Navigating the COVID-19 crisis and recovery

404 Pages·2021·11.49 MB·English

by  OECD

OECD Employment Outlook
2021
NAVIGATING THE COVID-19 CRISIS AND RECOVERY

OECD Employment Outlook
2021
NAVIGATING THE COVID‑19 CRISIS AND RECOVERY
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arguments employed herein do not necessarily reflect the official views of OECD member countries.
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Please cite this publication as:
OECD (2021), OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, OECD Publishing, Paris,
https://doi.org/10.1787/5a700c4b-en.
ISBN 978-92-64-70872-3 (print)
ISBN 978-92-64-34033-6 (pdf)
OECD Employment Outlook
ISSN 1013-0241 (print)
ISSN 1999-1266 (online)
Photo credits: Cover © León del Monte.
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© OECD 2021
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Foreword
The OECD Employment Outlook provides an annual assessment of key labour market developments and
prospects in OECD member countries. Each edition also contains several chapters focusing on specific
aspects of how labour markets function and the implications for policy in order to promote more and better
jobs. The 2021 edition is devoted to navigating the COVID-19 crisis and recovery. Chapter 1 focusses on
the labour market impact of the crisis and its consequences for vulnerable groups. Chapter 2 provides a
first assessment of the role of job retention schemes during the crisis. Chapter 3 analyses how active
labour market policies have responded to the challenges posed by the crisis. Chapter 4 assesses the
extent and consequences of domestic outsourcing for the labour market. Finally, Chapter 5 focusses on
trends in working time, including teleworking, and its regulations.
OECD Employment Outlook 2021 is the joint work of staff of the Directorate for Employment, Labour and
Social Affairs (ELS). The whole Outlook has also greatly benefited from comments from other OECD
directorates and contributions from national government delegates. However, its assessments of each
country’s labour market prospects do not necessarily correspond to those made by the national authorities
concerned.
This report was edited by Andrea Bassanini, and is based on contributions from Emily Farchy,
Satoshi Araki, Fabio Manca and Agnès Puymoyen (Chapter 1), Alexander Hijzen, Andrea Salvatori and
Agnès Puymoyen (Chapter 2), Stewart Butler, Kristine Langenbucher, Anne Lauringson and
Theodora Xenogiani (Chapter 3), Andrew Green (Chapter 4), and Sandrine Cazes, Chloé Touzet and
Sébastien Martin (Chapter 5). The report benefitted from extensive comments from Stefano Scarpetta
(Director of ELS), Mark Pearson (Deputy Director of ELS), Stéphane Carcillo (Head of the Jobs and
Income Division of ELS), Mark Keese (Head of the Skills and Employability Division of ELS) and
Stijn Broecke. The infographic is based on contributions from Alastair Wood. Pascal Marianna was
responsible for the statistical annex. Specific contributions were provided by Marius Lüske and
Morgan Williams. Statistical support was provided by Sébastien Martin, Agnès Puymoyen and
Dana Blumin. Editorial assistance was provided by Liv Gudmundson, Lucy Hulett, Niamh Kinane, and
Isabelle Reullon.
OECD EMPLOYMENT OUTLOOK 2021 © OECD 2021
4 
Editorial: Seizing the moment to
build a more inclusive labour
market
It is 16 months since the outbreak of the COVID-19 pandemic sparked a global health crisis without parallel
in living memory. With vaccination rates speeding up in many countries, the future is starting to look
brighter, but more for some and less for others. The economic and jobs crisis it unleashed is far from over.
Uncertainties, including the spread of new variants of COVID-19, loom on the horizon. The pandemic has
cost lives and livelihoods.
Economic growth has taken a massive hit. Many OECD countries will not re-gain the pre-COVID GDP
levels before 2022, and for many emerging and developing countries this target will take even longer to
reach.
