The webinar "Impacts of the COVID-19 crisis on formal sector workers: (potential) social protection and employment responses" was the 7th event of Social protection responses to COVID-19 webinar series and took place on April 28, 2020. It was co-organized by the Organization for Economic Development and Cooperation (OECD), the International Labour Organization (ILO), the International Policy Centre for Inclusive Growth (IPC-IG), the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and Australia’s Department of Foreign Affairs and Trade, (DFAT).

In the light of the unprecedented challenges the COVID-19 crisis poses to economies and societies in low-, middle- and high-income countries across the globe, this webinar aimed at:

  1. highlighting the specific challenges that it brings along for formal sector workers, on the one hand, and
  2. presenting policy options in the field of social protection and employment to address them, on the other hand.

The event was moderated by Luca Pellerano, Senior Social Protection Specialist at ILO. He was joined by four panellists:

  • Sebastian Königs, Labour Economist and Social Policy Analyst at OECD
  • Mohammed Noor Khrais, Head of the Research and Studies department of the Jordan Social Security Cooperation (JSSC)
  • Raden Muhamad Purnagunawan, Head of the Economy Working Group of the Secretariat of the National Team for the Acceleration of Poverty Reduction (TNP2K), Indonesia, and
  • Johannes Schweighofer, Senior Official at the Austrian Ministry of Labour, Family and Youth

You can watch the recording here and see the presentation here.

 

Setting the scene: Addressing the socioeconomic challenges of formal sector workers during the COVID-19 crisis

After welcoming the panellists and participants, Luca Pellerano gave a brief introduction to the topic and the specific questions to frame the webinar within the COVID-19 webinar series and set the scene for presentations and discussion. He started by introducing the various social protection options that governments have available to respond to the crisis - referring to and building up on the framing presentation given by Valentina Barca during the second webinar of the COVID-19 series. He emphasized that using the linkages and complementarities of these options is crucial to ensure that they are successful and respond to the specific needs of diverse populations.

The moderator pointed out that this specific webinar focuses on how the different tools available have been used and can be better used to respond particularly to the specific needs and challenges currently faced by formal sector workers (please note that there is another webinar available focusing on workers in the informal economy). He mentioned some examples that are already in action to respond to the crisis in a range of countries. These include (extended) paid sick leave, (extended) unemployment benefits and measures to keep workers on employment and safeguard their incomes - such as employment retention mechanisms and wage subsidies.

Approaches taken by governments have been two-fold (see slide below):

  • On the one hand, they have to ensure that the measures that already exist are resilient, i.e. that they do not collapse during the crisis. This requires some changes in routine design and implementation – especially taking into account the changing framework conditions due to lockdown measures and rules of social distancing now in place in many countries
  • On the other hand, they have to focus on rapid adaptation of programmes and systems to respond to the extended demand for social insurance and labour market mechanisms by a) providing higher amounts of support (adequacy), b) facilitating access and relaxing eligibility criteria to reach out to additional beneficiaries (coverage) and c) linking existing measures with other complementary services (comprehensiveness).

Luca continued by explaining that there is an intersection of four key areas for social protection of formal sector workers in the context of COVID-19: a) business continuity support, b) labour protection, c) contributory social protection, as well as d) non-contributory social protection. He emphasized that only a well-coordinated, consistent and mutually reinforcing articulation of these four areas can lead to the expected outcomes:

  • to ensure that workers can access the social protection they need in a comprehensive and timely manner, as well as
  • to ensure that businesses and productive capacities are preserved and able to quickly resume economic activity after the crisis, and at the same time
  • to ensure that public resources are used in a cost-effective manner

One important point to bear in mind for the discussion mentioned by Luca is that businesses (i.e. employers) are affected differently by this crisis and that their ability to pay wages – and in turn provide financial protection to their employees – mainly depends on a) the sector’s permission to operate, and b) the ability of the business to operate (at least under changed conditions). These two conditions can dynamically change over time as the crisis evolves. He further elaborated that employees are also facing very different and diverse conditions in the wake of the COVID-19 crisis, depending on their specific status (e.g. formally employed, self-employed, workers in the informal sector, etc.).

Based on these two perspectives, he shortly introduced a conceptual framework for comprehensive and coordinated social protection responses to COVID-19 (see table below). This framework could be helpful to guide policy responses in low-, middle- and high-income countries alike.

