How will COVID-19 affect the world of work?

COVID-19 will have far-reaching impacts on labour market outcomes. Beyond the urgent concerns about the health of workers and their families, the virus and the subsequent economic shocks will impact the world of work across three key dimensions. Initial ILO estimates point to a significant rise in unemployment and underemployment in the wake of the virus.

Based on different scenarios for the impact of COVID-19 on global GDP growth, preliminary ILO estimates indicate a rise in global unemployment of between 5.3 million (“low” scenario) and 24.7 million (“high” scenario) from a base level of 188 million in 2019. The “mid” scenario suggests an increase of 13 million (7.4 million in high-income countries).

Though these estimates remain highly uncertain, all figures indicate a substantial rise in global unemployment. For comparison, the global financial crisis of 2008-9 increased unemployment by 22 million.

Underemployment is also expected to increase on a large scale As witnessed in previous crises, the shock to labour demand is likely to translate into significant downward adjustments to wages and working hours.

While self-employment does not typically react to economic downturns, it acts as a “default” option for survival or maintaining income - often in the informal economy. For this reason, informal employment tends to increase during crises. However, the current limitations on the movement of people and goods may restrict this type of coping mechanism.

The decline in economic activity and constraints on people’s movements is impacting both manufacturing and services. The most recent data shows that the total value added of industrial enterprises in China declined by 13.5 per cent during the first two months of 2020.1  Global and regional supply chains have been disrupted.

The services sector, tourism, travel and retail are especially vulnerable. An initial assessment by the World Trade and Tourism Council forecasts a decline in international arrivals of up to 25 per cent in 2020, which would place millions of jobs at risk.

Implications for labour income and working poverty

Labour supply is declining because of quarantine measures and a fall in economic activity. At this point, a preliminary estimate (up to 10 March) suggests that infected workers have already lost nearly 30,000 work months, with the consequent loss of income (for unprotected workers).

Employment impacts imply large income losses for workers. Overall losses in labour income are expected in the range of between 860 and 3,440 billion USD. The loss of labour income will translate into lower consumption of goods and services, which is detrimental to the continuity of businesses and ensuring that economies are resilient.