Annual Meetings of the World Bank and the IMF Development Committee

COVID-19 recovery must be human-centred

To be effective, we need a global response that is addresses poverty and inequalities, promotes social dialogue, strengthens the institutions of work and supports social justice, the ILO’s Director-General said.

Statement | Washington D.C. | 09 April 2021

Summary

  • The equivalent of an unprecedented 255 million jobs were lost as a result of the COVID-19 pandemic. Global unemployment increased by 33 million in 2020, with the unemployment rate rising by 1.1 percentage points to 6.5 per cent while 81 million workers quit the ranks of the labour market altogether, and millions of enterprises were forced to close or sharply curtail their activities.
  • This led to a sharp increase in poverty and inequalities. Global labour income declined by 8.3 per cent, which amounts to US$3.7 trillion, or 4.4 per cent of global GDP. The number of working people in extreme poverty (i.e. earning less than US$ 1.90 per day in PPP) increased by 31 million worldwide between 2019 and 2020, bringing the extreme working poverty rate to 7.8 per cent (up from 6.6 per cent in 2019).
  • The loss in labour income has been distributed unevenly between workers, with youth, women and low-skilled workers seeing the sharpest drops in disposable income. The massive job losses in hard-hit sectors contrast deeply with the positive job growth evident in a number of higher skilled services sectors. This divergence increases inequality within countries, but also across countries depending on the severity of the employment impact on the hardest-hit sectors.
  • These differential effects of the crisis are likely to leave an enduring scar on the overall macroeconomic performance of economies. If they persist for an extended period, lower labour force participation and productivity growth will reduce the growth potential of individual economies and the world economy as a whole.
  • Given the uncertainties on the speed and quality of the economic recovery, ILO employment forecasts reveal persistent global working-hour losses in 2021, amounting to 3.0 per cent of total hours lost relative to the fourth quarter of 2019. This is equivalent to a forecasted loss of 90 million full-time jobs in 2021.
  • The world needs to invest in a human-centred recovery from the crisis and focus on achieving resilience through the pursuit of social justice. This requires to invest in strengthening the capacities of all women and men to benefit from the opportunities of a changing world of work; strengthening the institutions of work to ensure adequate protection of all workers; and promoting full and productive employment through massive investments in the digital, green and care economies.
  • Social dialogue between governments and employers’ and workers’ organizations will be essential to build the consensus needed to achieve a successful and sustainable recovery.
  • Improving data governance is particularly important to protect fundamental principles and rights at work.

Economic and social outlook

An unprecedented 255 million full-time equivalent jobs lost as a result of the COVID-19 pandemic

At the start of 2021, 3 out of 4 workers were still affected by restriction measures to stop the spread of COVID-19 – close to the peak of 85 per cent reached in late July 2020. Furthermore over 430 million enterprises worldwide operate in the four economic sectors hardest hit by the crisis, and since the pandemic began have needed to cease or sharply curtail business activities for long periods.1 As a result, 8.8 per cent of global working hours were lost in 2020 relative to the fourth quarter of 2019, the equivalent of 255 million full-time jobs. This decline in working hours translated into both employment losses – an unprecedented 114 million jobs were lost globally in 2020 relative to 2019 – and a reduction in working hours for those who remained employed, with significant variation across regions. Employment losses were highest in the Americas and lowest in Europe where job retention schemes supported reduced working hours while remaining employed. In relative terms, employment losses were higher for women than for men, and for young workers than for adult workers.2

These unprecedented employment losses translated in an increase in global unemployment by 33 million in 2020, with the unemployment rate rising by 1.1 percentage points to 6.5 per cent. But employment losses in 2020 translated mainly into inactivity, which increased by 81 million3, with the global labour force participation rate decreasing by 2.2 percentage points to 58.7 per cent.

A sharp increase in poverty and inequalities reversing progress made so far

Workers have suffered large reductions in the income they receive from work. Global labour income (referring to any income related to formal or informal employment undertaken for pay or profit, but without considering any government transfer and benefits) in 2020 is estimated to have declined by 8.3 per cent, which amounts to US$3.7 trillion, or 4.4 per cent of global gross domestic product (GDP).4 The largest labour income loss was experienced by workers in the Americas (10.3 per cent).