 

An overview of employment and social policy responses to COVID-19 in OECD countries

Sebastian Königs started his presentation with the statement that the interruptions in global value chains and the measures that have been taken to contain and mitigate the pandemic are having enormous consequences for people’s income in OECD countries and are putting their livelihoods at risk. Therefore, countries across the globe have been taking measures to protect workers, families and firms. The OECD started to put together a menu of policy options that OECD countries and G20 economies have in the social policy domain and tried to get an overview of what measures have been taken by countries so far – even though keeping track on fast-changing developments is not that easy at the moment.

The panellist gave an overview of the potential impact that the COVID-19 crisis is going to have on OECD economies. Partial or full shutdowns are estimated to count for a loss ranging from 15 to 30 % of GDP at current prices. This is directly transmitting on to labour markets and the numbers reported from OECD countries show a dramatic picture. Sebastian mentioned a range of examples: In the United States, 24 million people claimed unemployment benefits in 5 weeks - compared to one million during the global financial crisis of 2008-09. The UK government received 10 times higher claims than during normal time. Facts and figures from other countries show a similar picture.

To avoid layoffs - and even higher unemployment rates - an increasing number of countries has relied heavily on so-called short-time work schemes. They aim at maintaining work contracts for employees of businesses affected by the crisis, by heavily subsidizing wages and subsidizing/cutting incidental wage costs. Employees thereby continue to receive most of their salaries. In countries where these schemes exist (either newly established, extended or redesigned) the demand for participation is currently enormous. For example, in France half of the private sector employees (approx. 10 million people) are currently on short-time work (called Chômage partiel - activité partielle). Another example is the Austrian “Kurzarbeit” which was presented in more detail during the webinar later on (see below).

Sebastian also highlighted that whereas the virus is affecting everyone – as no one is immune – the economic effects of the crisis are distributed very uneven across labour market groups. High-skilled workers are much less affected by under-/unemployment – and consequently a loss of income – than low-skilled workers, such as workers in the accommodation and food services industry.

The panellist continued by introducing a menu of different policy options to contain the epidemic while minimising its economic effect compiled by the OECD, consisting of six different pillars (see slides).

During his presentation, he also gave some practical examples and insights on how these pillars are currently being realized in different countries.

Sebastian closed by giving an overview of further work done by OECD with regard to health, social and employment dimension of COVID-19. For more information, please have a look at the resources listed at the end of this blog post.

 

Spotlight on measures taken in an Upper-Middle Income Country: Social Protection to address the COVID-19 crisis for Formal Workers through Social Security Cooperation (JSSC) in Jordan

Mohammed Noor Khrais introduced the measures taken by the Government of Jordan, and in particular those implemented by the Jordan Social Security Corporation (JSSC). Some quick facts on JSSC: It is a contributory social insurance scheme for waged and salaried workers, providing protection against unemployment, old-age, disability and death, work injuries and maternity, currently covering approximately 1.4 million people (65% of workers in Jordan).

Mohammed started by presenting the overall framework for a coordinated response that JSSC is acting within: The Government of Jordan aims at ensuring business continuity, incomes support and social protection through the provision of a range of different policy measures. The key principle for the design and delivery of these measures is to leave no one behind.

JSSC took the following measures as a response to COVID-19:

  1. To ensure coordination with the major players in the field of social protection and coherence and comprehensiveness of measures a National Social Protection Team was established.
  2. To ensure business continuity of the JSSC itself a crisis management team was established and a call centre and electronic and online services to receive applications and inquiries were initiated, among other measures.
  3. To ensure business continuity of private sector firms businesses received the right to stop contributions for old-age insurance of their employees during April, May and June (keeping only disability and health insurance). In the case where firms will choose to do so, contribution rates are lowered from 21.75% to 5.25%. At the same time, employees that are subject to suspension of their mandatory employers’ contribution have the choice to contribute voluntarily during this period. Furthermore, businesses have the choice to defer the payment of contributions until the end of 2023 (based on an instalment system).
  4. To provide income support for particularly vulnerable families (currently those who include and individual over the age of 70 and casual workers), 50% of maternity insurance contributions for the year 2020 was allocated for in-kind and cash transfers.
  5.  To provide income support for employees of businesses that had to reduce or stop operations or those that are dismissed three different programmes have been initiated:
    1. Solidarity programme 1 provides unemployment insurance benefits to (former) employees of firms already covered and registered with JSSC
    2. Solidarity programme 2 provides unemployment insurance benefits to (former) employees of firms that are not yet registered with JSSC  
    3. The supportive programme provides support for those registered as self-employed and voluntarily contributing to JSSC. They are usually not eligible for unemployment benefits but can ask for a loan from their previous contributions.

