RIO DE JANEIRO, BRAZIL – According to the International Labor Organization (ILO), pandemic losses caused an 8.3% drop in labor income globally, before government aid measures were implemented. The decline is equivalent to US$3.7 trillion, or 4.4% of the world’s Gross Domestic Product (GDP).
The organization examined the impact of the pandemic in six countries – Brazil, USA, Italy, Peru, UK and Vietnam – comparing the first and second quarter of 2020 with the second quarter of 2019 in terms of “income from work after assistance” (total income from work after the governments’ implementation of aid measures). Workers in Brazil and Peru lost more income than those in the other countries.
The findings are that Brazil recorded a 21% decline in “income from work after assistance” as well as a 22% loss in working hours. Peru also suffered a sharp drop in income, which fell by 56% while it experienced a 59% reduction in working hours.
In the opposite direction, the UK experienced a lower impact on “income from work after assistance”, with a 3% decline against an 18% drop in working hours. Italy presents a similar situation, with a drop of 4% and 23%, respectively.
The ILO notes that the two European countries have used employment maintenance measures that subsidize workers’ income in partial employment, for instance. Hence, job retention measures, if implemented on a sufficient scale, have proved their efficacy in containing losses in working hours before they reach workers’ incomes and job losses.
The analysis also shows that the Covid-19 crisis has had disproportionate impacts on the self-employed, who normally perform their activities in the informal economy. In Peru, the difference in the rate of decline in “income from work after assistance” between wage earners and the self-employed is 21 percentage points. In Brazil and Vietnam, it is five percentage points.
In Brazil, Peru, Italy, USA and Vietnam, women had greater losses in “income from work after assistance” than did men. Another finding was that workers exercising high skills (director, specialized professional, technicians) have been less affected than others in Brazil, Italy, Peru and Vietnam.
Uncertain post-Pandemic rebound
The ILO points to indications of a timid, uncertain and unequal rebound in the global labor market after the unprecedented crisis triggered by the Covid-19 pandemic.
The ILO’s new annual projections confirm the “terrible impact” that hit the labor market in 2020. For the year as a whole, 8.8% of the world’s working hours were lost, compared to the fourth quarter of 2019. This is equivalent to 255 million full-time jobs (48-hour working week). The number is four times higher than the hours lost during the 2009 global financial crisis.
No less than 71% of job losses (81 million people) concern inactivity more than unemployment. This means that many people left the job market because they were unable to work, either because of restrictions, or because they gave up looking for a job.
Three rebound scenarios
The ILO has designed three scenarios on economic rebound for 2021. In the baseline scenario, based on International Monetary Fund (IMF) projections, it estimates a 3% loss in working hours worldwide, equivalent to 90 million full-time jobs.
In the pessimistic scenario, considering slow progress in vaccination, for instance, working hours would drop 4.6%, or 130 million jobs. In the optimistic scenario, this drop would reach only 1.3%, or 36 million jobs. Everything depends on whether the epidemic will be controlled and if consumers and companies will have confidence again.
The ILO projects that, in all scenarios, the Americas, Europe and Central Asia will be faced with twice as many working hours lost as the other regions.