By Verónica Escudero and Hannah Liepmann.
This blog posting was first published by the ILO in June 2020 and is available in English and Spanish.
As the devastating social and economic consequences of the COVID-19 crisis become apparent, a major challenge for governments is to limit adverse longer-term effects on labour markets. This effort requires a comprehensive policy response to lay the foundation for sustainable job creation. Thus, the ILO, in line with international labour standards, highlights the need for immediate action through macro-economic and sector-specific measures; specific support for enterprises, jobs and incomes; protection for workers in the workplace; and the reliance on social dialogue when setting up solutions (ILO, 2020g).
This brief focuses on the important role that active labor market policies (ALMPs) can play within this overarching strategy if they are integrated into income support measures. ALMPs include employment subsidies, start-up incentives, public employment programs, labor market services, and training programs (see Table 1 for definitions and examples). The brief discusses how ALMPs and income support can come together to support workers in the face of the pandemic and sustainably improve their employment and life trajectories, particularly in emerging and developing countries.
Policies aimed explicitly at improving workers’ prospects address a central challenge in emerging and developing countries. The lack of decent work opportunities disproportionately affects the most vulnerable groups of the population, such as the working poor and informal workers, who are usually overrepresented among youth, women, or migrant workers. The COVID-19 crisis has intensified pre-existing vulnerabilities and is imposing new challenges to the delivery of any policy due to lockdowns and confinement measures.
During the pandemic, many emerging and developing countries are relying on income support (through social protection systems), especially cash transfers (Gentilini et al., 2020; ILO, 2020a, 2020i). Aimed at ensuring income security, this support is indispensable in the context of COVID-19. For example, lockdown and social distancing measures have left millions of workers jobless and without protection, particularly informal workers. Addressing their basic food and health needs is pivotal (ILO, 2020g). Moreover, income support can stabilize economies during crises due to its positive effect on the demand for goods and services.
Photography: @macauphotoagency
Yet, income support alone does not necessarily maintain individuals’ attachment to the labor market, improve their skills and work experience, facilitate the matching between jobseekers and available vacancies, or directly create jobs. Other labor market policies, particularly ALMPs, pursue these goals. Combining income support with ALMPs can thus be an effective policy tool to protect incomes while also improving workers’ longer-term labor market prospects (ILO, 2019b).
The integration of ALMPs and income support can have an important and distinctive role during this pandemic. Prior to the COVID-19 crisis, countries around the globe had already combined ALMPs and income support. Such integrated approaches have shown beneficial effects on labor market and social outcomes, albeit under certain conditions that have been identified in the existing literature. These policies also had an important function in previous economic crises. The context of the COVID-19 crisis imposes the need to act quickly. Reliance on existing programs in the different countries, and hence already existing institutional capacities and knowledge, is thus important. Meanwhile, countries need to calibrate these programs to the unique challenges imposed by the pandemic. What specific gaps will these combined approaches fill and how can policies be adapted to attain these aims?
We argue that the combination of ALMPs and income support can play an important role in helping workers cope with the crisis due to its ability to support incomes, avoid layoffs and keep people attached to the labor market. In addition, this combination fosters (re)skilling and workers’ longer-term employment prospects. However, countries should plan the sequencing of policies strategically according to the different stages of the crisis. The needed combinations of policies will be different when supporting people during lockdowns, when activities resume with physical distancing, or while facing shortage of employment opportunities because of the crisis, and again when economic recovery eventually takes place. This brief examines these matters and concludes by discussing innovative delivery methods (e.g. modern technology) that can be used to limit health risks as well as options of financing the implementation of ALMPs and income support.