Last updated: 19 March 2020
Impact on global unemployment and underemploymentInitial 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 (see Annex I), 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 scaleAs 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 povertyLabour 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.
Table 1: Estimated decline in labour income and increase in extreme and moderate working poverty (<$US 3.20 per day, PPP), 2020
|Labour income (US$ billion)||-860||-1,720||-3,440|
|Extreme and moderate working poverty (millions)|
Note: Working poverty estimates pertain to an absolute poverty threshold (below US$3.20 at PPP) for 138 low- and middle-income countries. This analysis excludes potential impacts on working poverty in high-income countries.
Working poverty is also likely to increase significantly. The strain on incomes resulting from the decline in economic activity will devastate workers close to or below the poverty line.
The growth impacts of the virus used for the unemployment estimates above suggest an additional 8.8 million people in working poverty around the world than originally estimated (i.e. an overall decline of 5.2 million working poor in 2020 compared to a decline of 14 million estimated pre-COVID-19). Under the mid and high scenarios, there will be between 20.1 million and 35.0 million more people in working poverty than before the pre-COVID-19 estimate for 2020.2
Who are particularly vulnerable?Epidemics and economic crises can have a disproportionate impact on certain segments of the population, which can trigger worsening inequality.3 Based on past experience and current information on the COVID-19 pandemic and insights from previous crises, a number of groups can be identified:
- Those with underlying health conditions and older people are most at risk of developing serious health issues.
- Young persons, already facing higher rates of unemployment and underemployment, are more vulnerable to falling labour demand, as witnessed during the global financial crisis. Older workers can also suffer from economic vulnerabilities. After the MERS outbreak, older workers were found to be more likely than prime-age individuals to experience higher unemployment and underemployment rates, as well as decreased working hours.4
- Women are over-represented in more affected sectors (such as services) or in occupations that are at the front line of dealing with the pandemic (e.g. nurses). The ILO estimates that 58.6 per cent of employed women work in the services sector around the world, compared to 45.4 per cent of men. Women also have less access to social protection and will bear a disproportionate burden in the care economy, in the case of closure of schools or care systems (ILO, 2018).5
- Unprotected workers, including the self-employed, casual and gig workers, are likely to be disproportionately hit by the virus as they do not have access to paid or sick leave mechanisms, and are less protected by conventional social protection mechanisms and other forms of income smoothing.
- Migrant workers are particularly vulnerable to the impact of the COVID-19 crisis, which will constrain both their ability to access their places of work in destination countries and return to their families.
1 National Bureau of Statistics of China
2 These estimates are uncertain insofar as it remains unclear how low- and middle-income countries will be affected. If the virus impacts these economies to the same extent, the impact on working poverty will be much greater.
3 See for example Lee, A. and J. Cho 2016. The impact of epidemics on labor market: identifying victims of the Middle East Respiratory Syndrome in the Korean labour market. Int J Equity Health. 2016; 15: 196.
4 Lee and Cho 2016 (ibid).
5 Key lessons from previous crises, including the GFC and SARS/MERS are outlined in Annex II.