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The COVID-19 shutdowns have cut workers' income

September 23, 2020

The true impact of coronavirus countermeasures on the economy is becoming clearer. A new study estimates that already this year global income has declined by 10.7%, a loss of around $3.5 trillion.

A working standing in front of Qatar's football stadium
Image: picture-alliance/dpa/XinHua/Nikku

Coronavirus costs workers trillions in losses

The coronavirus pandemic and the efforts to stop its spread have made the world a much poorer place by slashing millions of working hours. These losses in turn pushed global labor income down by 10.7%, the equivalent of $3.5 trillion (€2.9 trillion), compared to the first three quarters of 2019. This translates into a whopping 5.5% of the world's entire gross domestic product (GDP).

These sobering figures are the conclusion of a new study by the International Labour Organization (ILO) released on September 23. The report, "ILO Monitor: COVID-19 and the world of work," is the fifth update of an earlier analysis on the impact of the pandemic on work, the last of which was released at the end of June.

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The new assessment by the United Nation agency paints a worse economic picture than previous estimates after the group calculated in newly released national statistics. "Global working-hour losses in the first nine months of 2020 have been 'considerably larger' than estimated in the previous edition," the ILO admitted in its press release. 

Women, the young and those working in the informal sector have been particularly affected, as countries try to avoid a second pandemic wave and more lockdowns. 

A 'bleaker outlook' 

With workplace closures and slowing demand, the report now estimates total working-hour losses at 17.3%, or around 495 million full-time equivalent jobs (based on a 48-hour working week) for the second quarter, relative to the last quarter of 2019. Their previous estimate was 14%. Lower-middle-income countries saw the biggest drop.

Working-hour losses include shorter working hours, being employed but not working, being unemployed and inactivity. Though there are big differences across the world "in many cases, unemployment accounts for only a small part of working-hour losses," the report showed. 

For the current third quarter the researchers expect the losses to be around 12%, or 345 million full-time equivalent jobs.

Ominously, they have also changed the outlook for the last part of the year. "Revised projections for the fourth quarter suggest a bleaker outlook than previously estimated," the report noted, and now expect losses of around 8.6% in the fourth quarter of 2020 compared with the same time last year. Their previous estimate was only 4.9%. 

The agency is quick to point out that the numbers do not take into account government income support programs that have helped millions to compensate for workplace closures during the pandemic. They conclude that without any of the fiscal stimulus, working-hour losses could have been as high as 28%.

Hopeless with little help 

Indeed these government programs have helped people around the world. Countries with larger fiscal stimulus packages have seen lower losses. Yet these packages have been distributed unevenly and have been more concentrated in rich countries like Germany and its now famous short-time work scheme. Poorer, developing countries do not have the cash necessary to keep up. 

On top of that a higher proportion of people working in developing and emerging economies work in informal employment, many of them are women. Overall, around 60% of global workers are informal. Unlike formal employees, they lack the benefits of social security or other public sector measures that cushion income losses. 

Developing economies also have limited opportunities for teleworking, public sector employment plays a smaller role and a larger portion of their resources are being spent to get the coronavirus under control. 

Guy Rider, director-general of the ILO, is most worried about the South and Central America regions. They have suffered from massive job destruction and loss of income. For the third quarter Latin America and the Caribbean are forecast to lose by far the most working hours and thus income. After the Americas, "the pain is pretty equally distributed amongst all the other regions," Rider said in an interview with DW. 

A lost generation?

For the ILO boss, the economy and people's health need to be attended to with the same equal care. There is no "choice between solving the health problems or solving the labor problems, we have to do both at the same time," Rider said. 

Poorer countries need more support through international financial institutions, debt relief or development assistance. In general, more international solidarity is needed. 

Young people also need special care to avoid creating a lost generation. Even before the pandemic, they were in a vulnerable situation in the work world. Since the start of the pandemic things have gotten worse.

"Young people have lost their jobs in greater numbers than rest of the working population, education and training has been interrupted and those new jobs are't there. That first entry into the labor market has been closed off," said Rider

For the ILO this is a particularly worrying problem as previous crises showed "that activating inactive people is even harder than re-employing the unemployed." Young people who cannot get a leg up in the job market now may encounter long-term disadvantages. 

Yet at this point the coronavirus crisis is far from over. Still 90% of global workers live in countries with workplace closures of some sort. Of those, 32% are in countries with closures for all but essential workplaces. Any job recovery can still be stopped in its tracks.

Timothy A. Rooks
Timothy Rooks One of DW's team of business reporters, Timothy Rooks is based in Berlin.