Those sizeable labour income losses could push households into poverty in the absence of income support measures. The World Bank estimates that the impact of the COVID-19 crisis will potentially push 150 million more people into extreme poverty by the end of 2021.5 The ILO estimates that the number of employed individuals in extreme poverty (i.e. earning less than US$ 1.90 per day in PPP) has increased by 31 million worldwide between 2019 and 2020, bringing the extreme working poverty rate to 7.8 per cent (up from 6.6 per cent in 2019). The number of moderately poor workers (i.e. earning between US$ 1.90 and 3.20) has increased by around 77 million (for a moderate working poverty rate of 14.2 per cent, up from 11.3 per cent in 2019).

The reduction in labour income has been distributed unevenly between workers, with youth, women and low-skilled workers seeing the sharpest drops in disposable income. In addition, the latest labour force survey data (up to the third quarter of 2020) reveal the contrast between massive job losses in hard-hit sectors (such as accommodation and food services, arts and culture, retail, and construction) and the positive job growth evident in a number of higher skilled services sectors (such as information and communication, and financial and insurance activities). This divergence will tend to increase inequality within countries. At the same time, there is considerable variation across countries with regard to the severity of the impact of the crisis on jobs in the hardest-hit sectors.

This crisis, therefore, interacts with and exacerbates inequalities, both between and within countries. In this sense, it poses a risk of an additional dimension of economic and social scarring at the international level as manifested in slower and more uneven progress toward poverty reduction, a deceleration of convergence in income between developing and developed countries and greater obstacles to the achievement of the Sustainable Development Goals by 2030.

The differential effects of the crisis are likely to leave an enduring scar on the overall macroeconomic performance of economies as well. The crisis’ disproportionate impact on youth, women, lower-skilled, and poorer workers, including with respect to their pace of skills acquisition and health status, implies a significant decrease in labour force participation and reduction in productivity growth. If they persist for an extended period, lower labour force participation and productivity growth will reduce the growth potential of individual economies and the world economy as a whole.

The outlook for global labour markets

The WBG projected 2021 global growth at 4 per cent6 , but prospects of a stronger recovery are emerging – because of additional fiscal stimulus, especially in the U.S., and the prospects of broader vaccination.

However, given the still high uncertainty on the speed and quality of the recovery, ILO employment forecasts reveal persistent global working-hour losses in 2021, amounting to 3.0 per cent of total hours lost relative to the fourth quarter of 2019. This is equivalent to the loss of 90 million full-time jobs assuming a 48‑hour working week.7

Labour force participation is projected to remain below 2019 levels through 2022 for countries at all levels of economic development. Productivity growth is also projected to remain lower for countries at all levels of economic development – less than half pre-crisis level. This deceleration is projected to be most pronounced in low-income and lower-middle-income countries – on the order of 2.5 and 3 percentage points, respectively.

A bridge to a human-centred recovery and achieving resilience

Without comprehensive and concerted policy efforts, there is a very real risk that the COVID-19 crisis will leave a legacy of widened inequality and social injustice.

