m. ihsan ajwad the world bank
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The Jobs Crisis Household and Government Responses to the Great Recession in Europe and Central Asia. M. Ihsan Ajwad The World Bank. Crisis monitoring. Crisis Response Surveys Assess primary transmission channels - PowerPoint PPT PresentationTRANSCRIPT
THE JOBS CRISIS
HOUSEHOLD AND GOVERNMENT RESPONSES TO THE GREAT RECESSION IN EUROPE AND CENTRAL ASIA
M. Ihsan Ajwad
The World Bank1
CRISIS MONITORING
2
Crisis Response Surveys Assess primary transmission channels Determine household responses and welfare
impacts (health/education expenditures and food security)
Armenia (HBS, Government), Bulgaria (OSI), Latvia (LFS, Government), Montenegro, Romania, Turkey (panel survey)
Government administrative data Social policy monitoring
OUTLINE OF THE PRESENTATION
1. Anatomy of the crisis2. Labor market impacts3. Household coping4. Government responses5. Concluding remarks
3
THE GDP CONTRACTION WAS HARSH IN SOME COUNTRIES BUT NOT OTHERS
4
Latvia
Ukrain
e
Lithua
nia
Armen
ia
Estonia
Russia
Sloven
ia
Roman
ia
Mold
ova
Hunga
ry
Croati
a
Mon
teneg
ro
Bulgari
a
Turke
y
Slovak
Rep
ublic
Czech
Rep
ublic
Georg
ia
Bosnia
and H
erzeg
ovina
Serbia
Mac
edon
ia, F
YR
Belaru
s
Kazak
hstan
Poland
Kyrgy
z Rep
ublic
Albania
Tajikis
tan
Kosov
o
Turkm
enist
an
Uzbek
istan
Azerb
aijan
-20
-15
-10
-5
0
5
10Real GDP Growth (%), 2009
Eastern Europe and Central Asia -5.2%
Source: Staff calculations based on IMF, World Economic Outlook Database, October 2010
CRISES AFFECT HOUSEHOLDS THROUGH FOUR CHANNELS
5
LABOR MARKET IMPACTS OF THE CRISIS
6
WHEN OUTPUT DEMAND FALLS, FIRMS USE SEVERAL STRATEGIES TO CONTROL LABOR COSTS
7
UNEMPLOYMENT INCREASED SHARPLY IN MOST EUROPEAN AND CENTRAL ASIAN COUNTRIES
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%Change in the number of survey-based
unemployed, 2008-2009
8
UNEMPLOYMENT: SOME GROUPS AFFECTED MORE THAN OTHERS
Male representation among the unemployed increased
Youth unemployment twice the adult rate Long-term unemployment increased
9
DECREASES IN EARNINGS WERE MORE COMMON THAN JOB LOSSES IN MANY COUNTRIES STUDIED
Bulgaria Montenegro* Romania* Turkey0
5
10
15
20
25
30
35
40
5.12.5
5.3 7.2
15.4
6.7
12.6
18.0
15.0
2.2
2.7
5.2
Working-age individuals reporting working hours, wage rate, and employment reduction
Job Loss Reduced earnings working same or more hours
Reduced earnings working less hours
Per
cen
t of
wor
ker
s
10
THE DYNAMICS BEHIND EARNINGS REDUCTIONS VARIED ACROSS THE REGION
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)Remittance flows fell sharply
11
THERE WAS CONSIDERABLE VARIATION IN THE EMPLOYMENT ELASTICITY OF GDP
12
-20 -15 -10 -5 0 5
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
ALBBLR
BGR
HRVCZE
EST
HUN
KAZ
LVA
LTU
MKD
MDA
POL
ROM
RUS
SRB
SVK
SVN
TUR
UKR
f(x) = 0.504606113601435 x + 0.247434557107241
GDP growth versus total employment growth, 2008-2009
Real GDP growth, %
Tot
al e
mp
loym
ent
grow
th, %
Sources: Staff calculations based on IMF, World Economic Outlook Database, October 2010 and ILO, LABORSTA database;
HOUSEHOLD COPING STRATEGIES
13
HOUSEHOLDS COPING STRATEGIES
14
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
• Impct on savings and assets
COPING STRATEGY: INCREASE DISPOSABLE INCOME
Households tried to increase labor supply
15Armenia 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
Households tried to increase labor supplyBut many, especially poor, were not successful
(evidence from Bulgaria)
161 (Poorest) 2 3 4 5 (Richest)
0
10
20
30
40
50
60
70
Found a job
Did not find a job
Quintiles based on per capita income
Per
cen
tage
of
hou
seh
old
s
COPING STRATEGY: REDUCE EXPENDITURES
Food expenditures – fell along with expenditures on non-essential items
Education consumption – generally protected Health spending – fell
Health utilization decreased Expenditures on medicines decreasedo Some evidence of health insurance
disenrollment
17
COPING STRATEGY: REDUCE EXPENDITURES
18
Q1 (Poorest)
2 3 4 Q5 (Richest)
0
5
10
15
20
25
30
35
40Bulgaria