The pandemic has also cost jobs. At the end of 2020, around 22 million jobs had vanished in the OECD
compared to 2019. And globally 114 million jobs had disappeared. In the OECD area, despite a gradual
recovery, there are still over 8 million more unemployed than before the crisis, and over 14 million more
inactive people. At the end of 2020, OECD countries were only half-way towards a full employment
recovery. A recovery to pre-pandemic levels of employment in the OECD will not be reached by the end
of 2022, according to our projections.
COVID-19 has also accentuated economic and social divides. It has amplified existing inequalities in labour
market outcomes, skills, and opportunities. It has accelerated the digital transformation and automation,
providing opportunities for many to continue work remotely, but also widening the gulf between workers.
Teleworking became mainstream for many high-skilled workers but remained peripheral in many low-
skilled occupations. At the beginning of the crisis, low-skilled workers were more likely to lose their jobs.
High skilled workers were more likely to reduce their working time.
The unprecedented scope and scale of state support for reviving and reinvigorating our economies is a
source of hope. Now we have a unique opportunity for bold labour market and social policies to avoid
locking in inequality and exclusion as a legacy of the crisis.
There is a real risk that the depth of the COVID-19 crisis will entrench inequality
and exclusion unless governments put jobs at the heart of the recovery
That recovery must focus on the most vulnerable – youth, women, the low skilled and some self-employed
– to ensure a transition from exclusion to inclusion.
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Failing to address inequality and exclusion now is likely to result not only in deeper social divisions but will
have negative ramifications for productivity and economic recovery.
There is light at the end of the tunnel, but it burns brighter for some than others
During the pandemic, government support for firms and households was unprecedented in breadth and
depth. For example, in the first half of 2020, despite GDP per capita falling by 12.4% across the OECD,
real household gross disposable income grew by 3.7% on the back of largescale COVID-19 government
support. Despite major support, however, the toll of the crisis has not been equally spread. The COVID-19
crisis has accentuated – and further deepened – economic and social divides in the OECD.
Some sectors – including tourism, food services and the arts – bore the brunt of COVID-19 lockdowns.
Other sectors not only suffered less but recovered more quickly. While there was one pandemic, its impact
was felt unequally. Skills, education, income, and gender divides were exposed by the crisis.
In low-paying occupations, as the COVID-19 crisis hit, one in ten jobs were destroyed across the OECD.
While in high-pay occupations the shock was, in most countries, absorbed through reductions in working
time, supported by generous job retention schemes, or by switching to teleworking. At the peak of the
crisis, half of workers with top earnings were able to work from home, against only 29% among low-paid
workers.
Other vulnerable labour groups, such as workers on non-standard contracts and youth, have been hit hard
by job and earnings losses. And these groups are often weakly covered by earnings replacement benefits
and job retention support, though many OECD governments tried to close these gaps with emergency
measures.
The crisis also highlighted, and compounded, other forms of economic and social disadvantage, such as
greater exposure to the virus for “frontline” workers. Homes were often ill suited for working and studying
for many lower-income households. Many working parents struggled to juggle work and childcare. Unequal
access to computers between affluent and poor households highlighted the digital divide at school.
The crisis accelerated the digital transformation and automation, which even before the pandemic favoured
those with higher skills and in ICT-related occupations. Evidence from online job postings suggests that
during the crisis, hirings in those occupations involving routine and physical abilities that were already
losing ground before the crisis have plummeted. At the same time, those occupations involving cognitive
and digital skills that were projected to expand, resisted the downturn in hirings better. In parallel, ageing
of the working population may hinder the speed of job reallocations towards growing sectors and firms,
which typically accelerate during the recovery phase. Such reallocations often require both occupational
and geographical mobility as well as the acquisition of new skills.
All this suggests that the COVID-19 crisis risks amplifying the longstanding trend towards increasing
economic inequalities in many OECD countries. In the decades before 2020, real household incomes
diverged, having grown, on average, by 63% for the top 10% of households, and only by 20% for the
bottom 10%, since 1985.