Policy coherence among key international institutions is needed more than ever before to stop this from happening. The WBG’s 4-pillar response to the COVID-19 pandemic8 needs to include a focus on the promotion of decent work to support a human-centred recovery and to build resilience to future shocks:
  1. Saving lives: strengthening occupational health and safety systems can save millions of lives and build resilience. More than 2.8 million people die as a result of occupational accidents or work-related diseases every year. Additionally, there are some 374 million non-fatal work-related injuries each year that result in an average of more than 4 days of absences from work. The human cost of poor occupational safety and health practices is vast and their economic cost is estimated at close to 4 per cent of global GDP each year. The COVID-19 crisis has highlighted the cardinal importance of protecting health and safety in the workplace. All WBG projects must strive to establish sound prevention, reporting and inspection practices and to provide for maximum safety at work in line with international occupational safety and health instruments (Convention No. 155, its 2002 Protocol and Convention No. 187).
  2. Protecting poor and vulnerable people: doing so requires strengthening social protection systems. The consensus around the pressing need to effectively guarantee universal social protection has been reinforced in the wake of the crucial role played by social protection to cope with the consequences of the COVID-19 pandemic. We have an opportunity today to join forces around a common paradigm that recognizes both the value and urgency of investing in comprehensive and adequate social protection systems9. Building resilience requires even greater commitment and collaboration on social protection at country level between ministries and institutions responsible for social protection, including ministries of economy and finance, sectoral ministries, and workers’ and employers’ organizations. Similarly, the ILO and the WBG have a shared responsibility to improve their collaboration and act as one, while duly recognizing each partner’s mandate, uniqueness and value added and working closely together within the UN family. This will be a determining factor in building back better and turning words and good intentions into a reality of social protection for all.
  3. Ensuring sustainable business growth and job creation: doing this in a way that is inclusive and builds resilience requires to focus on the quality of employment. The global economy needs urgent measures and policies that reach the real economy, all workers, including the self-employed and non-permanent, casual and informal workers, and all sustainable enterprises, especially small and medium-sized enterprises (SMEs). Maintaining accommodative macroeconomic policies for full and productive employment and promoting global solidarity through support for developing countries experiencing crisis-related reductions in fiscal and monetary policy space or unsustainable external debt obligations will be key in stimulating broad-based economic growth and employment creation. Similarly, countries should be given the space to provide financial support to maintain business continuity, particularly for SMEs and sectors hardest hit by the pandemic and preserve domestic and global supply chains, provide incentives to employers to retain workers despite crisis-related reduction of business activity, including work-sharing and shorter working weeks, supported by employment retention schemes and wage subsidies, measures to support their liquidity through the temporary tax and social security contribution suspensions, as well as access to other business support measures conditioned on retention of workers. The WBG should also support the provision of public employment programmes and subsidies to sustain jobs and livelihoods through the crisis, especially in lower income countries, and the implementation of measures to assist workers and employers in informal micro and small enterprises, alongside support for formal enterprises.
  4. Strengthening policies, institutions and investments: this must include strengthening the institutions of work to ensure adequate protection of all workers as well as pursuing the objective of full and productive employment in order to provide the conditions for a human-centred recovery, building on the proposals in the ILO Centenary Declaration for the Future of Work.
a) Strengthening the institutions of work: Social dialogue and the fundamental rights to collective bargaining and freedom of association – key institutions of work - can help to ensure that in the future all receive a fair share of the fruits of progress. The economic and employment consequences of the COVID-19 crisis are likely to continue to inflict massive downward pressure on wages. But ILO research shows that improving the legal coverage and the compliance with the minimum wage and raising the level, for example, up to two thirds of the median wage, have the potential to reduce income inequality, whatever the measure of inequality used10. In navigating the crisis and planning for the new and better “normal” after the crisis, governments, employers and workers should therefore seek to strengthen social dialogue around wages. Adequately balanced wage adjustments – both minimum wages and wages above existing floors– will be required to safeguard jobs and at the same time protect the incomes of workers and their families to sustain demand and avoid deflationary situations.

b) Full and productive employment: Stimulating investment in employment-intensive sectors, including sustainable infrastructure, the green economy, the health and care economy, and the digital economy and closing the social protection financing gap are centrally important to achieve a human-centred recovery and build resilience. These investments in inclusive and sustainable growth need, however, to be supported by investments in people and their capacities to benefit from the opportunities of a changing world of work. In his foreword to Global Economic Prospects, WBG President David Malpass notes that “Making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy.” This is why the needs of people need to be put before debt service and repayment. Countries must be given the fiscal space to invest in education and skills, reskilling and upskilling workers to equip them for their transitions into new sectors, better and higher paying jobs, in health and social protection systems that are comprehensive, covering all life-cycle risks – COVID-19 has demonstrated, for instance, the need for unemployment protection and sickness benefits – and provide adequate and predictable benefits to allow a life in dignity, to truly enable people to navigate uncertainties in their lives and to invest in their human capacities and capabilities. In this context, recovery strategies developed and implemented through social dialogue with employers’ and workers’ organizations will be vital to reshape trajectories to meet longer-term goals and promote the transition to a more inclusive, fair and sustainable economy.

