New branches in the labour market
G7 Summit

New branches in the labour market

The COVID-19 pandemic has hit G7 labour markets hard. To build resilience, governments need to focus on human-centred recovery policies that prioritise quality employment creation – particularly in the digital, green and care economies

The impact of the COVID-19 crisis on G7 labour markets has been deep. But without the measures that governments quickly put in place and have sustained to this day to protect workers and enterprises, it would have been much worse. In 2020, an estimated 8.7% of total working hours – an equivalent of 24.9 million full-time jobs – were lost in the G7. About half of the working hour losses were due to reduced hours of those remaining employed and can be attributed to shorter working hours or ‘zero’ working hours under furlough schemes. The remaining half reflects outright employment losses, largely in the United States. Compared to 2019, total employment fell by 12.9 million due to workers exiting the labour force or – to a lesser extent – becoming unemployed. Prior to the pandemic, G7 economies had been expected to create an estimated 1.2 million jobs. Taken together, this means that the shortfall in jobs in the G7 grew by 14.1 million in 2020.

The disruption to labour markets had devastating consequences for both men and women, but women’s employment declined by 4.1% in the G7 compared to 3.4% for men. Young people’s employment declined by 4.5% compared to 2.2% for adults. Moreover, the impact of the crisis on post-support labour income – labour income that includes the support received from the government – has been uneven across different parts of the workforce, with income losses relatively greater for youth, women, and low- and medium-skilled workers. This uneven impact of the crisis exacerbates pre-existing decent-work deficits and risks increasing social inequalities further.

The path to full recovery is still long. G7 members have not yet reached their pre-crisis employment levels. While there are hopes that a robust economic recovery will occur in the second half of 2021, our latest projections indicate a continued loss in working hours relative to the fourth quarter of 2019. The employment shortfall in the G7 due to the crisis will remain high, at 9 million in 2021.
The long road to recovery

Many challenges lie ahead. In addition to increasing the risk of a surge in bankruptcies in the medium term with all the employment losses they entail, the COVID-19 crisis has led to more economic inactivity, as many people – most of them women – have stopped looking for employment. Moreover, many people who were unemployed before the crisis or became unemployed just at the start of the crisis have now become long-term unemployed. These groups are the most difficult to bring back into employment, and are most in need of an employment opportunity.

Furthermore, we are now engaged in an unprecedented, large-scale experiment in mass teleworking. This stands to have a significant long-term impact even after the COVID-19 pandemic. The result could be a substantial reorganisation of the workplace that will require policy action, through regulation and collective bargaining, to leverage the potential benefits of teleworking while addressing the potential downsides.

It is vital that response measures build a bridge to the recovery and resilience phases. Continued policy support targeted at hard-hit sectors and workers severely affected by the health crisis will ensure the recovery is firmly embedded in inclusive and equitable growth.

Investment, spurred by public investment, must focus on the creation of productive and quality employment and realise the full employment creation potential of fast-growing sectors. The digital, green and care economies offer such potential. To assist enterprises, especially micro, small and medium-sized enterprises, as well as workers and jobseekers to take advantage of the new opportunities, employment services and active labour market programmes will be instrumental. Active monitoring will be important to determine whether these policies are meeting their employment/re-employment goals.

Designing targeted and responsive training pathways can reap large benefits. Ensuring that adequate social protection supports people in their transitions is equally important. So is strengthening labour market institutions, including collective bargaining, occupational safety and health regulations and wage-setting mechanisms, to ensure the protection of workers. Measures that address skilling, upskilling or reskilling for the unmet demand for digital jobs need to pay particular attention to persons with disabilities.

Finally, governments, employers’ organisations and trade unions have a joint responsibility to promote decent work and social justice. It is crucial to design and implement recovery strategies through social dialogue if they are to succeed.