BRUSSELS, July 31, 2020 – European Union member states must continue to reinforce existing social protection and labor market support to shield the one in eight households that face extended income drops in the fallout of the COVID-19 pandemic, says a new World Bank report. The report finds that nearly one in eight jobs are at risk even as countries have emerged from lockdown.
The World Bank’s latest EU Regular Economic Report – entitled Restarting Resilience – outlines priorities for countries to respond effectively to the impacts of COVID-19 on citizens’ incomes and labor markets. The rapid policy response to the COVID-19 pandemic has given economies the breathing space needed to maintain employment ties and has stemmed the immediate impacts on unemployment. The pandemic is hurting those who find it harder to move to socially distanced approaches of working, while workers who can pivot towards a home-based environment are less impacted.
The report finds that the share of the population ‘at risk of poverty’ could rise by 3-4 percent from 14.7 percent in 2019 to between 17.7-18.7 percent in 2020. The ‘at risk of poverty’ measure varies by country, and those considered in that bracket are people that fall below 60 percent of the national median income. “COVID-19 has the potential to reverse some of the income gains we have witnessed in the EU in recent years,” said Gallina A. Vincelette, Director for the European Union Countries at the World Bank. “The existing social protection structures will need to balance support to those households in need, while also incentivizing a safe return to work and the economic recovery.”
The report highlights that countries now have an opportunity to enhance social protection systems during the reopening phase to ensure the EU is better prepared to respond to future waves and crises. This can be done through strengthening systems’ flexibility to rapidly adapt in the face of a crisis and through addressing gaps in who is covered, including targeted support for those in non-standard or informal work structures. A key finding shows that, while extending transfers to existing social assistance beneficiaries would be relatively straightforward, not all the working-poor or those at high risk of employment impacts benefit from existing programs.
The crisis is widening labor market disparities and risks stalling regional income convergence across the EU. The report identifies four at-risk demographics--women, young people, low-wage and less-educated workers--who are more likely to be employed in heavily impacted occupations or have less secure contracts.
The impact on youth unemployment, for example, has been pronounced in recent months. Their employment prospects and earnings were heavily affected during the global financial crisis, as shown in previous World Bank reports, and early indicators show that they are likely to be heavily impacted during this crisis. Women face a greater risk than men in resuming work due to the sectors and occupations that they are working in. One in five women will face difficulty returning to work compared to one in ten men. Gaps between men and women have been reinforced due to inequalities emerging in who looks after children and does the housework.
The report also highlights the importance of societal trust and cooperation among businesses, government and trade-unions to navigate the crisis and instill solutions that support vulnerable household income recovery. This was a pillar of resilience highlighted in the fifth Regular Economic Report produced by the World Bank. The importance of the coordinated response will rise if the crisis is prolonged and government support packages become more targeted towards viable sectors. “While the crisis is widening labor market disparities, EU countries can use this period to reinforce social programs for those vulnerable in our societies, support the recovery and the rekindle productive job creation,” added Vincelette.
World Bank’s Regional Action in Europe and Central Asia:
To date, the World Bank has committed more than $1.4 billion to help countries in Europe and Central Asia mitigate the impacts of COVID-19. Since April 2nd, 2020, around $490 million has been approved through new emergency response projects. In addition, up to $925 million is being reallocated, used, or made available from existing projects and lending, including additional financing, to help countries with their COVID-19 response.
Amid continued uncertainty, the World Bank’s latest Global Economic Prospects report suggests a negative growth scenario for the region, including a major recession in 2020, with growth contracting by 4.7%.