Supporting workers’ transition to a new normal amid COVID-19

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After several weeks of lockdowns and strict social distancing, some countries are starting to open for business. This process, however, is bound to be slow, and may even see measures reintroduced if infections rise again. The gradual lifting of containment measures in countries like New Zealand, Austria, France, Germany, and others will likely shape how other countries respond when they reach a similar stage of the coronavirus pandemic (COVID-19).

This relaxation of lockdowns and other crisis measures does not mark a return to business as usual, but rather the transition to a “new normal.” This is a first stage toward recovery. With variations likely across contexts, economic activity will gradually return but will still be far different for workers and firms. After all, the impacts of rising unemployment and underemployment will not disappear, and labor market conditions may worsen further as emergency measures are phased out. Global working hours shrank by 4.5 percent in the first quarter of 2020 compared to the last quarter of 2019 per ILO estimates. Worldwide, three quarters of informal workers are estimated to be severely impacted by lockdowns or are working in the hardest hit sectors.  What can governments do to help workers transition to this new normal?

This relaxation of lockdowns and other crisis measures does not mark a return to business as usual, but rather the transition to a “new normal.”

Governments need to continue implementing strong actions to support workers. Three pillars can help set the stage for labor market recovery:

First, prepare an exit strategy from current emergency measures.

Countries around the world have responded strongly to the crisis, often setting up record-setting support packages for firms and workers aimed at sustaining livelihoods, saving jobs, and preserving the production capacity of firms. But these measures, given their nature and the fiscal cost, need to be time-bound. When countries reach the first stage of recovery, it is time to think about retiring or adapting these measures as necessary. For support to firms, this means paying more attention to viability and supporting innovation and investments to adapt to a new reality of doing business. For workers, wage subsidies aimed at preserving employment can gradually shift toward promoting employment, complemented by measures that support employment of vulnerable groups. Worker protections need to expand to cover more workers, and work safety conditions require upgrading for the return to work. This exit strategy will need to be differentiated by sectors, as some may recover faster, while uncertainty, physical distancing, and mobility restrictions will remain more binding in some activities than others.

Second, get the timing right for tailored support to workers.

Timing is key. From previous crises (see here, here and here), we have learned that workers who start looking for a job during a recession experience significant negative impacts on employment and income compared to those with better timing. Recent graduates, first-time job seekers, and workers who have lost jobs form the core of what could be called the “COVID-19 Generation.”  They should be the main target of policies to avoid long-term impacts. The longer they are out of work or underemployed, the more difficult it will be to reverse the impacts of the crisis. Since scarring effects tend to be particularly pervasive among low-skilled and more vulnerable workers, further focus on their needs is critical. Traditional wage subsidies that support new hiring are an important tool; so are complementary measures that support employability, including technical and socio-emotional skills training aimed at reskilling or upskilling workers, as well as intermediation services to facilitate job transitions. Technology can boost the implementation of these labor market programs. It can help minimize physical contact but also make them more targeted and cost-effective.

Third, stimulate overall labor demand and livelihoods.

Even as businesses reopen, local and international value chains may have fractured, with many countries in a recession already or soon to be.  This causes a potentially vicious circle that will depress labor demand for longer, even after the health emergency eases. Hence, stimulating labor demand through the tax system and government spending — including social assistance programs — will be critical. Particularly for informal workers and household enterprises in developing countries, social assistance programs should continue to help sustain livelihoods. They can be phased out at a slower pace than other COVID-19 emergency measures. Public works, including innovative digital public works, are further important policy instruments that can help stimulate labor demand toward the eventual recovery.

Until, then: Stay tuned for more on jobs policies for the transition to the new normal.

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Authors

Michael Weber

Senior Economist - Jobs Diagnostics (Supply), Labor Regulations & Social Insurance, World Bank

Join the Conversation

Olusegun Oyewole
June 02, 2020

The difference between the Western world and the Africans is the care for the citizens through the provision of social packages especially for the ' vulnerable' population in the society. Whereby many African leaders will steal the common resources to themselves and family members, the western world leaders will be concerned with the redistribution of the resources among the populace to achieve equity to mitigate against disaster especially as it affects the vulnerables. May I suggest that world bodies/ organisations should intensify/ strengthen the monitoring of programs/projects tailored towards the 'new normal' post covid-19 events especially in Africa. Social-economic Intervention programs should be such that promote job creations that will ensure food sufficiency in Africa especially in Nigeria. Nigeria for instance have been facing security issues and now the pandemic of covid-19 even before now, the health challenge of Lassa fever and Ebola were subsisting. The dastard killing of farmers by Boko Haram group, Killer Herders, Random kidnapping and killing by Bandits have been contributing to depletion of farmers population and others being discouraged from going to farms for cultivation leading to shortage of food supply and consequent high cost of living which will be inimical to 'new normal' post covid-19 events except there is improved security and access to good health care.

Subrata Ray
June 02, 2020

sure

Subrata Ray
June 02, 2020

I found it very rewarded.

Balaram mudhiraj
June 02, 2020

IAM unemployed due to covid 19 need job

Basadi Edith Tamplin
June 02, 2020

Different countries should adopt different measures that will work to revive the economy. Countries must realize that for the remaining part of 2020, it might be difficult to follow any plan. Spontaneous short term measures will be very crucial. However, during this critical period of adjustment, for some, it will be seen as a good opportunity to advance corrupt behaviour.

Solomon Kugbe
June 02, 2020

I'll be glad to receive regular write-ups from your blog. Thanks.

Hasnat M. Alamgir
June 02, 2020

Thanks for writing about supporting workers. In developing countries like Bangladesh millions of workers are engaged in informal sector and family owned businesses. These make up the groups who are most vulnerable as they may not likely benefit from any government stimulus packages. COVID-19 may create an opportunity to bring millions of workers to mainstream. To qualify for benefits, they will need to have appointment letters, labor contracts, record their addressees and contact information. May be in this new beginning, we start to do things correct and can overhaul the informal sector.

Hasnat M. Alamgir
East West University, Bangladesh