The Jobs Crisis
Household and Government Responses to the Great Recession in Eastern
Europe and Central Asia
M. Ihsan AjwadThe World Bank
Informing Human Development: An ESW FairJanuary 12, 2011
1
Tools to monitor the social impacts of the crisis
Crisis Response Surveys Armenia (HBS, Government) Bulgaria (OSI) Latvia (LFS, Government) Montenegro Romania Turkey (panel survey)
Government administrative dataSocial policy monitoring
2
Outline of the presentation
1. Transmission channels of the crisis2. Labor market impacts3. Household coping4. Government responses5. Concluding remarks
3
Crises affect households through four channels
4
Labor market impacts of the crisis
5
When output demand falls, firms use several strategies to control labor costs
6
Unemployment increased sharply in most European and Central Asian countries
-20
0
20
40
60
80
100
120
140
160Percentage change in the unemployment rate
between 2008 and 2009
7
Unemployment: disaggregated
Male representation among the unemployed increased
Youth unemployment at record highs Long-term unemployment increased
sharply
8
There was considerable variation in the employment elasticity of GDP
9
-20 -15 -10 -5 0 5
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
ALBBLR
BGR
HRV CZE
EST
HUN
KAZ
LVA
LTU
MKD
MDA
POL
ROMRUS
SRB
SVKSVN
TUR
UKR
f(x) = 0.504606113601435 x + 0.247434557107241
Employment growth versus GDP growth, 2008-2009
Real GDP growth (percent)
Tot
al e
mpl
oym
ent g
row
th (p
erce
nt)
Job losses were accompanied more broadly by smaller paychecks
Part-time employment Temporary employment (Latvia, Hungary, and Czech Republic) Real wages fell sharply in the Latvia, Lithuania, Slovenia, and Slovakia, but rose in Bulgaria, Czech Republic, and RomaniaWage arrears and administrative leave used in some countries in the CIS (e.g. Russia)
10
Household coping strategies
11
Households Coping Strategies
12
Source of shock to households
• Labor markets
• Financial markets
• Product markets
• Government services
Household responses
• Increase disposable income• Labor supply• Dissaving/
borrowing• Informal safety
nets• Formal safety
nets
• Reduce household expenditures• Durable goods• Food• Education/health• Insurance• Other
Household welfare impacts
• Impact on poverty
• Impact on long-term human capital accumulation
• Impact on savings and assets
Coping Strategy: Households tried to increase disposable income
13
Armenia Bulgaria Latvia Montenegro Romania0
5
10
15
20
25
30
35
40 Percent of households that increased labor supply in 2009 rel-ative to 2008
Not Affected Affected
Coping Strategy: Increase Disposable income
Poor households were not as successful as increasing labor supply
14
1 (Poorest) 2 3 4 5 (Richest)0
10
20
30
40
50
60
70 BulgariaFound a job
Did not find a job
Quintiles based on per capita income
Perc
enta
ge o
f hou
seho
lds
Coping Strategy: Reduce Expenditures
Food expenditures – fell along with expenditures on non-essential items
Education consumption – generally protected Health spending – fell
Health utilization decreasedExpenditures on medicines decreasedSome evidence of health insurance
disenrollment
15
Coping Strategy: Reduce Expenditures
16
Q1 (Poorest)
2 3 4 Q5 (Richest)
0
5
10
15
20
25
30
35
40 Bulgaria
Stopped buying regular medicinesSkipped preventative health vis-itsDid not visit the doctor after falling ill
Asset quintile
Perc
ent o
f ho
useh
olds
affe
cted
by
cris
is
Households adopted risky coping strategies
Q1 (Poorest) 2 3 4 Q5 (Richest)0
5
10
15
20
25
30
Cancelled Insurance
Reduced preventive care
Asset quintile
perc
ent o
f hou
seho
lds a
ffect
ed b
y cr
isis
Montenegro
Government Responses
17
First response: Unemployment benefits
18
Year over year growth in total registered unemployment and unemployment beneficiaries, 2008-2009 (%) Unemployment insurance beneficiaries Registered unemployed
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber0
10
20
30
40
50
60
70 Armenia
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber-20
0
20
40
60
80
100
120 Bulgaria
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber100
150
200
250
300
350Estonia
January
Febru
aryM
archApril
May
June
July
August
Septem
ber
October
November
Decem
ber0
50
100
150
200
250 Latvia
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber-20-10
01020304050607080 Poland
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber0
50
100
150
200
250
300 Romania
0
20
40
60
80
100 Russia
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber0
20406080
100120140160180
Turkey
January
Febru
aryM
arch
AprilM
ayJu
neJu
ly
August
Septem
ber
October
November
Decem
ber
-50
-40
-30
-20
-10
0
10
20
30
40
50
Ukraine
Social Policy Response: Last Resort Social Assistance
19
Number of beneficiaries of last-resort social assistance (LSRA) programs and total registered unemployed Number of registered unemployed, thousands (left) Number of beneficiaries of LRSAs, thousands (right)
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Jun
Jul
Aug Se
pO
ctN
ov Dec
2008 2009
70,000
72,000
74,000
76,000
78,000
80,000
82,000
84,000
86,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000 Armenia
Number of registered unemployed (left axis)Number of beneficiaries (right axis)
Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec
2008 2009
200,000
220,000
240,000
260,000
280,000
300,000
320,000
340,000
360,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000 Bulgaria
Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec
2008 2009
26,000
27,000
28,000
29,000
30,000
31,000
32,000
12,000.0
12,200.0
12,400.0
12,600.0
12,800.0
13,000.0
13,200.0Montenegro
Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec
2008 2009
200,000
300,000
400,000
500,000
600,000
700,000
800,000
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000 Romania
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Jun
Jul
Aug Se
pO
ctN
ov Dec
2008 2009
700,000
720,000
740,000
760,000
780,000
800,000
820,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000 Serbia
Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Jun Jul
Aug Se
pO
ctN
ov Dec
2008 2009
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000 Ukraine
Social Policy Response
Minimum Pensions Scaled up or introduced to protect the poor: Armenia, Russia,
Romania, Turkey High pension coverage in Eastern Europe and Central Asia:
potential for immediate poverty relief
Active Labor Market Programs scaled up
Education budget protection: most countries
Health budget protection: half of the countries
20
Concluding Remarks
21
Pillars of an effective crisis response
22
• Unemployment insurance benefits• Last-resort social assistance
Automatic stabilizers
• Unemployment insurance parameters• Social assistance parameters• Binding minimum wage levels
Adjusters
• Public works• Other programs (youth
apprenticeships, second -chance education programs, etc.)
Starters
A good crisis response requires fiscal discipline, planning and data
Build up savings for hard times
Factor in efficiency costs
Collect reliable and timely monitoring indicators
23