Stopped buying regular medicinesSkipped preventative health visitsDid not visit the doctor after falling ill
Asset Quintile
Households adopted risky coping strategies
1 2 3 4 50
5
10
15
20
25
30 Montenegro
Cancelled insurance
Reduced preventive care
Asset Quintile
Per
cen
t h
ouse
hol
ds
that
ad
opte
d c
opin
g st
rate
gy
GOVERNMENT RESPONSES
19
FIRST RESPONSE: UNEMPLOYMENT INSURANCE
20
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov Dec
0%
10%
20%
30%
40%
50%
60%
70%
Armenia
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov Dec-20%
0%
20%
40%
60%
80%
100%
120%
140% Bulgaria
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov Dec
0%
50%
100%
150%
200%
250%
300%
350% Estonia
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Se
pO
ctN
ov Dec
0%20%40%60%80%
100%120%140%160%180% Latvia
Year over year growth in number of registered unemployed and unemployment insurance beneficiaries between 2008 and 2009 Unemployment insurance beneficiaries Registered unemployed
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov Dec
-20%-10%
0%10%20%30%40%50%60%70%80%
Poland
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov Dec
0%
50%
100%
150%
200%
250%
300%Romania
Jan
Feb
Mar
Apr
May Jun Jul
Aug Sep
Oct
Nov Dec
0%10%20%30%40%50%60%70%80%90%
Russia
Jan
Feb Mar
AprM
ay Jun Ju
lAug
Sep OctNov
Dec
0%
40%
80%
120%
160%
Turkey
Jan
Feb
Mar
Apr
May Jun Jul
Aug Sep
Oct
Nov Dec
-50%-40%-30%-20%-10%
0%10%20%30%40%50% Ukraine
ACTIVE LABOR MARKET PROGRAMS WERE SCALED UP IN SEVERAL COUNTRIES
Mon
teneg
ro
Bulga
ria
Slove
nia
Latvia
Lithua
nia
Estoni
a
Croati
a
Bosni
a & H
erzeg
ovin
a
Armen
ia0.00
0.10
0.20
0.30
0.40
0.50
0.60
200820092010 (planned)
Budgets for active labor market programs as a percent-age of GDP
SOCIAL POLICY RESPONSE: LAST RESORT SOCIAL ASSISTANCE
22
Number of beneficiaries of last-resort social assistance programs and number of registered unemployed Number of registered unemployed, thousands (left) Number of beneficiaries of LRSAs, thousands (right)
Jan
Feb
Mar
Ap
rM
ay Jun
Jul
Au
gS
ep Oct
No
vD
ec Jan
Feb
Mar
Ap
rM
ay Jun
Jul
Au
gS
ep Oct
No
vD
ec
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)Ja
nFe
bM
arA
prM
ay Jun
Jul
Aug Se
pO
ctN
ov Dec Jan
Feb
Mar
Apr
May Ju
nJu
lA
ug Sep
Oct
Nov 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 Ju
nJu
lA
ug Sep
Oct
Nov Dec Jan
Feb
Mar
Apr
May Ju
nJu
lA
ug Sep
Oct
Nov Dec
2008 2009
26,000
27,000
28,000
29,000
30,000
31,000
32,000
12,000
12,200
12,400
12,600
12,800
13,000
13,200 Montenegro
Jan
Feb
Mar
Apr
May Ju
nJu
lA
ug Sep
Oct
Nov Dec Jan
Feb
Mar
Apr
May Ju
nJu
lA
ug Sep
Oct
Nov 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 Ju
nJu
lA
ug Sep
Oct
Nov Dec Jan
Feb
Mar
Apr
May Ju
nJu
lA
ug Sep
Oct
Nov 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 Education budget protection: most countries Health budget protection: half of the countries
23
Latvia
Ukrain
e
Armen
ia
Russia
Roman
ia
Mold
ova
Mon
teneg
ro
Croati
a
Bulgari
a
Turke
y
-20
-15
-10
-5
0
5
10
15
Real GDP and Education spending growth, 2009
GDP Education spending
Total government expenditure
per
cen
t ch
ange
Latvia
Ukrain
e
Armen
ia
Russia
Roman
ia
Mold
ova
Mon
teneg
ro
Croati
a
Bulgari
a
Turke
y
-20
-15
-10
-5
0
5
10
15
20Real GDP and Health spending growth, 2009
GDP Health spending Total government expenditure
per
cen
t ch
ange
Source: Ministry of Finance of relevant countries and IMF, World Economic Outlook Database, October 2010.
CONCLUDING REMARKS
24
IMPROVE CRISIS RESPONSES WITH PROACTIVE MEASURES
25
• Unemployment insurance• Social Assistance
Make automatic stabilizers more responsive
• Unemployment insurance parameters• Social assistance parameters and activation
conditions• Binding minimum wages
Adjust program parameters to reflect crisis conditions
• Public works• Other programs
Activate new programs to fill coverage gaps
A GOOD CRISIS RESPONSE REQUIRES FISCAL DISCIPLINE, PLANNING AND DATA
26
Build up savings for hard times with prudent fiscal policies during good times
Factor in Efficiency costs Collect reliable and timely monitoring
indicators