PARIS — The jobs crisis created by the pandemic will last years.
That’s according to a new report from the Organization for Economic Cooperation and Development, which said Tuesday that unemployment is far worse than what followed the 2008 financial crisis and will persist at elevated levels at least until 2022.
The Paris-based agency encouraged countries to extend unemployment benefits and other relief measures as necessary, especially given that low-wage workers, young people and women are “bearing the brunt of the crisis.”
“Despite the massive measures taken around the globe, uncertainty about future labor market developments is large, as the risk of new outbreaks is high,” said Stefano Scarpetta, the OECD’s director for employment, labor and social affairs. “Much of what will happen depends on the evolution of the pandemic.”
Top-earning workers were 50% more likely to work from home than low earners during lockdown, the OECD said, while women, who are more likely to be employed in struggling sectors, have been hit harder than men.
In the most optimistic scenario, where the virus continues to recede and remains under control, the agency predicts that unemployment will hit 9.4% on average in OECD countries at the end of 2020 — the worst reading since the Great Depression — before falling to 7.7% at the end of 2021. In late 2019, before Covid-19 hit, the unemployment rate for OECD countries was 5.3%.
The outlook appears even worse in the event of a second wave of infections late this year. The OECD thinks unemployment would then rise to 12.6% before easing to 8.9% in 2021.
Why it matters: The warning comes as governments debate how to extend or amend costly relief to the jobless and struggling firms, which has so far been crucial in protecting some positions.
The Trump administration on Monday released data on roughly 4.8 million small businesses that have tapped more than $520 billion in loans through its Paycheck Protection Program — a central pillar of the $2 trillion emergency economic relief efforts deployed in March.
The program was so critical at its inception that a first round of funding dried up in less than two weeks. But interest has waned recently as changing rules and borrowers’ inability to come back for a second loan has limited applications.
Europe’s response: The OECD noted that part-time work programs, which encourage employers to keep workers on payroll even if they’re not putting in full hours, have been hugely successful in limiting unemployment in countries like Germany, assisting an estimated 60 million people. But the situation remains in flux.
On Tuesday, the European Commission downgraded its economic outlook for the 19 countries that use the euro, predicting an 8.7% contraction in 2020 and 6.1% growth in 2021. That’s a big change from the previous forecast, which had the euro area economy shrinking 7.7% this year. It had also penciled in more robust growth in 2021.
Watch this space: The OECD said that almost half of all jobs “require frequent interactions,” putting workers at risk of infection as economies reopen. The agency said this means governments and companies must prioritize workplace safety and guarantee “extensive” paid sick leave to keep a lid on contagion in the months ahead.