ILO warns of ‘devastating’ consequences of COVID-19 on labour markets

The Director General of the International Labour Organisation (ILO) Guy Ryder. [Laurent Guillieron/EPA]

Lockdown measures decided across the globe to fight the spread of the COVID-19 pandemic, are having “devastating” consequences on labour markets, affecting around 81% of the world’s workforce, the International Labour Organisation (ILO) warned on Tuesday (7 April).

“This is the greatest test for international cooperation in more than 75 years,” ILO’s Director-General Guy Ryder said in a statement.

The ILO has monitored the impact of the coronavirus outbreak on the world’s labour markets over the past few weeks. Since its first report on 18 March, lockdown measures taken to contain the spread of the disease has affected already around 2.7 billion workers, the organisation estimates. 

“During the past two weeks, the COVID-19 pandemic has intensified and expanded in terms of its global reach, with huge impacts on public health and unprecedented shocks to economies and labour markets,” the report said.

“It is the worst global crisis since the Second World War,” it added.

“Workers and businesses are facing catastrophe, in both developed and developing economies,” Ryder warned. The crisis is threatening operations and therefore solvency, particularly for small and medium-sized enterprises, making millions of workers vulnerable. 

EU Commission expects deeper recession than in 2009

The economic slump caused by the coronavirus COVID-19 is expected to be deeper than the 2009 Great Recession, according to a European Commission document seen by EURACTIV.

Employment has been impacted “on a greater magnitude than initially predicted at the start of the pandemic,” the ILO admitted, warning that the extent of the crisis will depend on the evolution of the pandemic and the actions taken to contain it. 

Labour force adjustment plans, temporary layoffs or reductions in working hours are on the rise. “Employment contraction has already begun on a large, often unprecedented, scale in many countries,” the report said.

The European Trade Union Confederation (ETUC) estimated that the number of unemployed people has increased by at least 4 million across the EU since the crisis started while more than 7 million workers are on short-time work schemes.

But the impact will be harsher in developing countries where unprotected workers and those in the informal economy represent an important share of the labour force.

The extent of job destruction will “depend substantially on how quickly the economy will recover in the second half of the year and how effectively policy measures will boost labour demand,” ILO says.

Among the sectors most exposed to the economic fallout of the COVID-19 crisis, ILO identifies arts and entertainment, transport, accommodation and food, real state or wholesale and retail trade. 

In the report, the labour organisation stressed the need to uphold labour rights and strengthen health protection but also the need for fiscal and monetary responses to support the most affected sectors and vulnerable people, including financial assistance for enterprises. 

“We have to move fast, decisively, and together. The right, urgent, measures, could make the difference between survival and collapse,” Guy Ryder insisted.

This is how the EU’s €100 billion corona-fund will work 

Member states will provide guarantees to raise up to €100 billion for a new temporary fund to support workers in hard-hit countries affected by coronavirus, such as Italy and Spain, according to the proposal seen by

EU’s response to the crisis

In Europe, trade unions are getting worried. “Millions of European workers are finding themselves out of work and worried about money through no fault of their own for the second time in just over a decade,” said Luca Visentini, secretary general of the European Trade Union Confederation (ETUC).

“European leaders must learn the lessons of 2008 by doing whatever it takes to prevent this health emergency turning into long-term mass unemployment and another devastating economic crisis,” Visentini warned.

The ILO report was published ahead of an extraordinary Eurogroup meeting on Tuesday (7 April) in Brussels, where finance ministers tried to draft an economic response to the COVID19 crisis but ended without agreement.

The EU has already suspended the bloc’s fiscal rules, allowing member states to go beyond the 3% GDP expenditure ceiling of the stability and growth pact to fight the outbreak. The European Commission also temporarily relaxed state aid rules so that countries can support companies affected by the crisis and helped to channel remaining structural funds to support investment in strategic areas.

To mitigate the effects on employment, the EU executive last week also proposed a new instrument called SURE – Support to mitigate Unemployment Risks in an Emergency. The initiative aims to leverage €100 billion based on guarantees provided by member states to extend loans in favourable conditions.

The goal is to partially finance extra spending on temporary unemployment benefits that countries are putting in place, notably Italy and Spain, in order to reduce the risk of dismissals or loss of income.

On the monetary side, the European Central Bank also jumped into the fray and put forward a new corona-bond-buying program worth €750 billion to buy public and private debt.

EU finance ministers were expected to explore further options such as using the European Stability Mechanism – the Eurozone bailout fund – an investment package through the European Investment Bank,  or the possibility to mutualise COVID19-related debt in the form of so-called ‘coronabonds’.

EU countries use looser state aid rules to uphold troubled firms

Member states are making use of the new flexibility within EU state rules mainly to guarantee liquidity for all companies heavily affected by the economic fallout of the COVID-19 outbreak. EURACTIV has looked into the different schemes that have been approved so far.

(Edited by Frédéric Simon)

Subscribe to our newsletters