Job losses are the most devastating consequence of economic crises. Although the current crisis is health-related and the previous one had a financial origin, the common denominator is their negative impact on employment. The priority for authorities is the same in both cases: to combine reforms and economic policy measures that boost demand and create a favorable scenario for the future recovery to be intensive in job creation.
Authorities and the private sector made efforts during the worst of the health crisis to cushion its effects on families and preserve the productive fabric. The exceptional measures adopted have reached an unprecedented scale, but one consistent with the severity brought about by the lockdown imposed by the virus. Once the state of emergency has been overcome, while a vaccine is being sought, the priority is to accompany the initial boost in demand with reforms agreed at an international level that help reduce uncertainty and consolidate the recovery.
A recent working paper by the European Central Bank (ECB) analyzes the different behavior of unemployment in the United States and the eurozone during the first months of the health crisis. The unemployment rate rose by more than 10 percentage points between January and May on the other side of the Atlantic, compared to a marginal increase during the same period in Europe. However, if we consider the number of hours worked, the economic deterioration, and the impact on expectations, there are no major differences between the two regions. In Europe, public aid and the reclassification of jobs as inactive have minimized the negative impact on the statistical unemployment figure. But the real impact on employment is of such magnitude that it requires action without delay, focused on active employment policies, innovation, and improvement of business competitiveness.
The IMF has also analyzed employment trends during this health crisis and the previous financial crisis. The major difference is that the virus has forced work to be shifted to the home to a large extent, but the type of employment destroyed in both periods fits the same profile: jobs that require human interaction, low levels of education, and are held especially by young people. There is no magic wand to achieve immediate changes in the training model, but a balance can be sought between boosting demand in the short term to sustain the labor market and establishing favorable conditions for solid medium- and long-term growth that leads to more resilient and higher-quality employment.
The OECD recommended in its latest employment report that global authorities progressively adapt the exceptional expansionary measures and rigidities applied to date and during the worst of the lockdown to economic developments. Failing to do so, especially in the case of those actions that may distort the labor market, could harm the employment recovery by turning its deterioration into a structural issue. The combination of economic policies focused on demand thus far must now be accompanied by a reform plan that boosts productive supply and thereby improves employment prospects.
José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association
