What was the situation in the labor market during the quarantine and is there a recovery?

28 July 2020

Up to 3.1 million Ukrainians, or 17% of the labor force, were in the hidden unemployment at the quarantine’s peak. This means that the number of hours they work has decreased, or they were forced to take unpaid leave. Economists from the Centre of Economic Strategy reached these conclusions by analyzing data from the opinion polls.

During the crisis, people who were in hidden unemployment were living in uncertainty. There might be a possibility for them to return to full-time employment, but they could also be fired depending on the economic situation. Therefore, to not underestimate an issue’s scale, it is crucial to include hidden employment in the analysis when evaluating the data from the current crisis and future ones.

According to the opinion polls, up to 2.8 million Ukrainians, or 16% of the labor force, could temporarily lose their job. In contrast, official sources indicate much fewer victims. According to the CES calculations, only 368 thousand Ukrainians (2% of the labor force) have lost their job using the State Statistic Service data. Even if the number of layoffs was close to the lower limit, those are still mainly concentrated in specific industries and workers who work in the shadow economy – mostly it is less wealthy people who do not have a “safety net” if they get fired.

To minimize the number of layoffs, government support should aim to aid the industries that suffer the most. Besides that, CES recommends finding a support mechanism for people who will lose jobs but will not be searching for new ones. Those people either have lost hope or do not have the physical capacity to do so (for example, have to look after a child during quarantine). The differences between different datasets show that state statistics are not adopted for such crises. Although after restrictions were lifted, we can notice a rapid recovery in the number of job listings and an increase in active job searchers; if there will be a second wave of the virus, the employment rate will sharply decrease again. To prepare for a possible second wave, the government must immediately improve the collection of the labor market data to ensure it gets an accurate and undistorted image. To do so, it is necessary to improve data collection. During the first wave, the situation was changing very quickly, so it is reasonable to collect data every week instead of a month or even a quarter.