The effects of COVID-19 on the job market 



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## The effects of COVID-19 on the job market

18/06/2020 |
SCP

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At the end of the Second World War, the Prime Minister of the United Kingdom, Winston Churchill, said: “We must be tremendously grateful to those people who, instead of seeking glory, have simply made it a priority to save lives. The least we can do is to share their honour.”

The unexpected nature of COVID-19 is the biggest problem for managing the health and economic crisis. While the spread of the pandemic is symmetrical, affecting all countries equally, its consequences, as might have been predicted, are asymmetrical for the economy. Limits on people’s movements, together with interruptions to the supply chain, are causing a negative impact on the economy with devastating effects worldwide. No-one needs to be reminded that, whether we like it or not, the world’s economies are globalised and connected. We all depend on one another.

**Unprecedented crisis**

The current economic crisis caused by the pandemic is nothing like the financial crisis of 2008 which, in general terms, originated in financial deregulation (whose supporters considered that its benefits would make up for the negative effects) with the consequent development of financial products. That was an endogenous crisis which behaved systemically and was later transferred to the real economy. However, the origins of the 2020 crisis are not financial and it is not due to excess supply of products or goods as a result of scarce market demand. In other words, it has nothing to do with the operation of the economy.  It is not a question of lack of spending, but rather lack of activity. Ultimately, 2008 was an endogenous shock, while 2020 is exogenous.

After the health crisis comes the economic and social crisis. That is why international organisations are concerned about economic deterioration. The Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund and the European Commission are making pessimistic predictions. Recently, Brussels warned of a recession without precedent since the Second World War with very uneven effects. In fact, in 2020 the EU economy will shrink (-7.4%) but some countries, such as France (-8.2%), Spain (-9.4%), Italy (-9.5% and Greece (-9.7%), will exceed this average figure.

For the EU, the asymmetrical economic impact is due to three factors:

* a) The speed of release from lockdown.
* b) The importance of the tourism industry.
* c) The financial resources of each country.

**Effects on the job market**

An unequal scenario is also predicted for the EU job market, with an average unemployment rate of 9%. But countries like Greece (19.9%), Spain (18.9%), Italy (11.8%), France (10.1%) and Portugal (9.7%) will be above this figure.

We are clearly looking at a global crisis, not one that affects only particular parts of the world, like the EU, for a limited time. For example, it also affects the most developed economy in the world: the United States. Its current employment rate, according to its Department of Labor, has risen from 3.5% to 14.7%, representing an increase of 36 million unemployed people (20% of employees) since the beginning of the containment measures. The Chair of the Federal Reserve, Jerome Powell, estimates that the unemployment rate could go much higher (20-25%), the worst figure since the Great Depression of 1929, according to the newspaper *Les Echos.*

Tourism in the EU is very important economically, representing 10% of GDP and 12% of European jobs. The EU receives 700 million tourists. After France, Spain is the top destination in the world, followed by Italy, but the specific importance of tourism in each country is very different. For example, in France and Italy international tourism represents just 3% of GDP because there are other sources of income, while in Spain (6.6%) the economy is much more dependent on it.

In the productive structure of our economy, the Spanish and international tourism sector in Spain has a high specific importance as it represents around 15% of GDP and employs almost three million people.

The lack of international mobility does not encourage the tourism industry to work properly, which has damaging consequences for the Spanish economy, as Spain is one of the countries in southern Europe most affected by the destruction of jobs because of its high level of exposure to the tourism sector (catering, accommodation and transport). This is one of the factors that will affect the recovery in this country: without mobility there is no tourism. The movement restrictions make the arrival of tourists impossible.

The situation is worrying because tourism has traditionally been one of the driving forces leading the country out of the economic crises it has suffered.

For all these reasons, we should not be surprised that the effect of all these factors is a deterioration in the job market. In fact, unemployment between March and April shows a very negative trend, increasing by 584,000 people (+18%) to a figure of 3.8 million unemployed people.

However, according to figures from the Spanish Employment Ministry, not all industries or regions are affected in the same way by unemployment. The activities and regions most dependent on the tourism industry have been most heavily penalised. This is the case, for example, of the Balearic Islands and Canary Islands, where tourism is twice as important, in terms of GDP, as it is in Spain as a whole. More than a quarter of employees there are involved with tourism activities.

The biggest increases in unemployment have been in the Balearic Islands (26%), Canary Islands (23%), Andalusia (21%), the Valencian region (20%), Catalonia (18%) and Madrid (15%), compared to an average of 14% in the other regions. See figure 1.

Specifically, three-quarters of the increase in unemployment is concentrated in the six regions mentioned, which together account for 75% of the jobs in the tourism sector. From the above figures, we can deduce a correlation between the behaviour of tourism activity variables and the job market.

![](https://ujiapps.uji.es/ade/rest/storage/AJETQLW8D1F1RZE9MSP0FN9HEPJH2HXE)

Source: self-created based on data from the EPA and the Ministry of Employment and the Economy.

However, if we want to take a broader view of the job market, we need to take into account that the above figures do not include those affected by temporary lay-offs. In accordance the methodology of the EPA employment survey, these people are considered to be employed while their jobs are suspended for less than three months. The application of this device has made it possible to protect 3.4 million workers (21% of all employees). The most affected activities are accommodation (-75%), travel agencies (-75%), games of chance (-70%), food and drink (-62%) and air transport (-48%). See table 1.

![](https://ujiapps.uji.es/ade/rest/storage/J63DDBZ0PRXX5VXN6HGBJYIYMNMXZGCA)

Source: self-created based on data from the Ministry of Inclusiveness, Social Security and Migration.

By groups of the population, young people aged under 35 are receiving the worst economic effects of COVID-19, as they are affected more than any other group by the temporary lay-offs, making up 50% of the total.

A recent study by the consultancy Foqus and the University of Valencia concludes that the crisis will, directly or indirectly, destroy between 900,000 and 1.1 million jobs related to tourism.

Of all the industries in Spain, tourism is the one with most to lose as, because of the movement limitations, it will take longer than other industries to recover its levels of activity.

The automotive sector must also not be forgotten as the health crisis comes on top of its existing structural problems. In April, sales collapsed by 97% compared to the same month the previous year. In other words, the same number of cars were registered in the whole month as are usually registered in just one day.  This is the lowest figure for cars ever recorded.

Finally, it would be desirable if the joint economic and health initiative recently presented by the French President Emmanuel Macron and the German chancellor Angela Merkel, with a view to mobilising 500 billion euros in direct transfers, without loans or budgetary engineering of any kind, could succeed.

We would highlight the words of the French Prime Minister, Edouard Philippe. “Tourism is probably going through the worst experience in its modern history and rescuing it is therefore a national priority”.

**Vicente Castelló, lecturer at the Universitat Jaume I and member of the Inter-university Institute of Local Development**

**This article was published by eldiario.es on 21 May 2020**

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