International College of Economics and Finance

New gender roles, migration as a way of COVID treatment and unemployment benefits that will not discourage work

New gender roles, migration as a way of COVID treatment and unemployment benefits that will not discourage work

On September 12 the Third ICEF Conference on Applied Economics on COVID-19 was held online. Experts from Europe and the USA presented their latest research, made some social-economic forecasts and revealed issues, that different countries will face in a short-run perspective. Below read about some of the conclusions and predictions that researchers have made.

Thomas Le Barbanchon (Bocconi University):

According to the IMF, the unemployment is expected to rise due to the falling GDP. Unemployment in the US sore from below 4% to 14.7% already in May 2020. The authors measured the job-search responses to the COVID-19 pandemic using realtime data on vacancy postings and ad views on Swedish public employment service Platsbanken. It turned out that the labour demand shock in Sweden is as large as in the US. Moreover, the scope and direction of search has changed. Job seekers search less intensively and pay attention to occupations less affected by the lockdown. Mostly these are jobs with hybrid or distant work format.

Since early March 2020, employers post around 40% less vacancies. At the same time, the number of layoffs notifications is 10 times its 2019 level. While the shock has a negative impact on all industries, some industries are substantially more severely affected. In particular, we see larger drops in industries where social-distancing measures are likely to bind, such as hotels and restaurants (-185%), entertainment (-150%) and retail trade (-92%). The impact is much more moderate in the health and education sector, in real estate and in public administration and defence (reductions around -30%). For example, a share of vacancies for waiters and bartenders reduced by 225%. 

Demand for dentists reduced by 126%, and fast-food workers – by 123%

The professions connected with social intimacy were affected most. The job seekers in their turn revise the value of employment – a share of clicks on vacancies has dropped and to that end the employers change the strategies of attracting candidates by shifting hiring accents. So the labor market is affected on both sides. 

As vacancies in resilient occupations attract more attention, recruitment processes may speed up, decreasing recruitment costs, which would induce these employers to open new vacancies. At first the number of clicks on Platsbanken was expected to rise according to the unemployment rate, but by results of the research it turned out to have reduced by 30%. At least the employers will be happy – they will pay less and hire more. 

To the article: Job Search during the COVID-19 Crisis 

Libertad González (Universitat Pompeu Fabra):

Spain was hit early and hard by the new virus, leading to one of the strictest lockdowns in Europe. On March 17, the Spanish government announced a support package that included measures to help workers and companies affected by the lockdown. Companies had to grant employees temporary leaves. Job losses were larger for less-educated workers. College educated, white collar workers and high-income individuals were largely able to work from home. Women were slightly more likely to lose their job than men, and the lockdown led to a large increase in childcare and housework, given the closing of schools and the inability to outsource. Men increased their participation in housework and childcare slightly, but most of the burden fell on women, who were already doing most of the housework before the lockdown

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The employment in Spain during lockdown dropped by 23%. The sectors most hit were hospitality and retail. The studies predict that women are more likely to lose their jobs during the covid19 crisis, due to their over-representation in highly-affected sector. The pandemic and subsequent confinement and social distancing measures have had negative impacts on mental health, with larger effects on women.

The covid-19 crisis appears to have increased gender inequalities in the short-term. On the other hand, the situation is likely to have persistent effects on gender roles which will be reevaluated in the nearest future.

To the article: How the COVID-19 Lockdown Affected Gender Inequality in Paid and Unpaid Work in Spain

Ingo E. Isphording (IZA, Bonn):

According to World Bank, projections of economic damage range up to a 5.2 percent contraction in global GDP, which would be the deepest recession in decades. Other pressing social and economic issues, most notably environmental issues of climate change and pollution, have almost vanished from the public debate and are only slowly re-emerging, although decrease in economic activities will have a positive effect on ecology. 

On the basis of studies of the particulate matter (PM10) and ozone (O3) level in German counties the authors found the correlation between the air pollution and the spread of COVID-19.

It turned out that both environmental pollution and the COVID-19 pandemic are significantly connected: higher levels of local air pollution increase the number of deaths of COVID-19, leading to a more severe course of the pandemic. Effects are specifically pronounced for patients aged 80 and above.

Our results imply that moving patients at risk aged 60 and above out of more heavily polluted areas might be a way to reduce the number of deaths by COVID-19

This implication might be of specific importance when the pandemic unfolds in less-developed world regions where air pollution and associated health risks are of much higher importance. 

To the article: Pandemic Meets Pollution: Poor Air Quality Increases Deaths by COVID-1

Stanislav Rabinovich (UNC Chapel Hill):

The Coronavirus Aid, Relief, and Economic Security Act (CARES), passed in response to the COVID-19 pandemic and the ensuing economic crisis, included an aggressive expansion of unemployment insurance (UI). Specifically, the Federal Pandemic Unemployment Compensation added $600 to the weekly benefit amount of all UI recipients through the end of July 2020, which resulted in more than a 100% replacement rate of lost earnings for many job losers. This expansion of UI generosity paralleled an unprecedented increase in jobless claims starting in March 2020 — due to the pandemic and the subsequent economic lockdown. The efficacy of this UI expansion — and the desirability of extending it beyond July 2020 — is the subject of an ongoing heated debate in the U.S. Congress. The authors investigated the optimal UI response to the economic crisis and how it compares to the current implementation under the CARES act and alternative policy proposals.

It seems that it is optimal first to raise unemployment benefits but then to begin lowering them as the economy starts to reopen — despite unemployment remaining high. The $600 UI supplement payment implemented under CARES was close to the optimal policy. However, extending this UI supplement for another six months would hamper the recovery and reduce welfare. On the other hand, a UI extension combined with a re-employment bonus would further increase welfare.

The authors suggest that the optimal policy calls for raising the replacement rate of unemployment benefits dramatically in response to the fall in search efficiency, and then lowering them once search efficiency starts to recover. Indexing UI to the unemployment rate would keep benefits high for longer than our optimal policy implies, thereby impeding the economic recovery and reducing consumer welfare. 

Also a re-employment bonus providing $450 a week to both re-employed and unemployed would deliver higher welfare than the current UI supplement alone, despite leading to a slightly slower recovery of unemployment. 

To the article: Optimal Unemployment Benefits in the Pandemic