From pandemic shock to recession

PICTURE: it depended largely on the extent to which the activity could be moved home. see more

Credit: © Institute of Labor Economics (IZA)

Restrictions on the economic activity associated with the pandemic resulted in a massive reduction in working hours in March and April 2020. Only key post offices and those jobs that could be done from home were largely spared. After strict corona rules were relaxed, sectors particularly affected recovered relatively quickly, while other sectors saw a significant drop in hours. This is shown by a new study by economists from the class-Bonn cluster of excellence ECONtribute and the Institute for Labor Economics (IZA) based on detailed Dutch data.

In the early stages of the crisis, there was a massive decline in working hours in March, especially in the food services industry (minus 15 hours per week) and in the culture and tourism sector (minus nine hours). In the key health and social care sector, the decline in hours was significantly smaller at 2.5 hours. As Figure 1a shows, the change in working hours depended largely on the extent to which the activity could be moved home. For example, average working time in the financial and business services sector remained virtually unchanged with a slight minus of just under two hours.

In June, the picture was partially reversed (Figure 1b): The number of working hours in the food industry again increased significantly, more than halving the gap to pre-crisis levels. At the same time, there has been a more than twice as strong reduction in the number of hours in fields with a high level of work at home, such as financial and business services. Researchers attribute this finding to the fact that the “character” of the recession has changed: After the first “pandemic shock” with strong industry-specific declines due to government restrictions and the immediate effects of the virus, a general drop in demand followed affected the entire economy. This also meant that the “advantage of working from home” was no longer relevant: Figure 2 shows how the gap between low and high levels of work at home narrows between March and June.

The authors conclude that regulations on short-term work have made a crucial contribution to enabling companies to flexibly adjust working hours without causing waves of redundancies. There was also little shift in income distribution, although the reduction in the number of hours had a significantly greater impact on those on low incomes. “Here, government programs have a beneficial short-term effect. However, they are of little help when it comes to long-term changes in demand and may even be harmful,” says Hans-Martin von Gaudecker, professor of applied ECON Microeconomics at the University of Bonn and head of IZA. research team Structural Policy Assessment.

The study is based on the work of the CoViD-19 Impact Lab, in which von Gaudecker, together with his research team from Bonn and the Dutch University of Tilburg, analyzes the effects of the corona pandemic and its countermeasures. The goal is to quickly generate useful data in the current crisis and make it available to the public. Deeper analyzes follow in the medium term.


Data based on the Dutch LISS panel

The data were collected using the Dutch panel LISS (Longitudinal Internet Studies for the Social Sciences), which has regularly surveyed 4,500 households on various topics for more than ten years. Households are members of the Dutch population and respond to questionnaires online. For this data set, LISS participants aged 16 and over were interviewed in four waves of research in late March, April, May, and June. 6650 people completed at least one questionnaire in full. There is currently no data available for Germany in such abundance and present. However, the structural similarity of the Dutch and German labor markets means that the basic findings can be largely transferred to Germany.

The data collection was funded by the German Research Foundation (DFG) through the ECONtribute and through the TR / 224 Collaborative Research Center, IZA and the Dutch Research Council (NWO).

Further information on the COVID impact laboratory

ECONtribut: The only cluster of excellence in economics

The study was conducted as part of the ECONtribute. It is the only cluster of excellence in economics and neighboring disciplines funded by the German Research Foundation (DFG) and a joint initiative of the Universities of Bonn and Cologne. Cluster research focuses on markets at the interface between business, politics, and society. The cluster aims to advance a new paradigm for analyzing market failure in light of underlying social, technological, and economic challenges, such as increased inequality and political polarization or the global financial crisis.

Publication: Hans-Martin von Gaudecker, Radost Holler, Lena Janys, Bettina Siflinger, Christian Zimpelmann: Labor supply during locking and “New Normal”: the case of the Netherlands, ECONtribute Discussion Paper, Internet: / RePEc / ajk / ajkdps / ECONtribute_025_2020.pdf

Contact for journalists:
Katrin Tholen
ECONtribute: Markets and public policy
Tel. +49 228/737808

Contact the author of the study:
Prof. Dr. Hans-Martin von Gaudecker
Institute for Microeconomics
University of Bonn
Tel: +49 228 73-9357

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