Long-standing disparities in opportunities and outcomes have weakened the ability of vulnerable workers
and households to withstand the pandemic crisis, despite efforts to help them with emergency measures.
This is not new. Crisis periods often bring about further challenges in the labour market, often compounding
pre-existing ones.
OECD EMPLOYMENT OUTLOOK 2021 © OECD 2021
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The depth of the COVID-19 crisis raises the risk that the recovery will be harder
without bold and timely policies
Governments in most OECD countries and beyond have announced unprecedented plans for the recovery.
This provides a once-in-a-lifetime opportunity to address the main long-standing structural
challenges that have been exacerbated by COVID-19.
In previous recoveries, most countries quickly tightened their public finance belts. This time, enormous
resources have been made available in the next five to ten years. The Government of the United States is
committing trillions of US dollars, while the European Union is borrowing on behalf of its member countries
for the first time to support often large national recovery and resilience plans for the next five years.
Promote job creation while providing an effective bridge to the recovery for those still
affected by the crisis
“It ain’t over till it’s over”. As economies roll out their recovery plans in coming months, it is essential to
continue supporting families most in need and jobs that remain viable, while providing the right incentives
for job creation and resuming work. Withdrawing support too soon to the many still in need risks generating
mass bankruptcies and job losses in sectors still deeply affected by containment measures, making the
recovery more difficult and uncertain. The short-term costs of these measures can be reduced by
enhancing the targeting of support to the most vulnerable sectors, companies, and households, while
fostering start-ups and job creation.
Promoting reallocation of workers towards expanding job opportunities will indeed be key to sustain the
economic recovery and address the labour market challenges brought about by the crisis. Temporary hiring
subsidies can be an effective tool to promote job creation and a number of OECD countries have recently
introduced or renewed such schemes. Evidence from the global financial crisis suggests that hiring
subsidies can boost job growth and be cost effective. Incentives could also be used to promote the mobility
of workers from supported to other jobs. For example, governments could consider temporarily reducing
employee social security contributions for workers starting a new job in a firm not receiving job retention
support or temporarily providing an in-work benefit. These job mobility bonuses would promote the
reallocation of workers towards expanding firms.
It is time to think big and address the right structural issues affecting the labour market
It is also an imperative to strengthen the resilience of the labour market to better withstand potential future
shocks, which could include other pandemics, natural disasters and threats from climate change.
The recovery from the pandemic will take place in a context of profound transformation of our economies
and labour markets and the process of creative destruction. Certain tasks will either be taken over by
machines or offshored, while new, often greener, jobs will be created. The doubling of the incidence of
teleworking during the peak of the COVID-19 pandemic, often involving jobs where distant work was
considered impossible, is a stark reminder of how this process can suddenly be accelerated. While some
jobs and activities are likely to return to their pre-pandemic ways, the persistent increase in vacancies
requiring full-time home working confirms that business models are changing.
Investing in effective skills policies will be essential to reduce inequalities and minimise
individual risks
To allow people to better harness the opportunities brought about by such transformations, to keep their
jobs or move to new, more productive ones, upskilling and reskilling will be crucial.
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However, training opportunities are significantly unequal while skills policies often fail to reach those adults
who are more at risk. On average, across OECD countries, participation in training by those with less than
secondary education is one-third of that of highly educated adults. Similarly, workers whose jobs are at
high risk of automation are one half less likely to engage in adult learning than their peers in jobs with a
lower risk.
Rapidly changing skills needs in the recovery and beyond require a significant upscaling of adult learning
opportunities as well as the development of new tools for promoting skills investments over the whole
career. All efforts should be made to foster a culture of continuous lifelong learning and linking training to
individuals rather than jobs. Awareness of the benefits of training could be raised through information
campaigns and career guidance, which should identify training pathways from occupations with low growth
potential to occupations with high growth potential. Training formats should also address bottlenecks such
as workers’ lack of available time and prohibitive monetary costs, by making them more modular and
flexible, partially subsidising individual costs and/or developing better financial incentives. Employers can
and should play an important role in this respect, and they should be helped and encouraged to train
groups at risk.