The table below gives an overview of the labour protection aspects, the nature of the JSSC engagement, as well as the special JSSC measures available for different types of businesses.

At the end of his presentation, Mohammed stressed several opportunities that he sees arising from the COVID-19 crisis for social protection in Jordan: one is the formalization of informal work. A massive awareness campaign was conducted by JSSC reaching out to the whole country to illustrate the concept of social security and help register the firms and employees not yet covered. Furthermore, the investments now being made in online and electronic services will also sustain beyond the crisis.

But he also highlighted several challenges: the availability of resources for the unemployment scheme is limited and options to extend fiscal space will have to be developed if the crisis is going to continue. One of the biggest challenges faced by the government is to reach out to the 3.5 million refugees and expatriates living in Jordan.

 

Spotlight on measures taken in a Lower-Middle Income Country:  Social Protection, Economic Stimulus and Compensation Package to mitigate the COVID-19 pandemic in Indonesia

Raden Muhamad Purnagunawan started his input by presenting some facts and figures of what the COVID-19 crisis means for the world of work in Indonesia: As of 20th of April, out of almost 126.5 million formal and informal sector workers, around 2 million have been laid off or are forced to take unpaid leave as a result of the crisis. Due to non-reporting in the informal sector, the number of people being laid off or currently without employment as an effect of the crisis might be even higher.

The panellist elaborated in more detail on the economic stimulus compensation policies and programmes taken by the Government of Indonesia. A part of the additional budget released is allocated to social protection programmes to support individuals and families affected by the crisis.

Raden highlighted that, unlike in the case of Jordan where measures build up on the social insurance system, Indonesia is mainly relying on its already established non-contributory social safety net programmes to deliver extended social protection in the wake of this unprecedented crisis. The basis for this is the social welfare unified database (UDB) that provides information about the poorest population in Indonesia, covering 40% of all households in Indonesia. Two major social assistance programmes – the Family Hope Programme (PKH) and the food voucher programme - were extended both, vertically to deliver increased benefits for those already enrolled, as well as horizontally to cover additional households identified through the UDB. But challenges still exist to reach out to formal sector workers being laid-off as there is a lack of reliable data and the social insurance system does not provide readily available solutions to tackle the negative effects of the crisis for this population group.

Raden introduced four different measures that are being taken by the Government of Indonesia as safety nets for formal sector workers during the COVID-19 crisis (see slide below).

He then explained in more detail the Pre-Employment Card (Kartu Pra-Kerja) programme, which was originally designed as a labour market programme for both formal and informal sector workers searching for employment, with a focus on skills development, and has not yet started. As an immediate reaction to the COVID-19 crisis, the government decided to redesign the programme, initiate it immediately, double the budget initially foreseen and allocate 5.6 million new beneficiaries (instead of 2 million as planned before the crisis hit). The goal is to provide social protection to the working-age population who lost their jobs and overcome the negative impact of the COVID-19 outbreak on the national economy. Beneficiaries will receive vouchers for trainings, as well as cash support over a period of four months. Trainings are now being shifted online, as face-to-face trainings are not possible at the moment. Two weeks after the opening fir registrations (mid-April) the demand already exceeded the supply of available slots in the programme: more than 8 million applications have been handed in online until the end of April – a sign there is a dire need for such measures.  

 

Spotlight on measures taken in a High-Income Country:  COVID-19 in Austria – Unemployment vs. Short-Time Work

Johannes Schweighofer started by giving some background information about Austria, as compared to the other two country cases presented during the webinar: The informal sector in the country is extremely small, counting for less than 10% of GDP. 40% of GDP is collected as taxes and social security contributions, giving the government the fiscal space to react and manoeuvre such a crisis to a certain extent.

