Rethinking European Labor Market Policies in the Post-Pandemic Era

Wednesday, March 30, 2022, at 15:00-16:15 Vienna time (CET) 


Mr. Patrick Imam, Deputy Director, Joint Vienna Institute

Presenters and Discussants

Mr. Ekkehard Ernst, Chief Macroeconomist, International Labour Organization
Mr. Ravi Balakrishnan, Chief of the Advanced Economies Unit, European Department, International Monetary Fund

Mr. Piotr Lewandowski, Co-founder and President of the board at Institute for Structural Research, Poland
Ms. Branka Andjelkovic, Co-founder and Program Director of the Public Policy Research Center, Serbia

The COVID-19 pandemic has severely impacted the world economy. To mitigate the pandemic’s impact on labor markets, policymakers introduced a wide range of measures, including the widespread use of job retention schemes. This webinar presented the impact of the pandemic on labor markets and the design and effectiveness of policy measures, with a particular focus on advanced and emerging Europe. It also discussed the European labor market landscape in the post-pandemic era, including policy priorities for inclusive and resilient labor markets.

Mr. Ekkehard Ernst of the International Labour Organization (ILO) presented the flagship report on 2022 trends. He discussed the impact of the pandemic on global and regional trends in employment, unemployment, working hours and labor force participation, as well as on job quality and informal employment. An extensive analysis of trends in temporary employment both before and during the COVID-19 crisis was offered. The labor market has not yet fully recovered despite massive and unprecedented government interventions to support employment and growth, and the ongoing pandemic continues to weigh on labor supply bottlenecks in specific sectors (e.g. logistics, health care, education).
The “great resignation” and “she-recession” phenomena that were so prominent in the US have been absent in advanced and emerging Europe, and men in fact suffered more from the pandemic than women in the latter.  

Mr. Ernst illustrated that the pandemic is likely to have further accentuated pre-crisis trends related to digitalization, automation, and climate change policies, which were already expected to result in significant reallocation of workers across sectors and occupations. Finally, the war in Ukraine is likely to add a further challenge to the labor market in emerging Europe, given the current profile of most refugees (women and children), who are unlikely to join the labor market in their host countries. Ekkehard was also concerned that social protection, stretched after two years of Covid-19, will be further burdened by the newcomers unless properly funded. In his intervention, Piotr Lewandowski emphasized how the pandemic has exposed and aggravated existing vulnerabilities in the region–from weak public services to poor levels of underlying health. In the COVID-19 environment, some of the medium- and long-term challenges will be even more daunting in his view, with declining labor supply aggravating staffing shortages in the health care sector.

Mr. Ravi Balakrishnan of the European department of the IMF presented a recent IMF Departmental Paper on the European labor market. He documented how the Covid-19 pandemic caused by far the largest shock to European economies since World War II. Yet, astonishingly, by the third quarter of 2021, the EU unemployment rate has already declined to its pre-crisis level. 

Mr. Balakrishnan highlighted that the widespread use of job retention schemes has played an essential role in mitigating the pandemic’s impact on labor markets, saving 4 million jobs in the euro area, and in facilitating the restart of European economies after the initial lockdown. As economic activity recovered, labor market conditions in Europe have improved markedly, with the EU unemployment rate for example declining to a record low and the labor force participation reaching an all-time high. 

However, he noted that there is a high degree of heterogeneity across sectors and countries and concerns about labor market scarring remain in contact-intensive sectors. Spillovers from the Russian invasion of Ukraine will likely reduce the pace of labor market recovery while potentially also increasing labor supply. Significant reallocation policies will be needed to facilitate job-to-job transitions, minimize scars, and protect the most vulnerable. To achieve strong and inclusive growth, labor and product market flexibility will need to be enhanced, and workers will have to be reskilled and upskilled. To minimize scarring and protect the vulnerable, support to (re-)join the labor force and a rethinking of social protection are also warranted. In her intervention, Ms. Branka Andjelkovic emphasized that the “platform economy” is a flourishing phenomenon in Serbia, and that it could be an element for inclusive growth. It can offer alternative work arrangements, and often higher incomes, that are strongly embraced in the context of high entry barriers into the labor market.


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