A decent and human-centred future of work

The World Development Report 2021: Data for Better Lives is of significant and increasing importance in the current context of accelerated digitalisation.

The issue of workers’ data protection is very relevant for the topic of the WDR 2021. While the collection and treatment of workers’ personal data often respond to legitimate needs, they also entail the risk of breaching workers’ right to privacy and may lead in certain cases to discrimination against them. These concerns are intensifying with the increasing use of ICTs in the world of work, including through algorithm-based management by digital labour platforms. These concerns are all the more relevant in the context of the COVID-19 pandemic and its implications in terms of massive shift to telework and its potential implications on workers’ surveillance, and the processing of workers’ health data.

The WDR recommends a “rights-based legal approach”, which is particularly important to protect fundamental principles and rights at work, including the elimination of discrimination in employment and freedom of association. The ILO Code of practice on the protection of workers’ personal data regulates the collection, security and storage of personal data, as well as their use and communication to third parties, including automated processing. It also enumerates workers’ individual and collective rights. The recent ILO World Employment and Social Outlook on “The role of digital labour platforms in transforming the world of work” addresses the issue of workers’ data protection and the risks associated with algorithm-based management practices. It recommends exploring a more balanced data governance framework that shares ownership rights of data with the platform workers, individuals and communities that generate it. There has been some progress in this regard through data protection regimes, such as the EU’s General Data Protection Regulation, and a number of developing countries such as Brazil, India and Nigeria are drafting data protection legislation along similar lines11. In addition, important strides are being made towards establishing collective rights over community data. The bargaining power of communities is potentially greater than that of individuals and thus collective rights over community data can help workers to meaningfully negotiate their working conditions with platforms. The issue of data ownership and control also transcends national borders. There is an intense debate around data localization versus the free flow of data. There is therefore a clear need for effective data governance to strike a balance between privacy and domestic development on the one hand, and free flow of data on the other.

Achieving coherent multilateral action in support of a human-centred recovery

A global response is required to ensure that the economic and social recovery from the crisis is as human-centred in its impact as the effects of the crisis have been. Such a response should address pre-existing world of work challenges as well as the immediate impact of the pandemic with a view to building forward better. The ILO Centenary Declaration for the Future of Work provides an internationally agreed roadmap to build back more inclusive and more resilient societies. Sustained, increased effort and investment to accelerate the implementation of this roadmap should be made a top priority of public policy and international cooperation. The ILO will take all opportunities to harness the efforts of, and promote concrete cooperation with, other international organizations in support of a human-centred recovery in line with the Centenary Declaration. It will also contribute actively to the efforts of the UN system at the national and international level to ensure delivery of the 2030 Agenda and to promote all areas of multilateral cooperation in response to the COVID-19 pandemic.

1 ILO 2020. Enabling Environment for Sustainable Enterprises and the Post-COVID-19 Rapid Response. ILO Policy Brief (Geneva).
2 ILO 2021. ILO Monitor: COVID-19 and the world of work. Seventh edition. Updated estimates and analysis. (Geneva).
3 Over and above the increase in inactivity due to the growth of the working-age population, which amounted to an additional 73 million inactive people in 2020.
4 Global GDP in 2019 using 2019 market exchange rates.
5 Van Trotsenburg, A. 2021. COVID-19 response: Where we stand now, and the road ahead. World Bank Blogs.
6 WBG 2021. Global Economic Prospects (Washington DC).
7 ILO 2021. ILO Monitor: COVID-19 and the World of Work. Seventh edition (Geneva).
8 ILO/UNICEF 2020. COVID-19 and child labour: A time of crisis, a time to act (Geneva).
9 USP2030 2019. Together to Achieve Universal Social Protection by 2030 (USP2030) – A Call to Action (Geneva).
10 ILO (2020) Global Wage Report 2020-21: Wages and minimum wages in times of COVID-19. (Geneva).
11 ILO 2021. World Employment and Social Outlook: The role of Digital Labour Platforms in Transforming the World of Work. Chapter 5 (Geneva)..