The panellist shared two main messages already at the beginning of his presentation:

  • The Austrian government currently follows a strategy of “Austro-Keynesianism” to stabilize expectations and manage the crisis
  • Short-time work, as one of the main measures taken by the government to react to the crisis and safeguard jobs, is very helpful in the short-run (3-6 months), but comes with enormous costs in the medium to long run

By showing some facts and figures, Johannes elaborated that even though the unemployment rate is on the rise, it has not yet risen dramatically, compared to the bleak economic outlook for Austria: the IMF expects a decrease of GDP of 7% for 2020. However, unemployment rates are at a historical high: they rose dramatically by 70% during the first three weeks of the crisis. Since then, a levelling of the numbers can be observed. This shows that the policy measures initiated – and especially the Short-time work scheme - were successful in terms of stabilizing the inflow into unemployment.

The panellist also emphasized that in Austria, the crisis particularly hit workers in the tourism sector: 83% of them are currently out of work – either unemployed or on short-time work (compared to 39% of all workers).

Johannes continued by introducing the Austrian Short-time work scheme: The scheme aims at bridging temporary, non-seasonal economic difficulties in labour demand that arise from the crisis. Working times of employees registered for Short-time work can be reduced between 10 and 90% over a period of three months (with the possibility to extend to a total of up to six months if necessary). The scheme is available for all employees of small, medium and large private sector enterprises. Employees receive 80-90% (depending on their current gross salary) of their net salary during Short-time work (up to gross salaries of 5,370 Euros). This is fully subsidized by the government. Thus, the financial burden of the companies to keep their employees is close to zero.

The panellist also elaborated the drawbacks of the scheme and commented that the administrative burden for companies to register their employees for Short-time work is quite high. Furthermore, there is no possibility to receive an advanced payment from this scheme and companies receive the wage subsidies ex-post. Therefore, the scheme does not provide a form of liquidity aid, which constitutes a huge challenge especially for smaller companies with limited financial resources.

The slide below shows the uptake of and the public expenditure on Short-time work in Austria during the last years and highlights the tremendous increases since the outbreak of the COVID-19 crisis: the inflow in Short-time work is about 50 times higher as compared to the inflow caused by the financial crisis in 2008/2009. During the first four months of 2020 already 2% of Austria’s GDP were spent on Short-time work and 30% of all private-sector employees are registered for it. Johannes concluded by highlighting that this is a historical situation that the country has never experienced before.

The webinar concluded with a rich Q&A session, accessible here. You can also join the Q&A discussion here. 

 

References:

Gentilini, Ugo; Almenfi, Mohammed; Dale, Pamela; Demarco, Gustavo; Santos, Indhira (2020). Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures. Access here.

ILO (2020). ILO Monitor: COVID-19 and the world of work. Third edition. Updated estimates and analysis. Access here.

OECD (2020): Supporting people and companies to deal with the COVID-19 virus: Options for an immediate employment and social-policy response. Access here

OECD (2020): Overview policy table with countries’ policy responses. Access here

OECD (2020): Women at the core of the fight against COVID-19 crisis. Access here

OECD (2020): Flattening the COVID-19 peak: Containment and mitigation policies. Access here

OECD (2020): Beyond Containment: Health systems responses to COVID-19 in the OECD. Access here

 

This blog post is part of the Social protection responses to COVID-19 webinar series. The series is a joint effort initiated by the IPC-IGGIZ on behalf of the German Federal Ministry of Economic Development and Cooperation (BMZ), and the Australia Government's Department of Foreign Affairs and Trade (DFAT) collaboration with the socialprotection.org platform, and in cooperation with partners from different organisations. Join our online community ''Social protection responses to COVID-10 [Task force]" to learn more about the initiative and future webinars

Social Protection Programmes: 
  • Social insurance
    • Unemployment insurance
  • Labour market programs/Public work/Productive inclusion
    • Unemployment benefits
Social Protection Topics: 
  • Labour regulation
  • Programme design and implementation
  • Social protection systems
  • Universal Social Protection
Cross-Cutting Areas: 
  • Disasters and crisis
  • Labour market
    • Unemployment
  • Poverty
  • Resilience
  • Risk and vulnerability
Countries: 
  • Global
  • Indonesia
  • Jordan
  • Austria
Regions: 
  • Global
  • East Asia & Pacific
  • Europe & Central Asia
  • Middle East & North Africa
The views presented here are the author's and not socialprotection.org's