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News announcement3 August 2020

JRC analyses COVID-19 impact on economy and labour markets to help guide EU response

The COVID-19 lockdown and mobility restrictions have had an asymmetric impact across EU labour markets.

JRC researchers are investigating the impacts of COVID-19 on households across the EU
JRC researchers are investigating the impacts of COVID-19 on households across the EU
© H_Ko adobe stock 2020

The COVID-19 lockdown and mobility restrictions have had an asymmetric impact across EU labour markets, with the most negative effects concentrating on those who were already vulnerable before the outbreak.

JRC studies on the impacts on the labour market will help to guide EU efforts to mitigate the socio-economic impact of the outbreak.

The COVID-19 outbreak is an unprecedented shock to the EU economy and society. Although the economic impacts have hit all EU countries, the effects are felt differently by different regions and population groups.

Economic impact of COVID-19 is uneven among EU regions

A territorial analysis carried out by JRC scientists shows that the economic consequences of the crisis do not necessarily mirror the epidemiological damage caused by the pandemic, but largely depend on the economic characteristics of the region.

The analysis, using data from the Commission’s spring 2020 economic forecast and the RHOMOLO model, shows the GDP impact on EU regions is on average -6.44%, with a strong variation from one region to another.

One response to lessen these impacts is the Commission’s Coronavirus Response Initiative Plus, which introduces flexibility in the use of structural funds to support those regions most in need.

The GDP losses are highly correlated with drops in employment rates, with regions that rely on tourism being the hardest hit.

The analysis called for targeted policy responses and reactions both at the EU and Member State level.

The main result of this analysis was contained in the European Commission Staff Working Document "Identifying Europe's recovery needs", which accompanied the Communication "Europe's moment: Repair and Prepare for the Next Generation".

The communication contained a proposal for the recovery of the EU’s economy, with a temporary reinforcement of the EU’s long-term budget for 2021 – 2027.

Poorest households most severely hit by lockdown although policies can absorb a significant share of the COVID shock

Simulations carried out by a JRC research team show that as a result of the COVID-19 pandemic the disposable income of European households would fall by 5.9% on average in 2020, if no policy measures are put in place to alleviate the impacts.

The impact of the lockdown is likely to take a proportionally greater toll on those with lower income, leading to increased poverty rates.

Policy interventions aimed at protecting those most directly hit by the crisis would substantially cushion this downfall.

Measures such as income subsidies, tax rebates and unemployment benefits could contain the toll on household income by 40%, and the increase in poverty could be reduced by 60%.

Large scale policy interventions at EU level, in particular through the European Recovery Package could absorb a significant share of the economic and social shock, especially in countries and regions most directly affected by the crisis and with tight fiscal constraints.

The package is also designed to help EU countries recover from the crisis and be better prepared for the future.

Telework can curb the negative repercussions of the crisis, but not for everybody

The ability to telework has become a crucial factor in mitigating job losses, supporting business continuity and shaping the pandemic’s economic and distributional consequences.

Workers, firms, and countries with better readiness to telework are better equipped to deal with the negative repercussions of the crisis, and manage future risks.

The outbreak-induced necessity to work from home has removed, at least temporarily, many of the barriers to telework.

But unfortunately, teleworking is still not for everybody. JRC scientists warn about the emergence of a new divide in the spring of 2020, between those who can telework and those who cannot. Teleworking may also exacerbate existing gender divides, notably on working mothers.

According to a new report by the JRC and Eurofound, "Teleworkability and the COVID-19 crisis: a new digital divide", the feasibility of telework is greater for high-paid jobs and jobs in larger firms.

The researchers estimated that over 90% of the jobs in the finance and insurance sectors can be done from home. Similarly, large shares of jobs in sectors such as information and communication (79%), education (68%) and other professional, scientific and technical activities (66%) can be done remotely.

The report also found that most clerical and administrative jobs, that before the crisis had only limited access to telework, can in fact be done remotely

By contrast, less than 20% of the employees working in sectors hard-hit by the COVID-19 crisis, such as retail, accommodation and food services, are able to work remotely. According to the report, three-quarters of the highest-paid employees can telework, against only 3% of the lowest-paid workers.

Similarly, over 60% of employees with tertiary education can telework, against less than 30% of those with upper-secondary education.

These are workers who, already before the COVID-19 crisis, were among the most vulnerable. A teleworkability divide could therefore exacerbate existing labour market inequalities.

EU recovery tools to support the hardest hit

The European Commission proposed on 26 May a major recovery plan for Europe based on harnessing the full potential of the EU budget. On 21 July 2020, the EU leaders agreed on this recovery plan and the multiannual financial framework for 2021-2027.

The Next Generation EU recovery tool foresees EUR 750 billion to support the hardest hit and to boost the EU Single Market.

The Just Transition Fund will support the regions and the sectors who have bigger steps to make towards recovery from the crisis.

The EU financial measures aim to protect workers from unemployment and loss of income to avoid permanent effect.

The Commission will adopt an action plan in early 2021 to implement the European Pillar of Social Rights. It stands ready to support Member States in this, in particular promoting short-time work schemes and upskilling and reskilling programmes that have proven effective in the past. The European Skills Agenda outlines several actions to boost digital skills.

In April 2020, the Commission proposed a new instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) is designed to help protect jobs and workers affected by the coronavirus pandemic.

It will provide financial assistance, in the form of loans granted on favourable terms from the EU to Member States, of up to €100 billion in total. These loans will assist Member States to address sudden increases in public expenditure to preserve employment.

Specifically, these loans will help Member States to cover the costs directly related to the creation or extension of national short-time work schemes, and other similar measures they have put in place for the self-employed as a response to the current coronavirus pandemic.

Related Content

Teleworkability and the COVID-19 crisis: a new digital divide

Households ́ income and the cushioning effect of fiscal policy measures in the Great Lockdown (PDF)

The territorial economic impact of COVID-19 in the EU


Publication date
3 August 2020