Effectively helping jobseekers find work will require further investment in the
infrastructure of activation systems
The crisis risks leaving deep scars on those who lost their jobs at the beginning of the pandemic, and in
particular vulnerable groups marginally attached to the labour market who face major or multiple
employment obstacles (such as single parents with young children, people with disabilities, low-qualified
youth not in employment, education or training – NEET). These groups are often left outside the scope of
active labour market policies (ALMPs). Where this is the case, ALMPs should be expanded to provide
these vulnerable people with integrated, comprehensive, and individualised support in order to reconnect
them with good opportunities in the labour market.
More generally, ALMPs play a crucial role in fostering the resilience of a labour market in transformation.
The COVID-19 crisis, by increasing caseload while generating a slump in job vacancies, has posed a
significant challenge to public and private employment services. About two-thirds of OECD countries have
increased their budget for public employment services since the onset of the crisis. But increasing spending
may not suffice. Among the countries that were more effective in responding to these challenges are those
where the infrastructure to scale up support while ensuring quality employment and training services was
already up and running. Building this infrastructure takes time and will require medium-term planning. It
will also require harnessing the potential of digital technologies to better identify and match the skill needs
of firms and the skill sets of workers, and to develop appropriate profiling tools, without leaving the most
difficult clients unserved. Many countries have made substantial progress in this respect during the crisis
but additional investments in digital capacity and efficient internal processes are still necessary in many of
them.
Fostering inclusiveness requires addressing long-standing gaps in social protection
In the last decades, non-standard forms of employment, such as on-call or zero-hours contracts, as well as
various forms of own-account work, have grown in many countries in response to changes in preferences,
innovations in business models and technological developments. Yet, significant gaps in access to social
protection exist between workers on standard, full-time, open-ended contracts, and those in non-standard
forms of work. The self-employed are usually less well covered by statutory social protection provisions.
Many workers in other forms of non-standard employment (e.g. temporary, intermittent work), while being
equally covered in principle, still struggle to gain effective access, because they fail to meet minimum
contribution periods or earnings, and for this reason also remain off the radar of active policies.
OECD EMPLOYMENT OUTLOOK 2021 © OECD 2021
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Addressing gaps in social protection, where they exist, should be a priority. Proactive action is needed to
extend the reach of programmes that often exclude specific categories of workers. The portability of
entitlements between social insurance programmes that are intended for different labour market groups
should be boosted. And it is important to ensure a more neutral treatment of different forms of work to
prevent arbitrage between them. At the same time, means tests should be made more responsive to
people’s needs by changing the reference periods for the needs assessment and putting appropriate
weight on recent or current incomes of all family members. Many countries put in place emergency support
for the self-employed after the outbreak of the COVID-19 crisis, temporarily filling a few of these gaps, but
that experience should now be re-assessed and translated into a more systematic structural response,
capable of ensuring fairness and restoring incentives.
A transition agenda for a Future that Works for all
Two years ago, the OECD Employment Outlook was calling for a transition agenda for a Future that Works
for all – a whole-of-government approach that targets interventions on those who need it most.
Implementing this agenda is more than ever a priority to ensure that the opportunities that digitalisation,
globalisation, green technologies and longer lives can bring will be seized, the associated risks mitigated
and those who are left behind by the digital transformation and globalisation reconnected. Policies to build
a more productive, rewarding, greener, and inclusive world of work require adequate financial resources –
in particular for strengthening active policies, lifelong learning, and social protection. Before the crisis, often
strict constraints on public finances made financing this transition a difficult endeavour. More resources
are available now. A window of opportunity is opening. Let us not waste it.

Stefano Scarpetta
Director for Employment, Labour and Social Affairs
OECD
OECD EMPLOYMENT OUTLOOK 2021 © OECD 2021