ve been reading about job losses due to COVID-19

This blog is based on the January-February 2022 edition of the Knowledge4Jobs newsletter, curated by the World Bank’s Jobs Group and Labor and Skills Global Solutions Group. Click here to sign up for the Knowledge4Jobs newsletter.

In the early days of the COVID-19 pandemic, as massive shutdowns began, some observers predicted that the risk of job loss depended on factors such as an occupation’s amenability to working remotely, or contractions in aggregate demand and downturns in contact-intensive sectors like restaurants and travel. As the crisis has worn on, however, some less anticipated drivers of job losses have been revealed. First, whereas declining labor supply is a big story in rich economies, a new Jobs Group study shows that shocks to labor demand have been the predominant source of job losses in the middle-income economies (MICs) of Georgia and Jordan.

The primary causes of declines in labor demand are also becoming clearer. As anticipated, infection risk to customers has played a role (in Georgia), as have COVID-related closures and falling export demand. Yet less expected is that supply chain disruptions are also among the most significant determinants of job losses. In addition to the cases of Georgia and Jordan, a survey of Asian countries shows that firms more able to rearrange their supply chains did better during the crisis.

Another factor not clearly foreseen was that dynamic economies characterized by more robust competition have shown a faster rebound. And despite predictions, there is so far a lack of empirical evidence from some MICs studied that the ability to work from home has a measurable impact on job losses. Findings from Georgia and Jordan accord with those found in Peru. Clarity on the high magnitude of impacts of lockdowns is also emerging from MICs. Impacts on formal jobs in Mexico were also greatest where successive lockdowns occurred. Moreover, the international evidence of important labor market scarring effects is coming to light, showing the future earnings of students and young graduates who are losing the value of job experience due to COVID-19 era policies.

This month’s reading list examines the growing literature on the causal channels of the COVID-19 crisis on labor markets. This literature will not only help us predict the level and distribution of job market losses, but can help shape more effective policies to enhance resilience and reduce the adverse implications of future crises.

COVID-19 Labor Market Impacts

• The level of job losses in Jordan and Georgia is primarily due to a reduction in demand for labor. Closures, global demand shocks, supply disruptions, and other unexplained demand side shocks are significant determinants of jobs lost. (Hatayama et al, World Bank, December 2021)
• Using the World Bank’s Enterprise Surveys for about 8,000 firms in 23 emerging and developing countries in Europe and Central Asia, this paper examines the impact of the COVID-19 crisis on the reallocation of economic activity across firms and whether this depends on the competition environment. (Bruhn et al, World Bank, November 2021)
• This paper uses evidence from 145 countries at various levels of development to quantify the long-term impact of the pandemic. The results show that both lost schooling and experience contribute to significant losses in global learning and output. (Samaniego et al, World Bank, January 2022)

Essential Readings

• Examining the impact of COVID-19 on business activities and supply chains in the ASEAN member states and India. (Oikawa et al, ERIA, June 2021)
• How labor markets in developing countries have evolved since the initial phase of the crisis in the spring and early summer of 2020. (Khamis et al, World Bank, July 2021)
• In contrast to developed countries, and controlling for informal status, having a job in Peru that allows one to work from home is not correlated with COVID-19 related job loss when controlling for informal status. (Cueva et al, World Bank, May 2021)
• The pandemic and lockdown caused Mexico's formal sector to contract by 5 percent by November 2020. States that experienced multiple lockdowns saw more significant job losses. (Hoehn-Velasco et al, Journal of Economics and Business, May 2021)

Broader Jobs Agenda

• There’s little evidence that liquidity or credit constraints deter adoption of environmental technologies in Sahel. Providing farmers with training, however, increases the share of adopters by over 90 percentage points. (Aker & Jack, National Bureau of Economic Research, November 2021)
• This paper suggests areas where there is clear scope to improve the design and implementation of labor market regulations in the Middle East and North Africa. (Hatayama, World Bank, January 2022)
• In Germany, the concentration of workers on employers constitutes a key source for monopsony power that employers may exert over their employees. (Martin Popp, arXiv, January 2022)
• The $800 Billion Paycheck Protection Program: Where did the money go and why did it go there? (Autor et al, National Bureau of Economic Research, January 2022)
  These are the potential long-term structural changes in the US labor market as a result of pandemic-related changes in consumer and firm behavior. (Ice et al, Bureau of Labor Statistics, February 2021)
• In US states that chose to terminate unemployment benefits early, the flow of unemployed-to-employment for workers aged 25 to 54 increased by 14 percentage points, or two-thirds. (Holzer et al, IZA Institute of Labor Economics, December 2021)
• This paper investigates the factors that influence university lecturers' productivity while working from home in Indonesia. (Afrianty et al, Asia Pacific Management Review, March 2022)
• Young workers in Southeast Asia suffered a disproportionate amount of job losses, while women were more likely to exit the labor force following job loss than men. (Asian Development Bank, December 2021)
• This paper estimates the impact of technology sophistication pre-COVID-19 on the performance of firms in Brazil, Senegal, and Vietnam during the early stages of the pandemic. (Comin et al, National Bureau of Economic Research, January 2022)
• The mixed blessing of cyberloafing on innovation performance during the pandemic. (Zhong et al, Elsevier Public Health Emergency Collection, January 2022)