Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Europe’s labour markets cushioned against the coronavirus

Maria Figueroa, Ian Greer and Toralf Pusch 26th October 2020

Short-time work has prevented a drastic slump in employment in Europe. The United States has not been so lucky.

short-time work
Maria Figueroa

In March, ‘social distancing’ measures to stop the spread of Covid-19 led to the closure of schools, universities, restaurants, cafes, hotels, offices, factories and many other workplaces. During the first and second quarters of 2020, this resulted in an unprecedented slump in economic output. 

Despite all the bad news, however, there remains a ray of hope: labour markets in Europe have so far largely weathered the crisis. The unemployment rate rose only slightly until recently, by 0.5 percentage points compared with pre-crisis levels (see table).

Economic effects of the coronavirus in 2020

short-time work
 Source: OECD, unemployment rates harmonised, number of unemployed as share of labour force, seasonally adjusted
short-time work
Ian Greer

Above all, this can be attributed to the strong welfare states in Europe—or, more precisely, to the widespread use of short-time work. Across the European Union, short-time working reached unprecedented levels in April, embracing over 42 million employees; the proportion of employees in short-time work reached over 40 per cent in Italy, France and Luxembourg. Germany recorded its highest figure to date in April, with six million short-time workers. Since then, the figures have been falling but they will probably remain high for some time to come.

short-time work
Toralf Pusch

A look at the United States shows just how lucky Europe is with its established systems of short-time working. Right at the beginning of the pandemic, US applications for unemployment benefits reached an unprecedented level. Despite moves to reopen the economy, the figures for late September show 12.6 million US workers unemployed and 25.2 million receiving unemployment benefits. The headline unemployment number was reduced by workers’ reluctance to search for work during a pandemic, while the number receiving benefits was increased by new benefits for freelances, young people entering the labour market, the lowest earners and others normally excluded from traditional unemployment insurance.


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

Tragedy avoidable

This tragic hike in unemployment was avoidable. In the euro area, output dropped by about 15 per cent in the first half of 2020, or about 5 per cent more than in the US. Yet the US unemployment rate peaked at 14.7 per cent in April, when the European rate was 7.4 per cent. The latest comparable figure shows the US rate at 8.4 per cent, still above the European average (8.1 per cent). And the headline unemployment rate in the US is likely to be underestimated—as evidenced by the large number of unemployment-benefit recipients.

The US does not lack an equivalent to European short-time working. Enshrined in federal legislation, short-time compensation (STC) schemes are administered by states and have names such as Work Sharing (New York, California), Shared Work (Connecticut, Washington), WorkShare (Massachusetts, Maine, Rhode Island) and Short-Time Compensation (Florida). Only 26 states have them, however, and coverage is low and falling. 

At their peak in participation levels this past July only 400,000 workers were receiving STC benefits, and by late September the numbers had decreased to 195,000. While around 40 per cent of French workers and 20 per cent of German workers were enrolled in short-time work during the peak, only 0.25 per cent of US workers were participating in STC programmes. 

Long-term consequences

High unemployment should worry Americans: even if the economic recovery were quick, the consequences could be long-term. Job losses affect earnings and may damage workers’ long-term mental and physical health. After the dot-com and 2008 crashes, many unemployed workers gave up job search and dropped out of the labour force. 

The increasing average length of unemployment spells, structural changes in the economy, mass incarceration and restrictions on millions of undocumented migrants have all played a role in making US labour-force participation decline since 2000. It is now slightly below the average for the members of the Organisation for Economic Co-operation and Development and even EU countries (see figure). 

Labour-force participation rates (%)

short-time work
Source: OECD

Of course, short-time work alone cannot bring the European economy out of the crisis, but it has proved a major stabilising factor in the pandemic. Others, such as the often greater protection against dismissal in Europe compared with the US, have contributed to the transatlantic differences in labour-market developments. The advantages of these labour-market institutions—often criticised in the past—are particularly evident today. 

The US and other countries can however make broader use of short-time work without radically reforming all such institutions. Important steps would be better publicity for the (little-used) existing systems and a more attractive design for short-time work.

Maria Figueroa, Ian Greer and Toralf Pusch

Maria Figueroa is director of labour and policy research at the Worker Institute in the Cornell University School of Industrial and Labor Relations; Ian Greer is director of the Ithaca Co-Lab there. Toralf Pusch is a senior researcher at the institute of Social and Economic Research (WSI) of the Hans Böckler Foundation.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

You are here: Home / Politics / Europe’s labour markets cushioned against the coronavirus

Most Popular Posts

Visentini,ITUC,Qatar,Fight Impunity,50,000 Visentini, ‘Fight Impunity’, the ITUC and QatarFrank Hoffer
Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic

Most Recent Posts

transition,deindustrialisation,degradation,environment Europe’s industry and the ecological transitionCharlotte Bez and Lorenzo Feltrin
central and eastern Europe,unions,recognition Social dialogue in central and eastern EuropeMartin Myant
women soldiers,Ukraine Ukraine war: attitudes changing to women soldiersJennifer Mathers and Anna Kvit
military secrets,World Trade Organization,WTO,NATO,intellectual-property rights Military secrets and the World Trade OrganizationUgo Pagano
energy transition,Europe,wind and solar Europe’s energy transition starts to speed upDave Jones

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

ETUI advertisement

Social policy in the European Union: state of play 2022

Since 2000, the annual Bilan social volume has been analysing the state of play of social policy in the European Union during the preceding year, the better to forecast developments in the new one. Co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), the new edition is no exception. In the context of multiple crises, the authors find that social policies gained in ambition in 2022. At the same time, the new EU economic framework, expected for 2023, should be made compatible with achieving the EU’s social and ‘green’ objectives. Finally, they raise the question whether the EU Social Imbalances Procedure and Open Strategic Autonomy paradigm could provide windows of opportunity to sustain the EU’s social ambition in the long run.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

Foundation for European Progressive Studies Advertisement

Discover the new FEPS Progressive Yearbook and what 2023 has in store for us!

The Progressive Yearbook focuses on transversal European issues that have left a mark on 2022, delivering insightful future-oriented analysis for the new year. It counts on renowned authors' contributions, including academics, politicians and analysts. This fourth edition is published in a time of war and, therefore, it mostly looks at the conflict itself, the actors involved and the implications for Europe.


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube