OECD Employment Outlook 2022

Building Back More Inclusive Labour Markets

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OECD Employment Outlook

9 September 2022

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2. Supporting jobs and incomes: An update on the policy response to the COVID‑19 crisis

Oliver Denk

Sebastian Königs

Abstract

Countries’ labour market and social policy response to the COVID‑19 crisis was fast, decisive and helped to avoid an economic and social meltdown. Two and a half years after the onset of the COVID‑19 pandemic, this chapter takes stock of the crisis measures still in place, with a focus on the policy areas where action has been particularly important: job retention schemes; unemployment benefits; paid sick leave; active labour market policies; and specific policies for women, young people, frontline workers and racial/ethnic minorities. It also presents an overview of countries’ labour market and social policy challenges and priorities for 2022, including those due to the economic fallout from Russia’s unprovoked war of aggression against Ukraine.

In Brief

OECD countries responded with unparalleled resolve to the COVID‑19 crisis. Labour market and social policies have been at the forefront of the battle to help to preserve jobs, incomes and livelihoods. By revealing weaknesses in labour markets and gaps in social protection, the crisis has also led some countries to review their long-term policy priorities. Two and a half years after the onset of the COVID‑19 pandemic, this chapter takes stock of the measures still in place and presents an overview of countries’ labour market and social policy challenges and priorities in 2022.

The chapter relies largely on countries’ responses to a policy questionnaire that was circulated in autumn 2021. It focuses on the policy areas where action has been particularly important: job retention schemes; unemployment benefits; paid sick leave; active labour market policies; and specific policies for women, young people, frontline workers and racial/ethnic minorities.

Countries’ labour market and social policy response has overall been proportionate to the extraordinary depth of the COVID‑19 crisis. Thanks to the ad-hoc emergency measures taken to complement the standard response of labour market policies and social protection systems, countries were able to support workers’ jobs and incomes and lay the foundations for a strong recovery. By the end of 2021, crisis measures had largely been rolled back, except in the area of active labour market policies.

The urgency with which support had to be provided led in some areas to limited targeting, higher‑than‑needed expenditures and possibly incentive issues. Meanwhile, labour market inequalities may have grown as some groups of heavily affected workers outside of the reach of the standard system were not sufficiently covered by emergency measures. In some cases, policy reforms are needed to close such gaps in labour market and social policy and to further improve labour market resilience in the future; in other cases, the peculiarity of the COVID‑19 crisis may not justify reform. COVID‑19 also disrupted long‑prevailing consumption patterns, shifting demand to different sectors, firms and products; hence, policies to support worker reallocation to jobs in high demand will be particularly important.

The main insights by policy area are as follows:

Job retention schemes: At the height of the crisis in 2020, 37 of the 38 OECD countries had a short-time work or related wage subsidy scheme. Since then, as the recovery progressed, the use of these schemes has strongly declined, from 20% of dependent employment to 0.9% in April 2022 (on average among the countries with available data and a scheme in place at some point during the crisis). Thirteen OECD countries had terminated their schemes entirely by November 2021. Other countries began to target their schemes more tightly, by reducing access (i.e. restricting support to firms most affected) or generosity (i.e. lowering subsidy rates).
Unemployment benefits: Most OECD countries extended unemployment benefits by improving access, notably for workers with insufficient contribution records, lengthening maximum durations and raising benefit generosity to account for the great difficulty of finding work during the crisis. Nonetheless, many countries with comprehensive job retention schemes experienced only small increases in unemployment benefit receipt. By January 2022, only few of the benefit extensions introduced were still in place. Most countries also rapidly and pragmatically extended support for self-employed workers, who often did not benefit from job retention schemes and had lesser access to unemployment benefits. In light of this experience, several countries are currently exploring ways of extending income protection for self-employed workers.
Paid sick leave: Particularly in the early phase of the crisis, paid sick leave played a crucial role in containing the spread of the virus and in protecting workers’ health, jobs and incomes, and many countries quickly extended their systems to improve coverage and reduce employer costs. Attention has since shifted to providing workers affected by “long COVID‑19” with adequate income and employment support.
Active labour market policies (ALMPs): ALMPs have been a crucial component of countries’ crisis response. After being expanded in 2020, budgets increased further in 2021 for both public employment services (in some 80% of countries) and active labour market measures such as training and employment incentives (in 60% of countries). To respond to evolving challenges, countries have taken widespread action, including speeding up digitalisation, increasing remote service delivery and adapting policy design. ALMPs continue to play an important role to reduce worker shortages and support worker reallocation post-COVID‑19.
Labour market and social policies to support women: While more women than men lost their job in the initial phase of the crisis, women’s employment rate has by now improved relative to men’s over the crisis period. Yet, through its peculiar nature as a public-health crisis, COVID‑19 brought a number of specific challenges for women: they are over-represented in the health care workforce, although not generally among jobs with high COVID‑19 exposure; their unpaid work burden at home further increased as formal childcare services were disrupted; and victims of domestic violence were particularly exposed to their abusers during lockdowns. Many countries took measures in the areas of flexible forms of work, leave, childcare and income support to help parents, and often mothers, to cope with the additional unpaid work, and to tackle violence against women and girls.
Specific policies for young people: Young people, although less vulnerable to the virus itself, have been particularly affected by the COVID‑19 crisis. Unlike in previous crises, they received immediate policy attention. Youth labour market outcomes improved quickly with the economic recovery, but some young people may require additional attention and support. These include: young people who graduated during the crisis; unemployed or inactive young people who are not registered with public employment or social assistance services; students with insufficient financial means; and young people experiencing poor mental health.
Specific policies for frontline workers: Frontline workers are workers who continued to work in their physical workplace and in proximity to others even at the height of the crisis, such as employees in health care, long-term care or essential retail. Countries have adopted a range of measures to reduce health risks and improve job quality for frontline workers, such as testing or vaccination requirements and initiatives to increase their pay. These measures do not go far enough, however, to permanently improve job quality and to address large worker shortages for frontline jobs.
Specific policies for racial/ethnic minorities: Half of OECD countries with available data have had specific labour market or social policies in place to support racial/ethnic minorities in the crisis. Support often pre-dated COVID‑19, but it was particularly valuable in the crisis and sometimes complemented by additional measures. Yet, public employment services have experienced increasing difficulties in finding job opportunities for jobseekers from racial/ethnic minorities. A wider range of programmes, including initiatives to promote upskilling, reduce discrimination and improve labour market attachment, would help jobs of people from racial/ethnic minorities to be more resilient when the next crisis hits.
Policy challenges and priorities for 2022: Countries are having to strike a difficult balance between addressing the labour market challenges resulting from the COVID‑19 crisis, mastering the structural transformations underway and supporting a strong and inclusive labour market – all while dealing with the economic and social fallout from Russia’s war of aggression against Ukraine. When asked in autumn 2021 about the main labour market challenges, countries’ concerns about the immediate crisis consequences trumped longer-term structural challenges. Key priorities in national recovery plans are strengthening employment services for jobseekers, supporting upskilling, improving labour market inclusion and shaping the transformation resulting from digitalisation and the green transition. The rise in inflation and the fallout from Russia’s war of aggression against Ukraine have moved up high on the policy agenda: OECD countries have adopted measures to soften the impact of higher prices, notably of energy, on the cost of living and to help to integrate refugees from Ukraine.

Introduction

The COVID‑19 pandemic led to an economic contraction not seen in OECD countries in more than half a century. Governments contained the labour market and social fallout from the crisis, shielding many workers and households against job and income losses. As this chapter shows, two and a half years after the COVID‑19 pandemic began, policy has moved on from the crisis response: few crisis measures are still in place and few have been converted into permanent policy that is on automatic stand-by in case of another shock.1

Yet, some of today’s most pertinent labour market and social policy challenges remain connected with the COVID‑19 crisis: significant worker shortages, rising prices and fears of scarring for vulnerable groups such as young people. Policy priorities in OECD countries have been shifting from crisis-fighting to tackling such legacies of the pandemic. COVID‑19 has also refocused policy makers’ attention on the digital and green transformations, while new challenges have emerged or been reinforced because of Russia’s war of aggression against Ukraine, in particular further increases in the cost of living and a high number of humanitarian migrants, especially in Ukraine’s European neighbours.

The chapter depicts where current labour market and social policy stands and where it is heading. Section 5 provides a detailed update of countries’ COVID‑19 policy response in the areas where action has been especially important: job retention schemes; unemployment benefits; paid sick leave; and active labour market policies. Section 5 puts the spotlight on specific policies for groups that faced particular difficulties during the COVID‑19 crisis: women, young people, frontline workers and racial/ethnic minorities. Section 5 looks beyond the COVID‑19 crisis and presents an overview of countries’ labour market and social policy challenges and priorities in 2022. Section 5 offers concluding remarks.

The analysis relies largely on the OECD Questionnaire on Policy Responses to the COVID‑19 Crisis that was circulated to all OECD countries in autumn 2021. Responses were received from 36 of the 38 OECD countries, though not all of these countries provided complete information for all policy areas. As the policy questionnaire was circulated before Russia’s war of aggression against Ukraine, the parts in the chapter that rely on the questionnaire do not account for the latest geopolitical developments.

An update of countries’ COVID‑19 policy support to workers and households

The COVID‑19 pandemic led to a major rise in government expenditure and public social expenditure. While detailed internationally comparable data on public social expenditure during the crisis are not yet available across OECD countries, national accounts can give a first indication of spending trends. According to these data, social expenditure – very broadly defined – increased by approximately 12% in real terms between 2019 and 2020 across 28 OECD countries on average (Figure 2.1). This figure refers to the sum of social transfers in kind (including for health care and education; +4%), social benefits other than transfers in kind (cash payments to households in form of social insurance, including pensions; +11%) and subsidies on production (+294%, with very large cross-country variation). Subsidies on production go beyond social transfers more narrowly and include government support to help employers to keep employees on their payroll (e.g. expenditure for job retention schemes) and government support to the self-employed (ISWGNA, 2020[1]).

Figure 2.1. A major rise in public social expenditure

The increase in social expenditure for 2020 was considerably larger than during the global financial crisis (+9% between 2007 and 2010). It corresponds to an increase of 4.7 percentage points of GDP, from 29.4% to 34.1%. In percentage changes, this is broadly in line with the increase in government expenditure as a whole, which rose from 42.7% to 49.5% of GDP (OECD, 2021[2]).

The increase in social expenditure likely reflects primarily the rise in spending on unemployment support and job retention schemes. Across a selection of 17 European OECD countries for which early expenditure estimates are available by programme type, spending on unemployment (including job retention schemes) nearly doubled relative to GDP between 2019 and 2020 (+94%; Eurostat (2022[3])). This is a much larger increase than for the other spending categories, including health (+13%) and family payments (+12%). The large relative expenditure increases on unemployment do not translate into an even more substantial rise in overall social expenditure because, even during crisis times, spending on unemployment only accounts for a small part of overall social spending, about 6% in 2020. Nearly 70% of social spending in 2020 went to pensions as well as health care and sickness benefits.

2.1.1. Job retention schemes

When the COVID‑19 crisis erupted in spring 2020, nearly all OECD countries used job retention schemes to provide timely and broad-based support to firms and workers affected by physical-distancing restrictions. These job retention schemes sought to preserve jobs and incomes of workers at hard-hit firms by paying subsidies to lower firms’ labour costs against reductions in hours worked. They have taken the form of: i) short-time work schemes that subsidise hours not worked; or ii) wage subsidy schemes that subsidise hours worked but can also be used to top up the earnings of workers on reduced hours. In both cases, contracts of employees remain in force while their work is partially or fully suspended. The analysis of job retention schemes in this section builds on earlier work in the last two OECD Employment Outlooks (OECD, 2021[4]; 2020[5]) and two policy briefs (OECD, 2022[6]; 2020[7]).

Job retention schemes limited costly layoffs and re‑hiring over a temporary shutdown of economic activity. They are also unlikely to have come at the expense of lost productivity growth initially, since the COVID‑19 shock hit high- and low-productivity firms indiscriminately. Hence, it was not only, or mainly, low‑productivity firms that received the subsidy, and the subsidy did not distort the survival chances of firms (Cros, Epaulard and Martin, 2021[8]). As the health and economic situation evolved, concerns about the economic costs of job retention schemes increased. Such economic costs may come principally in two forms: government support may go to jobs that do not need to be supported; or support may go to jobs that will anyway not come back, or come back only after an extended period (e.g. certain segments of the entertainment industry), slowing reallocation of jobs across firms. Evidence from job retention schemes in Australia, New Zealand and the United Kingdom suggests that these distortive effects have grown as economies recovered (Andrews, Charlton and Moore, 2021[9]; Andrews, Hambur and Bahar, 2021[10]).

Several countries phased out job retention support, and use has declined in others

Of the 38 OECD countries, all except Mexico operated a universal job retention scheme in the early phase of the COVID‑19 crisis. In 17 OECD countries, a scheme had already been in place before COVID‑19, while 20 OECD countries did not have a scheme and introduced one during the crisis. The countries that had a scheme in place before COVID‑19 often widened its access and increased generosity considerably and in some cases introduced additional schemes (Canada, Denmark). By November 2021, the reference date of the policy questionnaire, 13 of the 20 OECD countries that had introduced a scheme terminated it; hence, 24 of the 38 OECD countries still operated a universal job retention scheme (Table 2.1). Several countries (the Czech Republic, Ireland, the Netherlands, the Slovak Republic), that in November 2021 had operated a scheme, subsequently terminated it.

Countries supported an unprecedented number of workers at the beginning of the COVID‑19 crisis through job retention schemes, ten times as many as in the global financial crisis. The ending of the schemes in several countries in the context of a rapid recovery meant that the use of job retention support has fallen strongly: from a peak of 20% of dependent employment to 0.9% in March/April 2022 (on average among the OECD countries with available data and a scheme at some point during the crisis). There has also been a big decline in their use in the countries with schemes that still operated in March/April 2022. Ireland and Belgium were the countries that had the highest numbers of employees on job retention support (Figure 2.2). Belgium continued to make access to its short-time work scheme (chômage temporaire) easier, specifically for companies experiencing problems due to the war in Ukraine (for example supply of resources).

The reduced use of job retention support reflects two factors: lower demand by firms and workers for such support as well as reduced access and generosity offered by the programmes. As the recovery has been progressing, countries have increasingly targeted job retention support to firms and workers in two ways: i) by targeting it to firms, sectors or regions that have been particularly hard hit by physical-distancing restrictions; and ii) by reducing its generosity. The remainder of the section takes stock of the approaches that countries, which did not terminate their programme by November 2021, have taken to limit access and to limit generosity with the aim to target and scale down support.

OECD countries that had a job retention scheme in place already before COVID‑19	OECD countries that had introduced a job retention scheme during COVID‑19 that still operated in November 2021	OECD countries that had introduced a job retention scheme during COVID‑19 that was terminated by November 2021	OECD countries that did not have a job retention scheme during COVID‑19
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Korea, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, United States	Chile, Colombia, Czech Republic, Greece, Ireland, Netherlands, Slovak Republic	Australia, Costa Rica, Estonia, Hungary, Iceland, Israel, Latvia, Lithuania, New Zealand, Poland, Slovenia, Türkiye, United Kingdom	Mexico

Note: Canada and Denmark introduced additional job retention schemes during COVID‑19 that were terminated by November 2021. Greece introduced two job retention schemes, one of which was terminated by November 2021. The date for this table is 1 November 2021; countries may have terminated or reintroduced job retention schemes subsequently.

Source: National sources and OECD Questionnaire on Policy Responses to the COVID‑19 Crisis.

Figure 2.2. Use of job retention schemes: Nearing zero in most countries

Limiting access: Some countries restrict job retention support to firms most affected

Among the countries that as of November 2021 still operated a job retention scheme, several differentiated support by firm size, firm profitability, sector or region (Table 2.2). The intention of such differentiation is to target firms that were most affected by physical-distancing requirements, although some eligibility criteria may be the result of poor firm performance relative to competing firms, which reduces the effectiveness of targeting. Portugal, for example, adapted its scheme in mid‑2020, so that benefits are more generous for companies with greater turnover losses. In Austria, from mid‑2021 only firms in industries directly affected by the lockdown or that encountered a fall in sales of at least 50% between autumn 2019 and autumn 2020 received full job retention amounts. Korea provided special support to firms in 14 hard-hit sectors (including travel and tourism) and 7 “employment-crisis” regions. Japan introduced additional support to firms that shorten business hours in regions with a state of emergency or other government measures. However, half of the countries that as of November 2021 still operated a job retention scheme did not differentiate by firm size, firm profitability, sector or region (Belgium, Chile, the Czech Republic, Denmark, Finland, Germany, Greece, Norway, the Slovak Republic, Sweden, Switzerland and the United States).

Differentiation of job retention support
By firm size	By firm profitability	By sector	By region
Colombia, Italy, Japan, Korea, Spain	Austria, France, Ireland, Korea, Netherlands, Portugal	Austria, France, Italy, Korea, Luxembourg	France, Japan, Korea

Note: OECD countries that had a job retention scheme in place in November 2021 but did not differentiate support by firm size, firm profitability, sector or region: Belgium, Chile, the Czech Republic, Denmark, Finland, Germany, Greece, Norway, the Slovak Republic, Sweden, Switzerland and the United States. No information is available for Canada.

Source: OECD Questionnaire on Policy Responses to the COVID‑19 Crisis.

Limiting generosity: Some countries have reduced the subsidy rate for job retention

Of the 24 OECD countries that in November 2021 still operated a universal job retention scheme, 10 had reduced its generosity over the course of the COVID‑19 crisis. These reductions were especially large in the United States, Sweden, the Czech Republic and France (Figure 2.3). With the exception of the United States, the reduction in support came at least in part about by greater co-financing requirements for firms. Such co-financing has the advantage that it tends to improve the targeting of the financial support to firms and jobs in need and make it less attractive for workers to stay in jobs that will not become viable again. In line with this, take‑up rates for job retention support were close to three times as high in countries without co-financing as in countries with co-financing (as of November 2021), although with some heterogeneity across countries within each group. In the four countries that reduced government support the most (the United States, Sweden, the Czech Republic and France), these reductions have also been absorbed by workers in the form of lower incomes. Overall, despite these reductions, the public subsidy in November 2021 still tended to cover 50% of the labour cost of a worker who was on a job retention scheme on average in the countries that had a scheme in place. This is still well above the subsidy rates before the COVID‑19 crisis, even in the countries in which the scheme pre‑dates COVID‑19.

Adapting job retention schemes to the evolving crisis has been a major challenge, due to the high uncertainty about the outlook and varied effects of physical-distancing restrictions across groups of firms. The uncertainty about the future evolution of the health situation has made it difficult to plan ahead. Several countries that started scaling back job retention support had to scale it back up as the health situation worsened again. Adjusting eligibility and generosity too frequently may reduce the predictability of the system and undermine its effectiveness. At the same time, maintaining generous support and avoiding multiple adjustments runs the risk of unnecessarily increasing fiscal and economic costs. Overall, the crisis does not appear to have led to a greater adoption of permanent job retention schemes, as the majority of OECD countries that introduced a scheme have ended theirs.

Figure 2.3. Job retention support has become less generous

A priority going forward should be to learn from the experience of the COVID‑19 crisis and evaluate the effectiveness of job retention schemes in preserving jobs and supporting job creation. A key aspect of such evaluations should be to analyse the effectiveness of job retention schemes in protecting different groups of workers. Breakdowns of job retention support by different socio-demographic groups are often not available, preventing a more formal assessment of the distributional impact of job retention schemes. It would be important in the future that countries collect these statistics.

The OECD has undertaken one country evaluation to date for Switzerland; another evaluation is underway for Spain. Some OECD countries (Australia, Austria, France, Luxembourg, the Netherlands, Sweden) have evaluated their programmes or are planning evaluations for 2022‑24, while other countries (Canada, the Czech Republic, Germany, Hungary) have no such plans. The OECD study on Switzerland concludes that the short-time work scheme helped to preserve the jobs and incomes of different socio-demographic groups, including low-educated, temporary-contract and foreign‑born workers (Hijzen and Salvatori, 2022[11]). The Treasury evaluated Australia’s wage subsidy scheme after three and also six months and found that it was important for macroeconomic stabilisation, productivity and business recovery, and that it kept employees and employers connected (The Australian Government the Treasury, 2021[12]). The Cour des Comptes in France lauds the fast and massive rollout of the short-time work scheme, while pointing to insufficient cost control as a major issue (Cour des Comptes, 2021[13]).

2.1.2. Income support for workers affected by job and earnings losses

Income support for workers affected by job losses was a second pillar of governments’ efforts to cushion the effects of the COVID‑19 crisis on workers and households. In spite of the rapid introduction or expansion of job retention schemes, the COVID‑19 crisis caused massive job losses in the OECD area, although concentrated in a limited number of countries. At the end of 2020, around 22 million jobs had vanished in OECD countries compared with 2019 (OECD, 2021[4]). Finding new employment was difficult or impossible during lockdown periods, including for jobseekers that were already without work prior to the pandemic. Unemployment benefits and other out‑of‑work income support played a vital role in protecting workers and families’ livelihoods during these periods.

As restrictions to economic activity and social life were lifted, jobless numbers fell rapidly, particularly in Canada and the United States, where many millions of workers returned to their jobs following temporary layoffs. Total employment in the OECD returned to pre‑crisis levels at the end of 2021 and continued to grow in the first few months of 2022 – see Chapter 1. Still, substantial numbers of workers, including from sectors where the recovery was subdued, did not manage to return to employment and continued to rely on out-of-work support. In several countries, the support provided during the crisis has been shaping reform agendas, for example because the pandemic highlighted gaps in pre‑crisis support provisions, or because emergency measures altered perceptions of what constitutes adequate income protection.

Most OECD countries temporarily extended unemployment benefits for dependent workers

The majority of OECD countries (32 out of 38) extended entitlements to unemployment benefits during the COVID‑19 crisis. Nearly all of these countries adopted measures during the initial pandemic wave in spring 2020, extending benefit entitlements along one or several of the following three dimensions (Table 2.3):2

Improving access (19 countries) by reducing or entirely waiving minimum contribution periods, or by covering groups of workers who had previously not been entitled (such as workers whose contract was terminated during a probationary period, workers on unpaid leave and workers who had quit their job for a new job offer that fell through when the crisis hit). A number of countries also introduced new unemployment assistance benefits or made extraordinary payments to jobseekers who were not entitled to receive any unemployment benefits.
Extending benefit durations (16 countries) by lengthening durations outright, or by automatically extending entitlements that expired during the peak of the crisis.
Raising benefit amounts (12 countries) by introducing temporary lump-sum top‑ups to unemployment benefits, raising replacement rates, or by lifting benefit floors or ceilings. A number of countries also suspended progressive reductions in benefit amounts for those with longer unemployment spells.

By lengthening benefit durations and raising generosity, countries accounted for the fact that jobseekers, and notably those who had already been unemployed when the crisis hit, had only poor chances of finding new work at a time when large parts of the economy were effectively at a standstill. The type and scope of countries’ benefit extensions depended partly on the accessibility and generosity of their income support systems at the onset of the crisis.

	Improved access			Extended benefit duration			Raised benefit generosity
	Spring 2020	January 2021	January 2022*	Spring 2020	January 2021	January 2022*	Spring 2020	January 2021	January 2022*
Australia**	●	●					●	●
Austria							●
Belgium	●						●	●
Canada	●	●			●			●
Chile
Colombia	●						●
Costa Rica
Czech Republic
Denmark				●	●
Estonia**								●	●
Finland	●						●	●
France	●	●		●
Germany				●
Greece				●	●
Hungary
Iceland								●	●
Ireland	●	●	●
Israel	●	●		●			●	●
Italy				●	●
Japan				●	●	●
Korea		●	●
Latvia	●	●		●	●
Lithuania	●	●
Luxembourg				●
Mexico
Netherlands
New Zealand**	●						●
Norway	●	●	●	●	●	●	●	●	●
Poland	●						●	●	●
Portugal**	●			●	●			●
Slovak Republic				●
Slovenia	●
Spain	●	●	●	●	●	●		●	●
Sweden	●	●	●				●	●	●
Switzerland				●
Türkiye	●	●		●	●
United Kingdom							●
United States***	●			●	●		●
# of countries	19	12	5	16	11	3	12	12	6

Note: The table documents changes in either “first‑tier” unemployment insurance or “second‑tier” unemployment assistance programmes. A black dot for spring 2020 indicates that unemployment benefits were extended relative to the situation in January 2020. A black dot for January 2021 / January 2022 indicates that some of these extensions, or new extensions, were (still) in place, again relative to January 2020. A blank cell indicates that no extensions are in place (anymore) relative to the situation in January 2020. * Data for 2022 are preliminary; shaded cells for Israel indicate that information for 2022 is missing. ** Some unemployment benefit extensions are not shown in the table because they do not directly relate to the COVID-19 crisis: Australia and New Zealand increased earnings disregards and benefit levels after the expiry of their temporary COVID-19 measures in 2021 and 2022; Estonia made it possible for jobseekers to combine temporary work and receipt of unemployment benefits under certain conditions in September 2020; Portugal raised the amount of its Unemployment Social Allowance for households with children from 2022. *** Information for the United States refers to the federal level.

Source: OECD (2020[5]), OECD Employment Outlook 2020, https://doi.org/10.1787/1686c758-en, and the OECD tax-benefit database, oe.cd/TaxBEN.

Many unemployment benefit extensions were still in place in January 2021, but they have largely expired since

The benefit extensions carried out at the onset of the crisis were nearly always explicitly temporary, often initially time‑limited up to summer 2020. As the pandemic evolved in autumn 2020, many countries extended or reinstated these measures, while others introduced new ones. This included, for example, an extension of the income‑related component of unemployment benefits in Iceland, the temporary introduction of an unemployment assistance benefit in Poland (the Solidary Allowance) and lump-sum payments to recipients of unemployment insurance and unemployment assistance benefits in Austria.

By January 2021, over half of all OECD countries (23 out of 38) still had some form of unemployment benefit extensions in place relative to the pre‑crisis situation in January 2020. Those were mainly measures initially taken during the first pandemic wave and then extended into 2021, sometimes with adjustments to maintain the greater access and coverage, the longer benefit durations (e.g. the Pandemic Emergency Unemployment Compensation in the United States) or the higher benefit levels (e.g. the Coronavirus Supplement Payments in Australia, the suspension of benefit reductions for longer unemployment spells in Belgium and higher benefit floors and ceilings in Sweden). A few countries replaced earlier extensions through new, more targeted or less generous measures to account for the developing public-health and labour market situation. Canada, for example, phased out its Canada Emergency Response Benefits and instead introduced temporary changes to simplify access, increase benefit durations and raise generosity of its Employment Insurance programme. Some also introduced entirely new measures that were not directly related to those implemented in spring 2020: Estonia increased replacement rates during the first 100 days of benefit receipt, as well as the benefit floor and ceiling; France shortened the minimum contribution period from six to four months; and Korea introduced a new unemployment assistance scheme, the National Employment Support Programme.

Together, these measures considerably eased access to unemployment benefits for some groups. In January 2021, a 24‑year‑old jobseeker with a single month of prior work was entitled to unemployment benefits in 11 OECD countries, up from six in January 2020 (Figure 2.4, Panel A). Lithuania, Spain and Türkiye had completely scrapped minimum contribution requirements, and Israel substantially eased them; such reductions in contribution requirements are especially consequential for labour market entrants. In Canada and Korea, benefit entitlements relate to newly introduced unemployment assistance benefits.

In a small number of countries, unemployment benefit levels were still higher in January 2021 than before the crisis, as shown by simulations of the OECD TaxBEN model. Calculations refer to net replacement rates, the share of previous net earnings replaced through unemployment benefits, after two months of unemployment for a 24‑year‑old jobseeker, assuming a six‑month work history (Figure 2.4, Panel B). Substantial increases in the net replacement rate in several countries reflect the fact that this jobseeker would not have qualified for unemployment benefits at all before the crisis. Indeed, relative to its pre‑crisis level, the net replacement rate increased most in countries that substantially lowered their minimum contribution requirements (Israel, Lithuania, Spain and Türkiye). The net replacement rate for a young jobseeker was also above pre‑crisis levels in Ireland (due to the continued Pandemic Unemployment Payment), Australia (Coronavirus Supplement Payments), and Estonia and Sweden (increased unemployment benefit levels).

By January 2022, a little less than two years into the pandemic, unemployment benefit extensions introduced during the crisis had expired in most of the countries for which information is already available. Exceptions include the Nordic countries, which had maintained reduced work requirements (Norway, Sweden), longer maximum benefit durations (Norway) or higher benefit levels (Iceland, Norway, Sweden). In Japan, the extended unemployment benefit durations introduced in June 2020 were still in place. Ireland’s Pandemic Unemployment Payment was briefly reopened for new applications as the country introduced new public‑health restrictions in December 2021. In Spain, the generous extensions to unemployment benefits were suspended in March 2022. In three countries, unemployment benefit extensions carried out during the crisis have been permanent: Korea’s new unemployment assistance programme, introduced in January 2021, remains in place; Estonia and Poland have maintained their higher unemployment benefit levels.

Figure 2.4. In a few countries, unemployment benefits remained more accessible and generous for young jobseekers with short contribution periods in January 2021 than before the crisis

The COVID‑19 crisis highlighted the need for unemployment support for self‑employed workers

Self-employed workers have been particularly vulnerable to income losses during the crisis as typically they did not benefit from job retention schemes and often had less access to unemployment insurance benefits than dependent workers. At the onset of the crisis, only 11 of 36 OECD countries with available information offered self-employed workers the same unemployment protection as dependent employees; another seven offered partial access, i.e. with lower amounts and/or more stringent eligibility criteria than for dependent employees. In five countries, the self-employed had the option to join a voluntary unemployment insurance scheme, but membership rates were often low – under 1% of all self-employed workers in Austria and Korea, 3% in the Slovak Republic and 10‑15% in Finland (European Commission, 2022[14]; Park, 2020[15]). Thirteen countries did not offer any unemployment insurance benefits for self‑employed workers. This incomplete coverage left a significant part of the labour force exposed as the crisis hit: across the OECD on average, one in six workers are self-employed, with self-employment much more frequent in Mexico (one in three workers), Italy and Korea (one in four, Figure 2.5, Panel A).

At the onset of the COVID‑19 crisis, countries who already provided (some) self-employed workers with unemployment benefits were able to shore up support using existing structures: in Denmark, for example, self-employed workers could retrospectively join an unemployment insurance fund by paying a year’s contributions if they were affected by containment measures, and Ireland suspended minimum contribution requirements to its unemployment benefit programme.

Countries that had no systems in place to assess affected workers’ previous earnings and entitlements had to either create such structures quickly or to adapt their minimum income benefits. Austria, Norway, Switzerland and the United States, among other countries, introduced new emergency benefits for self‑employed workers that were tied to previous earnings or crisis-related losses. But carefully assessing previous income (especially the fluctuating income of the self-employed) takes time, particularly in the absence of established administrative procedures to do so. Some countries therefore relied on the self‑certification of losses, especially at the beginning of the crisis (e.g. Austria), risking precision in targeting. Others circumvented time‑consuming earnings assessments by providing flat-rate benefits (e.g. Canada, France, Italy). Chile, Germany, the Netherlands and to a lesser extent Mexico extended their existing minimum income programmes to make them more accessible to self-employed workers. These programmes are typically not designed for sudden (albeit catastrophic) income losses, but to support the long-term needs of low-income households, and are therefore often associated with careful means and asset tests. Extensions therefore included the easing or suspension of asset tests (thus allowing self-employed workers to draw benefits while keeping their business capital and any savings) and income tests on partner income (Figure 2.5, Panel B).

Already before the COVID‑19 crisis, many countries had been exploring how to shore up access to out‑of‑work benefits for self-employed and other non-standard workers. The pandemic made the need for equal access to out-of-work support for all labour market groups even more apparent: countries had to develop new programmes quickly without being able to carefully consider their design and implementation, leading to both gaps in emergency protection and overpayments. Unlike insurance‑based unemployment benefits, emergency support measures are also not balanced by contributions, perpetuating the existing differences in labour costs between employment forms (OECD, 2019[16]).

In light of this experience, several countries are currently considering extending income protection for self‑employed workers. Italy introduced a new unemployment benefit for the previously uncovered group of para-subordinate professionals (unlicensed professionals, such as web-designers, who are legally self‑employed but economically dependent on one or very few clients) on an experimental basis from 2021 to 2023. The benefit does not insure against total loss, but significant reductions in income (at least 50% over the last three years) and cushions half of this loss. It is therefore well tailored to the circumstances of freelancers relying on a small number of clients. Similarly, Germany is considering extending access to voluntary unemployment benefits for self-employed workers without an insurance record as dependent employees. In France, there are plans to extend unemployment support to those with unviable businesses (currently only those whose business has been closed by court order are eligible).

Figure 2.5. Access to unemployment benefits for self-employed workers was limited before the pandemic

One argument against unemployment protection for the self-employed is that running a business does – and should – imply risk, because self-employed workers control the success of their businesses in ways that employees do not. Providing them with unemployment insurance can therefore be prone to significant moral hazard – with no employer to confirm a layoff it is difficult to establish whether a loss of income is caused by a (prior) lack of effort or external circumstances leading to business failure (OECD, 2018[17]). However, not all self-employed activity is equally entrepreneurial, some self-employed workers are economically dependent on one or very few clients, and moral hazard can also be a challenge for dependent employees. Careful policy design and complementary measures can mitigate moral hazard, e.g. making benefit receipt conditional on active job search and other activation measures, including training (OECD, 2019[16]). As countries seek to ensure effective social protection in a changing world of work, one pragmatic way to circumvent moral hazard problems would be to insure self-employed workers only for income losses during sector- or even economy-wide shocks, as opposed to idiosyncratic ones (Franzini and Raitano, 2020[18]). This would limit moral hazard (although seasonality needs careful consideration), and provide protection in future crises, along with access to activation, training and employment support services. Only partially insuring the risk of job loss can also lower contributions relative to standard workers, an advantage given that the self-employed are necessarily liable for both employee and employer contributions.

Unemployment benefit receipt has remained low in many countries with comprehensive job retention schemes

In spite of countries’ measures to improve the access to, and coverage of, unemployment benefits during the crisis, including for self-employed workers, receipt numbers have mostly remained low.3 This is illustrated in Figure 2.6, which depicts for a selection of countries with available data trends in the monthly number of recipients of unemployment benefits, and job retention support, between 2019 and mid‑2021, expressed relative to the working-age population. Countries with comprehensive job retention schemes experienced massive temporary inflows into these systems in the initial phase of the crisis while unemployment benefit receipt rates remained largely stable. This applies to Belgium and France (Panel A), two countries with pre‑existing short-time work schemes, where unemployment benefit receipt numbers remained virtually flat. Australia and the United Kingdom experienced even slightly larger inflows into their newly established wage subsidy schemes, while unemployment benefit receipt rose by 4‑5 percentage points (Panel B). Also in Denmark and Sweden, two countries where the reduction in working hours during the crisis was lower (OECD, 2021[4]), the pre‑existing job retention schemes that got activated (in Sweden) or extended (in Denmark) in March 2020 absorbed most of the labour market shock. At the peak of the crisis, around 7% of the working-age population received job retention support, while the share of unemployment benefit recipients rose by only about 1 percentage point (Panel C). These trends contrast with the numbers observed in the United States, where the pre‑existing job retention scheme – the Short‑Time Compensation – remained marginal throughout the crisis. Here, the labour market shock was nearly fully absorbed by the generously extended unemployment benefit system, and the number of claimants, including workers on temporary layoff, reached nearly 16% of the working-age population. In Korea, the labour market shock largely translated into reductions in hours worked while the receipt numbers for both job retention support and unemployment benefits remained very low in international comparison (Panel D).4 This may partly reflect weak benefit coverage of the non‑employed in Korea (OECD, 2021[4]).

Figure 2.6. The interplay of unemployment benefits and job retention support across countries

These trends illustrate the different – and lesser – role that out-of-work income support has played during the COVID‑19 crisis compared to previous economic downturns. In previous crises, unemployment insurance benefits represented the “first line of defence” of social protection systems, supporting the incomes of workers who lost their jobs often for extended time periods. During the global financial crisis, for example, the number of unemployment insurance benefit recipients relative to the working-age population rose by 90% between 2007 and 2009 across the OECD and declined only little in 2010 (OECD, 2014[19]). During the current crisis, broadly accessible and generous job retention schemes represented this “first line of defence” in most countries, temporarily protecting jobs rather than just incomes, and taking most of the pressure off unemployment benefit systems.

2.1.3. Paid sick leave

During the COVID‑19 pandemic, paid sick leave5 played a crucial role in containing the spread of the virus and protecting simultaneously workers’ health, jobs and incomes (OECD, 2020[20]). First, paid sick leave complemented other epidemic containment measures, reinforcing their action. The introduction of temporary paid sick leave for COVID‑19‑related diseases in the United States, for example, contributed to an 18% decrease in full-time presence at the workplace and an 8% increase in staying at home, as evident from cellular mobile data (Andersen et al., 2020[21]). Its introduction led to an estimated one daily prevented COVID‑19 case per 1 300 workers, or a 56% lower case number (Pichler, Wen and Ziebarth, 2020[22]). Second, paid sick leave contributed to protecting workers’ health by providing income support to workers (potentially) exposed to the virus, therefore permitting them to self-isolate. Survey data for Israel collected in the lead‑up to the COVID‑19 outbreak indicated that 97% of adults reported they would quarantine if their wages were compensated, whilst compliance would drop to 57% without such compensation (Bodas and Peleg, 2020[23]). Third, paid sick leave helped to preserve jobs by reducing pressure on unemployment benefit systems and job retention schemes. Job losses in the United States between 8 March and 25 April 2020, measured by the number of initial unemployment insurance claims, were larger in the 38 states that did not have statutory paid sick leave policies in place (Chen et al., 2020[24]). Fourth, paid sick leave supported workers’ incomes by ensuring an uninterrupted continuation in income for those either affected by the virus or otherwise asked to self-isolate. The temporary expansion of paid sick leave in several countries to parents who had to take care of children as schools were closed further strengthened its role as an income security instrument (OECD, 2020[20]).

Many countries expanded paid sick leave during the first pandemic wave, but only few have made additional changes since

Most OECD countries reacted to the outbreak of the COVID‑19 pandemic with paid sick leave extensions of various types, improving the accessibility and increasing the generosity of the system. Most of the measures taken, however, were temporary and remained limited to people affected by COVID‑19. The main measures included:

Easier access and broader coverage: some countries facilitated access to benefits by delaying or waiving the need for medical certification or allowing online applications. Other countries lowered the qualification requirements to entitlement to paid sick leave. Canada, for example, initially reduced the entitlement requirements from 600 to 120 insurable hours of employment (increased again to 420 hours as of September 2021). Over 25 OECD countries eased or extended access to sickness benefits for self-employed workers who were sick with COVID‑19 or in quarantine (OECD, 2020[20]). Before the pandemic, self-employed were entitled to sickness benefits in many countries, but access was often limited or voluntary (OECD, 2019[25]).
Access to paid sick leave during quarantine: more than half of all OECD countries extended benefit coverage also to quarantined workers or introduced new crisis payments for both sick and quarantined workers. Australia, for example, introduced a special unemployment benefit that people who are sick from COVID‑19 can claim as soon as they have exhausted their accrued employer-provided sick-pay entitlements (OECD, 2020[20]).
Abolition of waiting periods: about one in three OECD countries temporarily abolished waiting periods, thus improving workers’ income security and slightly raising the implied income replacement rates. France, for example, waived its waiting period for both employer-provided sick pay and sickness benefits. Ireland increased benefit levels and the maximum duration of its sickness benefits, and waived the waiting period (OECD, 2020[20]).
Exemptions of employer costs: about one in three OECD countries also introduced measures to support or eliminate employer costs for sick pay (ESPN, 2021[26]). In Luxembourg, for example, a temporary legal change allowed the National Health Fund to pay for the sick leave from the first day instead of taking over only after the end of the month of the 77^th sick day.
Introduction of hitherto non-existing entitlements: before the pandemic, two OECD countries stood out as having no statutory regulations on paid sick leave in place. Both countries decided to react. The United States, which had no federal paid sick leave requirements6 before the pandemic, introduced two weeks of mandatory paid sick leave for workers with COVID‑19‑related symptoms or in quarantine, paid by the employer initially but fully reimbursed by the federal government (the programme expired in 2021). Korea provided exceptional sickness benefits through its 2015 Epidemic Act to workers who were hospitalised because of COVID‑19 (OECD, 2020[20]).

Limited additional measures were taken to strengthen paid sick leave systems as further waves of the pandemic unfolded, but about half of the extensions made during the first pandemic wave or during the first year were still in place in December 2021 (Table 2.4). A number of countries with only basic sick leave systems, or no such system at all, are considering structural reforms. This includes in particular Ireland, which published a draft Sick Leave Bill with statutory employer-provided sick pay in November 2021 (yet to be approved by parliament at the time of writing), Korea, which is piloting a government‑provided sickness benefit from July 2022 onwards, and New Zealand, which is currently developing a government‑provided social insurance that will cover both unemployment and temporary sickness.7

	Extensions still in place	Extensions expired
Reduction in waiting period	Chile, Denmark, Estonia, France, Portugal, Spain, Sweden	Canada, Ireland, Latvia
Increase in benefit level	Australia, Belgium, Chile, Finland, Greece, Italy, Korea, New Zealand, Poland, Portugal, Spain	Canada, Czech Republic, Ireland, Slovak Republic, Slovenia, United States
Reduction in employer costs for sick pay	Austria, Denmark, Estonia, Germany, Hungary, Italy, Korea, Norway, Spain, Sweden	Latvia, Luxembourg, Slovak Republic, Slovenia, United States

Note: All changes are limited to COVID‑19 except in Belgium, Norway and Sweden where the measures include all types of illness. The changes refer to measures affecting employees though some include self-employed. Countries with missing information are not reported.

Source: OECD Questionnaire on Policy Responses to the COVID‑19 Crisis; OECD (2020[20]), “Paid sick leave to protect income, health and jobs through the COVID-19 crisis”, https://doi.org/10.1787/a9e1a154-en; ESPN (2021[26]), Social protection and inclusion policy responses to the COVID‑19 crisis, https://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=10065&furtherNews=yes.

Take‑up of paid sick leave reflects the changing role of paid sick leave over the course of the pandemic

The changing role of paid sick leave systems over the course of the pandemic, and their interaction with other policy interventions, is reflected in benefit take‑up. Data for four European countries show a notable increase in take‑up at the onset of the pandemic in spring 2020 in Finland and Germany and smaller upticks in Latvia and possibly Austria (Figure 2.7). The rapid shift to teleworking in many occupations and the introduction or expansion of generous job retention schemes limited further rises in paid sick leave numbers. Workers became less exposed to the virus, and if they were, many continued receiving job retention support rather than having to go on paid sick leave. As a result, take‑up up rates declined again. In the subsequent phases of the crisis, changes in take‑up reflect the development of the pandemic and societies’ public-health responses – with variation over time and across countries in vaccination, incidence, and hospitalisation rates, the abolition of extensions implemented in paid sick leave systems, and the recognition of “long COVID‑19” as an occupational disease (see below). The most recent available data, for late 2021, show an increase in take‑up of paid sick leave with the emergence of the Omicron variant, when – in the context of high vaccination rates and a much lower hospitalisation risk – higher COVID‑19 infection rates did not prompt costly containment measures such as lockdowns. Indeed, many countries responded to rising incidence rates and associated worries about the continuation of essential services and infrastructure by easing quarantining rules rather than further adjusting paid sick leave regulations or introducing further confinement measures. Overall, the take‑up of paid sick leave in the four countries has only been a little higher during the COVID‑19 pandemic than in 2019, and “traditional” seasonal variation has often been larger than the variation during the pandemic.

Figure 2.7. Take‑up of paid sick leave has strongly varied over the course of the pandemic

Policy priorities are changing as countries move out of, and beyond, the pandemic

It is still early days to draw clear lessons for the functioning of paid sick leave systems and the extensions taken during the crisis because empirical evidence on take‑up, health outcomes, and the impact on labour markets and poverty prevention are still limited. Simultaneous adaptations and increases in other benefits, such as job retention schemes, limit the specific lessons that can be learned for paid sick leave schemes alone.

One take‑away is that a good way of preparing for future pandemics, or even future COVID‑19 waves, would be to implement mechanisms that, in times of crisis, automatically and temporarily extend paid sick leave entitlements and reduce employer costs.8 Only few OECD countries have reacted to the COVID‑19 pandemic by introducing, or improving, such legislation. Others could consider to follow their lead.

Moving out of the acute phase of the pandemic, the support for the many people with long COVID‑19 needs to become a top priority, especially as their return to work appears to be difficult (HSE, 2021[27]). Many OECD countries are moving ahead by recognising COVID‑19 as a work injury or an occupational disease (ILO, 2020[28]). This may give workers access to longer-term compensation of lost earnings (“workers’ compensation”), better coverage of medical expenses and better return-to-work support.

More than half of all OECD countries now consider COVID‑19 to be an occupational disease, at least for specific groups of workers (Figure 2.8). The main economic sectors considered as risk groups for COVID‑19 include health care, residential care, and social work (Eurostat, 2021[29]), all characterised by female‑dominated workforces. In Austria, the number of sectors covered is larger and includes occupations in public and private welfare (schools, kindergartens and nurseries), medical laboratories and prisons. In Japan, sick workers are entitled to workers’ compensation if they require recuperation care and long-term leave because of “long COVID‑19” symptoms. In Italy and Slovenia, contraction of COVID‑19 at work entitles workers to compensation under the claim of an accident at work. In Germany, infections with COVID‑19 can be recognised as an accident at work for all groups of workers, with rather tight regulations, and as an occupational disease for workers working in health services, welfare services and laboratories. A few other countries make a similar distinction.

Figure 2.8. More than half of all OECD countries recognise COVID‑19 as an occupational disease

In practice, access to workers’ compensation benefits may be easier, and the number of recognised cases ultimately larger, in countries that recognise COVID‑19 as an occupational disease only for workers in certain economic sectors or occupations.9 In such cases, the requirements for proving infection risks may be, and typically are, lighter, because the risk is high and the infection route often clear. By contrast, in countries that cover all sectors in principle, rules can be much tighter.

2.1.4. Active labour market policies

Active labour market policies (ALMPs) assist jobseekers and people at risk of losing their job in finding or remaining in quality employment. They also support employers in finding employees with the right skills. ALMPs encompass the provision of labour market services (employment services and administration of benefits) and active labour market measures (training, employment incentives, sheltered and supported employment and rehabilitation, direct job creation and start-up incentives).10 Throughout the COVID‑19 crisis and recovery ALMPs have played a crucial role, and they will continue to be of importance in the face of new labour market needs.

The changed environment: Challenges facing the public employment services

Prior to the onset of the pandemic, the majority of public employment services (PES)11 already faced significant challenges. For many countries, this took the form of ongoing needs to further invest in the IT infrastructure of the PES, shortages of (skilled) staff and challenges related to effective co‑operation with other organisations. Many countries were also struggling with providing appropriate support for jobseekers with multiple or severe employment obstacles (90% of the OECD countries for which data are available) and young jobseekers (83% of countries).

COVID‑19 not only brought new challenges, but also exacerbated many pre‑existing challenges faced by the PES – see Figure 2.9. In particular, for many countries the COVID‑19 crisis contributed to the emergence of, or intensified, the need to redesign the ALMP package to better align it with the labour market situation (86% of countries), to make investments in IT infrastructure (79%), to increase staffing levels (79%) and to further increase the budget for ALMPs (79%). In addition, the pandemic put on hold plans by some PES to change their internal functioning or implement major digital projects which became less of a priority in the actions required to address the consequences of the pandemic (European Commission, 2021[30]).

Figure 2.9. COVID‑19 exacerbated pre‑existing challenges and brought about new ones for the public employment services

The need to redesign the package of ALMPs is reflected also in the enhanced difficulties during the crisis in finding job opportunities for, and providing supports to, jobseekers facing major or multiple obstacles and young jobseekers (noted by 79% and 76% of countries respectively). This often requires resource‑intensive individualised ALMPs in co‑operation with other service providers such as health and social services (OECD, 2021[31]). The COVID‑19 crisis also contributed to challenges in supporting employers, with more than four‑in‑five countries having experienced increased difficulties in filling vacancies in certain frontline occupations.

Spending on active labour market policies further increased in 2021, but to a lesser extent than in 2020

At the onset of the COVID‑19 pandemic in 2020, countries responded rapidly by increasing their budgets for PES and other ALMPs (OECD, 2021[32]). Despite the increased needs and budgets, actual spending did not increase in all countries and for all types of ALMPs, as the provision of ALMPs faced significant challenges during the times of stricter confinement and physical-distancing rules. The increase in public spending was generally higher for passive labour market policies (unemployment benefits, job retention schemes). The increases in actual spending on ALMPs and passive labour market policies were in many countries higher than the increase in the number of unemployed, as both types of policies aimed to prevent unemployment and income losses before these could materialise, thus covering groups beyond the (registered) unemployed.

Faced with ongoing high demand for ALMPs in 2021 and having established better ways to provide ALMPs in the context of the challenging health situation, heightened levels of public spending on ALMPs continued in 2021 for many countries (Figure 2.10). Budgets for labour market services increased in almost four‑in‑five countries in 2021 relative to 2020. This effect was somewhat more muted for active labour market measures, for which public expenditure increased in 64% of countries for 2021. Within the basket of active labour market measures, training and employment incentives saw the highest share of countries increasing expenditure for 2021. Indeed, investing in training measures and well-targeted employment incentives can be particularly effective in supporting the labour market during a crisis and the subsequent recovery (Card, Kluve and Weber, 2018[33]; OECD, 2021[4]; 2021[34]).

However, not all countries opted to tread the same path, with approximately one‑in-five countries decreasing expenditure for labour market services in 2021 relative to 2020 (Canada, the Czech Republic, Finland, Luxembourg, Mexico). This trend was sharper for public expenditure on active labour market measures, where one‑in-three countries reduced public expenditure in 2021 relative to 2020. This reduced expenditure in some countries was likely due to a combination of factors, including the significant pressure on public finances since the onset of the pandemic and the fact that the peak in unemployment had been reached during 2020 for many countries.

Looking forward, among countries where budgetary decisions for 2022 were known at the end of 2021, two‑in-three expect to further increase the budget for labour market services in 2022 relative to 2021, and one‑half for active labour market measures. Overall, this means that in 2022 ALMP budgets will be significantly higher than in 2019 before COVID‑19, even though OECD-wide employment recovered its 2019 level already at the end of 2021 – see Chapter 1. These trends highlight a broad recognition within many countries of the ongoing role to be played by ALMPs in promoting labour market outcomes. Countries should also be aware of the risks associated with withdrawing budgets too quickly as, for example, truly committing to enhanced digitalisation will take substantial investments before these generate efficiency and effectiveness gains.

Figure 2.10. The majority of OECD countries increased expenditure on active labour market policies in 2021, with many countries planning further increases in 2022

The significant increase in resources put in place as a result of the pandemic cannot be assumed to have necessarily enhanced effectiveness and coverage of ALMP provision. Continuous monitoring and evaluation of policy measures will be important to ensure that resources are only allocated to those areas which have a proven track record of providing effective support to jobseekers and employers.

Re‑orientation of public employment services strategies and operating models, including via greater digitalisation

In response to the COVID‑19 crisis, PES across the OECD adapted their strategies and operating models to better deliver their services. In almost three‑in-four countries, the PES have made, or plan to make, changes to the way in which they work with employers. This exceeds by far the extent of reported changes in other areas. For example, Lithuania’s PES plan to establish a separate employer services team to work strategically with employers on national level. Slovenia is working to further develop its existing formal national partnership with employer associations on a regional and local level to find new solutions for tackling labour market bottlenecks. For many countries, such changes go hand-in-hand with efforts to enhance digitalisation of services and processes, including increased online outreach efforts and implementing online job-matching and recruitment services. Australia, for instance, created a new Jobs Hub, which helps to connect jobseekers with employers and provides tools to aid jobseekers in identifying jobs that match their skills profile.

A high share of countries have also adjusted, or plan to adjust, their PES case management strategy, in terms of the frequency or intensity of job search assistance for jobseekers (66% of countries) and in how tasks are allocated among PES staff (57%). In bringing about change in this area, some countries (including France, Iceland, Japan, Lithuania, Mexico, Slovenia) have increased or plan to increase the intensity of supports provided to certain groups of jobseekers, such as individuals at high risk of becoming long-term unemployed, women, young people and migrants. In addition, more than half of countries have adapted job search requirements for jobseekers. In some cases, this took the form of a temporary suspension or relaxation of job search obligations for jobseekers during confinement periods, while more recently countries have been taking steps to strengthen these requirements again.

Across almost all areas of change to PES operating models and strategies, both implemented and planned, changes are associated with greater digitalisation efforts. This includes developments in reaching out to jobseekers and the inactive (e.g. Italy’s development of apps to reach out to young people out of work), improving the profiling of clients (e.g. Luxembourg’s use of artificial intelligence in a new jobseeker profiling method) and enhancing the job-matching process (e.g. Flanders’ development of a Talent API to compare supply and demand of new vacancies with client files and CVs). The United States seeks to reduce administrative burdens across public sector agencies (including employment services) and calls on them to design and deliver services that people of all abilities can navigate, use technology to modernise and simplify processes, and consider ways to reduce the “time tax” in getting people the services they need.

Many countries are also in the process of implementing wider‑scale reforms to their PES strategies and operating models. Examples include the new Nordic labour market service model in Finland, which came into effect in May 2022 and aims to support rapid employment and re‑employment by introducing more intensive support to jobseekers and on an earlier basis than was the case previously. The move to this model precedes an even larger reform, which will see employment services transferred to municipalities in 2024. In Australia, the Workforce Australia reform aims to deliver a more modern and sophisticated service, where job-ready jobseekers can self-manage their return to work using digital services. The digital employment services platform will also support upskilling, proactive employer engagement and matching jobseekers with job opportunities. Sweden is scaling up contracting out to private employment services, via an elaborate reform which is expected to begin implementation in 2022.

Adapting the design and mode of delivery of active labour market policies to support an inclusive recovery

Faced with containment measures restricting the ability for in-person service delivery during the pandemic, countries needed to adapt the mode of delivery of ALMPs in order to continue their service provision. The route to solving this problem was most commonly investment in the digitalisation of PES services and processes. While some countries had already taken steps towards a more digital provision in preceding years, the COVID‑19 pandemic undoubtedly acted as an accelerant to the digital advancement of many PES (OECD, 2022[35]). Such digitalisation efforts were particularly prevalent in the area of job search support and counselling, where three‑in-four countries made changes to the mode of delivery (largely involving increased use of telephone and digital channels) in 2021 relative to pre‑pandemic times (Figure 2.11). Examples include the e‑AMS tool introduced by the Austrian PES (AMS) to assist with the online provision of services for jobseekers, including distance counselling, and the introduction of a Rapid Return to Work Service in New Zealand which was a phone‑based employment service lasting up to six weeks to support clients with work readiness, assessing transferable skills and job interview preparation. The other common area of changes to modes of delivery was training, with 70% of countries implementing changes to deliver these initiatives digitally in 2021.

Figure 2.11. Countries have adapted the design of active labour market policies in response to the crisis

Countries also made changes to the targeting of ALMPs. This was most common in the areas of employment incentives and training, where 63% and 30% of countries altered the targeting of these initiatives, focusing on groups most impacted by the crisis and those at risk of long-term unemployment. Examples are the expansion of the coverage of Korea’s Special Employment Promotion Incentive to include jobseekers registered with the PES already from their first month onwards and changes to the eligibility criteria for Ireland’s JobsPlus recruitment subsidy to make it available earlier to persons under 30 years of age.

Countries also made changes to ALMPs to support sectoral and occupational reallocation. This was most prevalent in the provision of training, with 35% of countries making changes in this area in 2021. These efforts centred on focussing training efforts on emerging workforce needs and sectors experiencing skills shortages. Going forward, measures to improve skills and support jobseekers who are unlikely to find a job in their previous sector or occupation will be increasingly important to connect people with jobs (OECD, 2021[34]).

These trends in adapting ALMP design are likely to continue during 2022. The most cited areas for intended change are the mode of delivery of job search support and counselling (53% of countries) – much of which is related to further digitalisation initiatives – and the target groups of active labour market measures (39%). Examples include a new youth engagement contract launched in France in March 2022 to offer individualised and reinforced support for young people aged between 16 and 25 who are far from employment (including young people with disabilities) and the future Employment Act in Spain which will extend the list of priority groups for employment policies (to people with limited intellectual capacity, migrants, beneficiaries of international protection, female victims of gender-based violence, people belonging to ethnic minorities and workers from sectors undergoing restructuring).

Many countries also plan to introduce new ALMPs to meet labour market needs. Some prominent examples include a Portuguese pilot project (Incubadoras Sociais de Emprego) to encourage a more active and collaborative approach to job search among jobseekers, a Finnish experiment on recruitment subsidies for sole entrepreneurs and Sweden’s plans to introduce an entry jobs programme (etableringsjobb) to stimulate employment for newly arrived immigrants and the long-term unemployed. With the aim to improve the targeting of ALMPs, some countries are identifying groups of jobseekers in need of better support (e.g. Mexico intends to place increased focus on certain vulnerable groups such as young people, women, migrants or refugees), while other countries seek to expand supports beyond registered jobseekers by increasing efforts to target those at risk of unemployment (e.g. Latvia).

Post-COVID‑19 priorities for active labour market policies and public employment services

Moving forward, countries will need to be mindful of the ongoing role to be played by ALMPs in supporting jobseekers, displaced workers and employers and leverage the investments made during the pandemic to promote a more resilient and inclusive labour market. This includes committing to continued investment in the digital capacity of the PES, while ensuring that steps are taken to ensure that people without digital skills or means of accessing digital services are not excluded from PES support.12 In addition, countries should continue to invest in programmes that help jobseekers, displaced workers and those at risk of job loss to transition across sectors and occupations.

Due to the wide variety of programmes adapted or introduced over the course of the pandemic, in addition to large‑scale increases in public expenditure to enable these changes, it is important that these measures are evaluated to assess their effectiveness. Action should then be taken swiftly on the basis of the evaluation results, to terminate or improve measures found to be ineffective.

As countries take steps to further digitalise, emphasis should be placed on making better use of technology and data. Technology and data have the potential to increase efficiency in administrative processes, enhance jobseeker profiling, target support to individual needs, match jobseekers with vacancies and imbed a monitoring and evaluation framework of ALMPs into the policy making process. As in the case of specific labour market measures and services, it is also vitally important to monitor and evaluate the impact of digital tools beyond their take‑up. This will allow countries to better understand their effects on the labour market and service provision, and to fine‑tune them.

More recently, Russia’s war of aggression against Ukraine has been posing new challenges to the PES in many OECD countries – particularly those neighbouring, or in close proximity to, Ukraine – that have been facing massive refugee inflows. With work and access to the labour market playing an important role in the integration and social inclusion of refugees (see Chapter 1 and OECD (2016[36])), PES will need to adapt their offerings to this rapidly evolving situation. One initiative is to flag vacancies that can be particularly suitable for refugees due to lower requirements for national language skills. Moreover, information provided in Ukrainian (including PES directly hiring Ukrainian refugees and training them to support other refugees), language training, quick recognition of foreign qualifications and skills and fast delivery of work permits are needed. Many countries have already adapted their services along these dimensions.

Spotlights on specific policies for women, young people, frontline workers and racial/ethnic minorities

Women, young people, frontline workers and racial/ethnic minorities are groups that experienced particular difficulties in the COVID‑19 crisis – see Chapter 1. This section puts the spotlight on specific policies that OECD countries have had in place to support them.

Spotlight 1: Labour market and social policies to support women during the COVID‑19 crisis

The COVID‑19 crisis, through its peculiar nature as a public-health crisis, has had a gendered impact on labour market and social outcomes, and brought specific challenges for women. While more women than men lost their job initially, women’s employment rate has by now improved relative to men’s over the crisis period. And while women are over‑represented in health care – globally, they make up two‑thirds of the health care workforce (Boniol et al., 2019[37]) – a slightly smaller share of women than men worked in jobs with high COVID‑19 exposure (see Chapter 1). Women were also over-represented in the hardest-hit sectors within the informal economy, making them vulnerable to job loss with less access to social protection (OECD, 2021[38]). At home, they continued to do the large majority of unpaid work, resulting in increased care burdens when formal care services were closed or disrupted. During lockdowns, victims of domestic violence were more exposed to their abusers and faced increased risks of violence (OECD, 2022[39]; 2020[40]). These pressures put women under particularly high psychological strain and risks of poorer mental health. Indeed, women were more at risk of depression than men, and mothers of young children were particularly likely to report that the pandemic has negatively affected their mental health (OECD, 2022[39]; 2021[41]; 2021[42]).

Unpaid work increased during the pandemic, especially for women

The closure of formal care facilities brought a commensurate increase in households’ care burdens, while the suspension of the food and service industry also meant an increase in non-care housework. Much of this increased unpaid work fell on women, though there are large differences across OECD countries. According to the 2020 OECD Risks that Matter Survey (OECD, 2021[43]), mothers with young children were nearly three times as likely as fathers (62% versus 22%) to report that they took on most or all of the additional unpaid care work related to school or childcare facility closures. Even in countries where the additional unpaid work was shared between partners, the prior unequal distribution of housework meant that the additional work weighed much more heavily for women. Before the pandemic, across the OECD on average, women spent about two hours more per day on unpaid work than men (Queisser, 2021[44]).

To help parents to cope with the issues imposed by the additional unpaid work, governments took measures in the areas of flexible forms of work, leave, childcare and income support (OECD, 2022[39]). Governments assisted parents by providing emergency additional paid or unpaid leave, which was crucial to mitigate the impact of childcare and school lockdowns, though the leave periods were often not long enough. Examples include the adjustment and extension of parental leave arrangements and/or the provision of care‑related leave entitlements and benefits (e.g. Australia, Canada, Chile, Denmark, Ireland, Israel, Korea, Latvia, Luxembourg, Norway) also in the form of additional part-time parental leave (e.g. Belgium), as well as tax reliefs for small and medium-sized enterprises providing paid sick and family leave wages to their employees (e.g. the United States). Other measures supported childcare availability and accessibility by granting financial assistance to childcare providers during the pandemic (e.g. Ontario in Canada, the Czech Republic, the United Kingdom), by ensuring the availability of different modes of childcare provision (e.g. Hungary), or by strengthening childcare benefits (e.g. Chile, Latvia, Slovenia). Additional interventions include emergency income support to families through extraordinary allowances, one‑off payments or the extension of the disbursement of family benefits (e.g. Czech Republic, Hungary).

Working from home can be a double‑edged sword for women

While before the COVID‑19 pandemic, women seem to have been only slightly more likely to telework than men, women shifted to telework much more quickly than men in the first phase of the pandemic as schools and other childcare facilities were closed. In May 2020, the difference between the shares of male and female workers working from home was 18 percentage points in Australia, and nine in France (Ker, Montagnier and Spiezia, 2021[45]). It is still unclear to what extent these higher rates of teleworking among female workers reflect gender‑related occupational differences, and hence potential differences in the “teleworkability” of male and female jobs, or mainly gender differences in teleworking behaviours within occupations. It also remains to be seen whether the shift to telework is temporary or to what extent it becomes persistent (Queisser, 2021[44]).

Telework has its pros and cons for gender equality. During the COVID‑19 crisis, it seems to have helped to protect women, and especially mothers, from completely exiting the labour force (OECD, 2022[39]), and OECD data show that both mothers and fathers are optimistic that technology will improve work-life balance (OECD, 2021[42]). Nonetheless, during the pandemic, teleworking mothers suffered negative consequences in terms of productivity (Alon et al., 2022[46]), interruptions during work hours (Andrew et al., 2020[47]) and higher childcare burden (Boll and Schüller, 2021[48]). Gendered changes in work patterns deriving from telework need to be cautiously considered, as they have implications for gender disparities in labour market outcomes, the work‑life balance of women and men, and gender equality more broadly (Queisser, 2021[44]). While reduced commuting times and the flexibility of working around care commitments are obvious advantages, blurred boundaries between work and non‑work times and spaces can negatively impact work-life balance, especially for women. Furthermore, there is a risk that women who require this flexibility could be seen as less productive and committed in the workplace (Chung, 2018[49]). Depending on workplace practices, teleworking can also lead to less visibility, especially if teleworking is much more common among women than men.

Women entrepreneurs under strain

The COVID‑19 crisis has had a disproportionate effect on female entrepreneurs relative to their male peers. Business closure rates of female‑led businesses across the world were about 7 percentage points higher than those of male‑led businesses between January and May 2020, at 27% vs. 20% (OECD/European Commission, 2021[50]). Although this gender gap subsequently narrowed, the closure rates for women-led businesses remained higher than those for men-led businesses in October 2020 (16% vs. 14%). Even among businesses that continued to operate, women entrepreneurs were more likely to be affected adversely. For example, self‑employed women in Germany were more likely to experience an income loss of more than 35% compared to men (Kritikos, Graeber and Seebauer, 2020[51]), while self‑employed women in the United Kingdom were also more likely to experience reductions in hours worked and earnings (Reuschke et al., 2021[52]).

This reflects a number of different factors. Women are overrepresented in many of the industries that have been most affected by the crisis, such as food and beverage services, accommodation services, personal services, arts and entertainment, and the retail trade. And again, there are large gender disparities in the burden of additional unpaid work. Between May and October 2020, about one‑in‑four women business leaders stated that they spent at least six hours per day on domestic responsibilities such as home schooling and childcare relative to 11% of male business leaders (Facebook/OECD/World Bank, 2020[53]). Women were also sometimes not as well supported by COVID‑19 emergency measures for entrepreneurs, which in most countries were designed to be gender-blind. This is partly because women entrepreneurs are less likely to use bank loans (many programmes relied on existing bank products), and because women-led businesses are smaller on average than men‑led businesses (some supports have minimum thresholds for income from self-employments). At the same time, women entrepreneurs also typically had less access to resources (e.g. external finance) and networks, and differences in financial knowledge likely played a role (OECD, 2022[39]). However, some countries introduced measures that were explicitly targeted at women business owners. In Costa Rica, for example, the FOMUJERES project supported businesses owned by women or groups of women operating in the areas of agriculture, crafts, textile services.

Victims of domestic violence more exposed to their abusers

The onset of the global pandemic brought an increase in officially reported incidents of domestic violence, of calls to helplines, and of visits to websites offering support and assistance (Leight, 2022[54]; OECD, 2021[38]). In Australia, for example, two‑in‑three women who experienced physical or sexual violence by a current or former co-habiting partner since the start of the COVID‑19 pandemic reported the violence had started or escalated since the pandemic began (Boxall et al., 2020[55]). Many countries correspondingly adopted additional measures during the crisis (OECD, 2022[39]). These range from broad gender-inclusive recovery plans and funds that set the fight against violence against women and girls as one of their objectives (e.g. Australia, Canada, Iceland, Italy and Sweden) to specific (emergency) support for the continuation and adaptation of services for violence survivors. Examples include new or strengthened emergency helplines, websites and web apps (e.g. Canada, Chile, Costa Rica, Greece, Hungary and Portugal); increased assistance through resource centres, crisis intervention units, drop-in services and direct support provision (e.g. Australia, Canada, Costa Rica and Korea); information, outreach and awareness raising activities (e.g. Austria, the Czech Republic, Greece, Latvia and Portugal); as well as capacity building for staff, guidance provision and financial support to organisations operating in the field (e.g. Canada, Costa Rica, Greece, Iceland, Korea, Latvia, Portugal and Sweden). Some also engaged in data collection, the creation of special task forces and increased inter-governmental co‑operation (e.g. Canada, Greece, Luxembourg, Sweden and Switzerland); and strengthened judiciary support through, for example, the application of more severe criminal punishment for gender-based violence cases (e.g. Costa Rica, the Czech Republic and Korea).

Spotlight 2: Protecting young people from scarring effects and economic hardship

As in previous crises, young people have borne a disproportionate share of the labour market and social cost of the COVID‑19 crisis, although they have been less vulnerable to the virus itself. Recognising the need for rapid action, most OECD governments included in their emergency support packages a range of measures specifically targeted at young people (OECD, 2021[56]). The support reflects not least the lessons learned from 2008‑09 global financial crisis, when government support for young people who were not in employment, education or training (NEETs) often came too little, too late. As OECD economies bounced back from the initial COVID‑19 shock and labour market outcomes improved, youth unemployment rates also returned to their pre‑crisis levels in many – though not all – OECD countries. Meanwhile, the recovery in young people’s employment rates still lags that of older adults – see Chapter 1. In the context of these developments, it is important not to lose sight of the young people most heavily affected by the crisis for whom support has not always been adequate. This group includes the cohort of young people who entered the labour market during the crisis; young NEETs who are not registered with public employment or social assistance services (the so-called “hidden NEETs”); students with insufficient financial means; and young people experiencing poor mental health. As highlighted in the Updated OECD Youth Action Plan (OECD, 2021[57]), they will require additional support to avoid long-lasting scars on their careers and life outcomes.

Supporting young labour market entrants

Many OECD countries have deployed measures to support young labour market entrants in finding and keeping jobs since the beginning of the COVID‑19 crisis. Around a third introduced new hiring subsidies for employers who recruited young people, or extended existing schemes during the pandemic; another third already had such schemes in place prior to the crisis (OECD, 2021[56]). In Italy, for example, employers can now receive an exemption of up to 100% of employer contributions to social security over a period of three years (up to a maximum EUR 6 000 per year) when they hire on a permanent basis a 15‑35 year‑old who is NEET. In more than half (54%) of the 24 OECD countries that have hiring or wage subsidies in place, the number of young workers (15‑29 year‑olds) benefiting from such subsidies increased between October 2019 and October 2021.

While the literature finds mixed results for hiring and wage subsidies for young people, programmes targeted at disadvantaged young people tend to be more cost-effective than those aimed at young people more generally (Bördős et al., 2017[58]; Kluve et al., 2019[59]). Combining hiring subsidies with additional support measures, such as on-the-job training, can further improve the long-term benefits for the subsidised workers. However, stringent training conditions would have to be compensated with sufficiently generous subsidies to cover employers’ opportunity cost and enhance their participation (Caliendo, Künn and Schmidl, 2011[60]; Roger and Zamora, 2011[61]). Only few OECD countries have support or conditions attached to their fiscal incentive schemes: out of the 21 countries for which such information is available, eight mention on-the‑job training requirements; seven countries request on-the‑job mentoring; four countries oblige companies to keep the subsidised employee for a certain period after the subsidised contract ends; only one country (Austria) offers support to the subsidised employee to find a new job opportunity post-subsidy. Going forward, careful evaluation of the newly introduced or expanded measures is necessary, to avoid that the available subsidies go to young people who would have likely found a job also in the absence of the subsidy (deadweight losses). Where needed, general programmes should be adjusted and targeted to those groups who can benefit the most, for example low-skilled young people who have been unemployed for a longer period.

Many countries have used similar fiscal incentive schemes to support apprenticeships during the crisis. Particularly smaller employers have been reluctant to take on apprentices during the crisis because of the economic uncertainty, financial difficulties, and concerns about how to organise work-based training while respecting physical distancing. As a result, young people often faced troubles finding apprenticeships or work experience opportunities. To encourage and support companies who continued training young people during the crisis, eight countries (Australia, Austria, France, Germany, Ireland, New Zealand, Switzerland and the United Kingdom) introduced new incentive schemes for hiring or retaining apprentices, and another eight scaled up existing schemes (Belgium, Greece, Italy, Korea, Luxembourg, the Netherlands, Norway and the United States) (OECD, 2021[56]). There is some evidence that these schemes may have been effective at supporting the provision of apprenticeship positions: at least eight OECD countries with such schemes in place even experienced an increase in the number of apprenticeship enrolments between the school year 2019‑20 and 2021‑22. In France, where strengthening uptake of apprenticeships has been a priority for the government since before the COVID‑19 crisis, the number of apprenticeship placements rose by 42% in 2020 relative to 2019, and by an additional 37% in 2021. By contrast, Germany experienced a substantial decline in the number of apprenticeship contracts signed in 2020 and 2021, which implies that an unusually high number of young people may have left school without a qualification during the crisis (OECD, 2021[62]). As financial incentives for employers to take apprentices likely come with substantial deadweight losses – i.e. apprenticeships are being subsidised that would have been provided even in absence of a subsidy – their use during the recovery period and thereafter should be evaluated carefully and directed to specific sectors or companies where needed (Kuczera, 2017[63]).

Reaching out to the “hidden NEETs”

In addition to supporting young labour market entrants, PES quickly adapted their services since the start of the crisis to provide rapid support under very complex labour market conditions to workers who lost their jobs or had to reduce their hours worked (see Section 2.1.4). However, not all young people who are unemployed or inactive reach out to PES for support, for a variety of reasons: they may not be entitled to income support; they may not be aware of the support they can receive; or they may lack trust in public authorities. Pre‑crisis data from 2019‑21 show that only 40% of unemployed 15‑29 year‑olds contacted a PES or used their vacancy announcements to find work on average across 29 OECD countries. The shares ranged from less than 15% in Canada, Chile, Mexico and the Netherlands to more than 70% in the Czech Republic, Greece, Lithuania and the Slovak Republic. In comparison, among unemployed 30‑64 year‑olds, the cross-country average for using PES support as a resource to find work was 53%. The experience from the global financial crisis has illustrated that re‑engaging young people in education or work becomes increasingly difficult after long periods of inactivity (Carcillo et al., 2015[64]; OECD, 2016[65]).

During the COVID‑19 crisis, countries have therefore used a combination of outreach tools to establish, and maintain, contact with young people in need of employment support, including to young people not in employment, education or training who are not registered with public employment or social assistance services (the “hidden NEETs”). Across 28 OECD countries for which such information is available, partnerships between the PES and local-level stakeholders (e.g. schools, NGOs, etc.) have been the most popular outreach measure. They are in place in 24 OECD countries (Figure 2.12). Some countries also formally track all school dropouts and provide official guidelines for outreach activities for all involved stakeholders, though the shares are much lower (39% of countries in 2021 in both cases). Only a minority of countries have peer-to-peer outreach in place, one example being the “young marketers” in Sweden (OECD, 2016[65]). A number of countries have made outreach to young people a priority for their employment services during the crisis, including Korea and Spain where the PES were given the institutional mandate to reach out to unregistered NEETs. In Australia, the Faster Connections and Greater Support for Young People Budget measure, announced in October 2020, devotes AUD 21.9 million (EUR 14.2 million) to connecting young people with employment services more quickly to encourage earlier intervention and provide greater support for young people in online employment services. In the Netherlands, 35 Crisis Regional Mobility Teams work closely with employment services, employer organisations and trade unions to provide additional support to jobseekers and those at risk of unemployment, with young people being one target group of this scheme.

Figure 2.12. Local-level partnerships are the most widespread tool for reaching out to young people

For many young people who look for a job, basic counselling and job search support will be sufficient, especially with the recent uptake of economic activity. However, young people facing major or multiple employment obstacles may need more comprehensive, tailored measures to support their labour market inclusion. Of the 35 countries for which data are available, 21 mentioned difficulties in finding job opportunities or providing individualised support to young jobseekers, in 19 of them this challenge further intensified during the COVID‑19 crisis. To ensure efficient use of limited resources, (digital) profiling tools can be used to identify and prioritise young people at risk of long-term unemployment. Contracting out employment services to external providers or collaborating with local stakeholders may be an option to increase capacity to deliver individualised support (OECD, 2021[32]). At the end of 2021, three‑in‑four OECD countries mentioned that they provide individualised support to unregistered NEETs who are brought in contact with the PES.

Providing income support to students affected by job loss

Working students have been among those suffering hardest during the COVID‑19 crisis.13 Many of them worked in sectors heavily hit by the crisis, including hospitality and tourism, with few immediate alternative employment opportunities available. Working often fewer hours, on temporary contracts and with short work histories, these young people have weaker employment protection and less access to social protection. They were also less likely to qualify for some of the emergency support measures introduced or expanded during the crisis, such as job retention schemes not available to part-time workers, unemployment benefits with minimum contribution requirements, or minimum-income benefits with an age threshold. For these young people, the loss of a part‑time job can mean a hefty drop in income and bring acute hardship, particularly as they often do not have significant savings that could help to cushion the income shock.

At least 11 OECD countries therefore put in place specific emergency income support measures for students in post-secondary education and at universities at the start of the pandemic (OECD, 2021[56]). These measures usually targeted students who lost part-time jobs, were unable to find work, or experienced financial hardship (Austria, Canada, Colombia, Denmark, France, Germany, Ireland, Japan, the Netherlands, Norway and the United States). Measures taken included the introduction of new allowances, expansion of eligibility of existing measures to students, and adjustments to tuition fees and loan repayments.

The financial hardship experienced by students raised the broader question of the income support measures that countries have in place for this group. At the end of 2021, full-time post-secondary students were entitled to some type of income support in 20 out of 30 OECD countries with available information. However, unemployment benefit and assistance programmes typically come with strict minimum contribution and job availability requirements, for which full-time students would not qualify. In only six OECD countries, a 20‑year‑old full-time post-secondary student with three months of cumulative work history would be eligible for unemployment benefits or assistance after job loss if actively looking for work. In only seven countries, this young person would qualify for social assistance benefits. Eligibility to social assistance typically depends on household income, for young people often also parents’ income. Even young people living on a low income outside their parents’ home will generally not be entitled to social assistance benefits below a certain age threshold (e.g. 24 years in Lithuania or 26 years in France). More common income support measures are education grants, low-interest loans, housing support or temporary emergency income support measures, which are available in 12 of the studied OECD countries. In some countries, such support can be substantial, like in Denmark where post-secondary students can receive a state education grant of DKK 6 397 (EUR 860) per month. In other countries, like France, the support consisted of one‑off emergency aid worth up to EUR 500 for students in sudden financial difficulty because of the crisis (OECD, 2021[56]). The gaps in income support for students revealed by the crisis sparked discussions in several countries to expand access, including in New Zealand, where the government already increased social benefits for young people.

Ensuring integrated support for young people experiencing poor mental health

The COVID‑19 crisis continues to have a significant impact on the mental health of many young people, with young people reporting significantly higher prevalence of symptoms of anxiety and depression than other age groups throughout the pandemic (OECD, 2021[66]; 2021[41]). In March 2021, based on data from a selected number of OECD countries, young people were 30% to 80% more likely to report symptoms of depression or anxiety than adults (OECD, 2021[67]), a pattern that has been confirmed since. For example, in France, 42% of 18‑24 year‑olds reported symptoms of anxiety in February 2022, compared to 23% in the general population (Santé Publique France, 2022[68]), while in the United States, almost half of 18‑29 year‑olds were reporting symptoms of anxiety or depression, again in February 2022 (National Center for Health Statistics, 2022[69]). Disruptions to schooling, education and work have not only weakened protective factors for young people’s mental health such as daily routines and social interactions, but also resulted in disruptions in access to mental health services and supports (OECD, 2021[70]). In recognition of the challenges posed by the pandemic for young people’s mental health, at least half of OECD countries have strengthened mental health supports for young people (OECD, 2021[56]). Yet the scale of these measures has often been insufficient to meet the sharp rise in support needs among young people, which came on top of high levels of unmet need for mental health care that existed from before the pandemic (OECD, 2021[70]).

As outlined in the OECD Recommendation on Integrated Mental Health, Skills and Work Policy, the factors that determine mental health status are diverse, and therefore an integrated approach to mental health policy is required that includes measures to promote better mental health among young people in education, employment and welfare systems in addition to measures within health systems. Even before the pandemic, across OECD countries, students indicating mental distress were 35% more likely to have repeated a grade at school, while adults with mental health issues were 20% less likely to be in work (OECD, 2021[66]). Targeted measures are needed to promote better mental health among young people at risk of long-term social and labour market exclusion, including the inactive, unemployed and early school leavers, given individuals with mental health conditions are overrepresented in such groups.

OECD countries’ efforts to strengthen supports for young people with mental health conditions outside of the health system during the pandemic have largely focused on expanding mental health support and increasing awareness of mental health in the education system. In France, the chèque psy étudiant scheme, launched in February 2021, provides up to three sessions with a psychologist without charge for all university students and supported more than 180 000 students in 2021. In the United States, the presidential discretionary budget for 2022 more than doubled the funding for mental health support, with grant expansions for schools to connect young people to services, train staff to help them to identify mental health issues, and increase awareness of mental health among students. The United Kingdom’s Mental Health Recovery Plan funds mental health support including for children and young people and allocated additional funding for schools and colleges to train mental health leads in February 2022.

Fewer initiatives have been taken across OECD countries that promote the mental health of young people in the workplace and young jobseekers. Most measures to promote good mental health in the workplace do not target young people specifically; besides sick leave and return-to-work policies (see Section 2.1.3), one focus has been on disseminating tools and guidelines to both employees and employers on maintaining good mental health in the context of the pandemic. It is particularly important amidst the pandemic that young jobseekers with mental health conditions receive both employment and mental health support simultaneously. Evidence suggests that such integrated support – often through services based on the Individual Placement and Support (IPS) model – is more effective than standalone mental health or employment support (Killackey et al., 2018[71]; OECD, 2021[66]). A few countries have expanded the provision of such integrated support for young jobseekers, although this often reflects the implementation of commitments that pre‑date the pandemic. Australia has continued to expand IPS trials targeted at young people and, as of 2021, IPS-based services were available in 50 headspace centres that provide easy-to‑access mental health support for young people. In Norway, the government is shifting from trials to scale‑up of supported employment for individuals with mental health conditions, including through targeted measures at young people at risk of school dropout.

Spotlight 3: Improving job quality for frontline workers

Frontline workers are workers who continued to work in their physical workplace and in proximity of other people even during the heights of COVID‑19 – see Chapter 1. The most typical example are health care workers, but other frontline workers are employed in social and long-term care, the police, the fire service, essential retail and certain forms of transport. School teachers and workers in early childhood education and care were often at the frontline as well, although many countries closed schools and care institutions for small children at least in the initial phase of the crisis. Staff employed in restaurants, hotels and tourism‑related activities are also in close contact with clients, but many businesses were required to close when health risks were high.

The COVID‑19 crisis highlighted the importance of frontline jobs and workers quite plainly for the bare functioning of the economy, during a pandemic like this one, but also more generally. It was the dedication of frontline workers working in hospitals, care homes, supermarkets and elsewhere that avoided an even bigger human and social catastrophe. Nevertheless, frontline workers tend to earn less than other workers, in part due to their lower levels of education and a greater exposure to employers’ market power – see Chapters 1 and 3 and OECD (2022[72]). Some frontline workers come from vulnerable groups, such as young people, migrants and racial/ethnic minorities. The public policy concern is that frontline workers are the over-worked and underpaid.

Special provisions for frontline workers: Reducing health risks and improving job quality

The threat from COVID‑19 for frontline workers in health care, social and long-term care, essential retail, etc. was not that of losing their job; quite the contrary, they were needed more than ever. Rather, the problem was that they had high exposure to the virus in the workplace (sometimes also during the commute to the workplace) and that their working hours were often long. Policy measures that increased access or generosity of job retention schemes, unemployment benefits and active labour market policies – discussed in earlier sections of this chapter – were less relevant to them, as they mostly remained in employment. What mattered most to frontline workers were measures to reduce risk of infection and to improve other aspects relevant for the quality of their job, in particular working hours and pay.

To reduce risks of infection at work, many OECD countries strengthened occupational safety and health obligations for different groups of frontline workers. As the ones most exposed to the virus at work, frontline workers also benefited from general restrictions to the economic and social lives of citizens that countries implemented at various points of the crisis to limit the number of infections: closures of schools, workplaces and public transport, cancellations of public events, stay-at-home requirements, restrictions to public gatherings and internal movements, and international travel controls (Ritchie et al., 2020[73]).

Some OECD countries made vaccination against COVID‑19 mandatory for health care and long-term care workers (Australia, Costa Rica, Hungary, and Italy). Costa Rica, Hungary and Italy also made vaccination mandatory for police officers, Costa Rica and Hungary in addition for school teachers and workers in early childhood education and care. As of November 2021, one‑half of OECD countries required vaccination or vaccinated-recovered-tested certificates for health care and long-term care workers (Figure 2.13) and one‑third for firefighters or police officers. These requirements have made hospitals and care homes safer, for patients but also for frontline workers, although some workers object to the state imposing such rules on them.

Figure 2.13. Health care and long-term care workers at the frontline

One‑off crisis rewards were one way through which countries compensated frontline workers for the elevated health risks at their job during COVID‑19 and for exceptional working hours and commitment. Rewards were especially common for health care workers (76% of the OECD countries surveyed) and long-term care workers (53%). Frontline workers in private firms, such as in retail, mostly did not receive publicly funded rewards. The value of the crisis rewards may have been higher than their monetary amount as they served as recognition of the importance of frontline workers’ jobs. Belgium is among the OECD countries that have made particularly active use of publicly financed crisis rewards, including for frontline workers: health care and long-term care workers received one‑off premiums, health care workers in addition a salary increase and long-term care workers in addition a “corona day of leave”; firms in the hospitality sector could give their employees tax-free consumption vouchers.

Permanently higher pay, rather than one‑time crisis rewards, would be an even more powerful way to raise pay and recognise the value of frontline jobs. There have been only few government-led initiatives of this kind, particularly outside health and long-term care, likely as wages in private‑sector frontline occupations are not under the government’s remit. Belgium, Chile and Slovenia report of initiatives to promote pay in health care and long-term care, Hungary, Latvia and Switzerland for health care, and the Czech Republic for long-term care. More thought will have to be given why pay is low in many frontline jobs and how to achieve pay increases in frontline jobs where pay is inefficiently low. This would help also to reduce shortages in labour supply for these jobs (see also Chapter 1); conversely, the current situation with worker shortages for frontline occupations is conducive to augment wages in these professions.

COVID‑19 and the rising shortage of frontline workers: How countries are responding

Worker shortages have arisen in many segments of the labour market – see Chapter 1. One cluster of jobs for which shortages have been large are frontline occupations which is one factor contributing to long working hours in these occupations – see e.g. OECD (2020[74]). Around 80% of OECD countries report that labour supply shortages in health care and long-term care have become more severe since the COVID‑19 crisis, in 60% of the countries this is the case in hospitality and tourism (Figure 2.14, Panel A). Shortages appear smaller in other occupations with close contact between persons (the police, the fire service, school, pre‑school, essential retail, transport). One commonality of health care, long-term care, and hospitality and tourism is that workers may have become less keen to work in these occupations as health risks on the job have increased. But there are also important differences. Demand for workers has likely increased in health care because of greater needs, while in hospitality and tourism workers, in particular those on short-term contracts, may have re‑oriented themselves to jobs in sectors that were affected less by government-imposed business shutdowns.

Figure 2.14. Frontline workers in short supply

In another sign of labour supply shortages for frontline jobs, the PES have found it progressively difficult to fill frontline vacancies. In almost 60% of OECD countries, such difficulties existed already before COVID‑19, and more than 80% of OECD countries report that these difficulties have further intensified in the COVID‑19 crisis (Figure 2.14, Panel B). To reduce supply shortages for frontline jobs, governments have been taking a variety of measures, including some to make their jobs more attractive to existing staff (such as crisis rewards or initiatives to increase pay as mentioned above). Some are specific to the sector – see, for example, the detailed accounts of policy responses for long-term care workers in Rocard, Sillitti and Llena-Nozal (2021[75]) and OECD (2021[76]). In addition, several countries have stepped up recruitment campaigns, eased immigration rules and brought retirees back from old-age pension for specific frontline jobs, in health and long-term care in particular. To reduce labour supply imbalances for frontline workers across countries, the European Union issued guidelines at the beginning of the pandemic to facilitate the free movement of workers across internal EU borders in essential sectors (Samek Lodovici et al., 2022[77]). Overall, measures do not go far enough, however, to permanently improve job quality and to address large worker shortages for frontline jobs.

Spotlight 4: Supporting racial/ethnic minorities through the COVID‑19 crisis

Racial/ethnic minorities have received particular policy attention in several OECD countries, before and during the COVID‑19 crisis. One source of their greater vulnerability in the crisis has been that they are more frequently employed on temporary contracts or in frontline jobs with high risk of COVID‑19 exposure – see Chapter 1 and OECD (2022[72]). This section highlights the differences between racial/ethnic minorities across OECD countries, in their characteristics and their labour market experience during the COVID‑19 crisis and recovery, and the policies that governments have put in place to support them.

Racial/ethnic minorities in OECD countries and their labour market experience in crisis and recovery

Unlike immigrants and foreign nationals, racial/ethnic minorities have long been citizens of, or at least been rooted in, their country. There is not a simple definition of racial/ethnic minorities that fits all OECD countries. Racial/ethnic groups are most often characterised by a shared culture or other factors, including language or religion, as well as their physical appearance (for example skin colour) or the country of origin of their ascendants (Balestra and Fleischer, 2018[78]).

Many of the racial/ethnic minorities that countries highlight in their national context are Indigenous populations (Australia, Canada, Japan, New Zealand) and Traveller communities including Roma people (Austria, the Czech Republic, Greece, Hungary, Ireland, Latvia, Lithuania, Portugal, Slovenia, Spain, Switzerland). Other important racial/ethnic minorities are Black, Asian and Hispanic/Latino people (in the United States), Pacific peoples (in New Zealand) and populations speaking the language of, and identifying themselves with, the culture of a foreign country (e.g. in Estonia, Italy, Latvia, Lithuania, Slovenia). The differences between these groups underline the differences of issues at play for the relevant racial/ethnic minorities in the respective country.

Few OECD countries collect data or information on the labour market performance of racial/ethnic minorities, in some countries to avoid, for historical reasons, classifying individuals by race or ethnicity. For countries with available data, differences in the labour market experiences during the COVID‑19 crisis and recovery between racial/ethnic minorities across OECD countries are notable – see Chapter 1 and OECD (2022[72]). Racial/ethnic minorities in Estonia, Latvia, the United Kingdom and the United States have lost out compared with other groups since the crisis began. In Canada and Denmark, they were hit more strongly initially, but also recovered quickly. In New Zealand, they have done better than other groups throughout the crisis.

Half of OECD countries with available data have had specific labour market or social policies in place to support racial/ethnic minorities during the crisis

Half of the OECD countries for which data are available – 14 out of 27 – have had specific labour market or social policies in place for racial/ethnic minorities during the crisis to reach out to them and help them with their specific needs (Figure 2.15, Panel A). Some countries have adopted new measures since the start of COVID‑19 (Australia, Canada, Greece, Ireland, Portugal, Slovenia, Spain, Switzerland). Not in all cases were these motivated by COVID‑19, and the crisis was not the sole trigger to support racial/ethnic minorities in any of these countries. Support for racial/ethnic minorities mostly pre‑dates COVID‑19, while it has proven particularly valuable during the crisis, and in some cases it has been complemented by additional schemes. Table 2.5 lists in more detail specific labour market and social policies that OECD countries have in place to support racial/ethnic minorities.

Figure 2.15. Racial/ethnic minorities: Policy measures over the COVID‑19 crisis

One worrying trend in effectiveness of policy support for racial/ethnic minorities is that the PES have been experiencing greater difficulties in finding job opportunities or in providing individualised support to jobseekers from racial/ethnic minorities since the start of the crisis. In 17 of 25 OECD countries for which data are available, the PES experienced such difficulties in job search for people from racial/ethnic minorities already pre‑COVID‑19, but in 12 of them these difficulties have further intensified in the crisis (Figure 2.15, Panel B).14 A wide range of programmes, including initiatives to promote upskilling, reduce discrimination and improve labour market attachment, as some countries are doing (see Table 2.5), would help jobs of people from racial/ethnic minorities to be more resilient when the next crisis hits.

Country	Racial/ethnic minorities targeted	Specific labour market and social policies
Australia	Aboriginal and Torres Strait Islander people	A wide range of programmes, for example vocational training, specific active labour market policies, traineeships, support for employment in large companies, region‑specific measures, a COVID‑19 package targeted at Indigenous people
Austria	Roma people	Roma empowerment programme for the labour market, including job search support, motivation to participate training, help in writing job applications
Canada	First Nations, Inuit, Métis and urban/non-affiliated Indigenous people	Indigenous Skills and Employment Training Program for 2021‑22 to step up training and supports for Indigenous people, including young people and persons with disabilities, to prepare them for good jobs
Czech Republic	Roma people (as the main ethnic minority)	Several types of social services with ethnic minorities as one target group that provided support before and during the COVID‑19 crisis
Greece	Roma people	New National Strategy and Action Plan for Roma Social Inclusion 2021‑30, including housing, scholarship, COVID‑19 vaccination and many other programmes
Hungary	Roma people	The comprehensive Hungarian National Social Inclusion Strategy which includes dedicated support for the integration of Roma people
Ireland	Roma people and other Traveller communities	National Traveller and Roma Inclusion Strategy 2017‑21, followed up with measures for 2021‑25, with a wide range of dedicated public employment services
Japan	Ainu people in Hokkaido	Initiatives to promote job security and employment for Indigenous people living in the Ainu District, in place since 1975
Lithuania	Roma people	Schemes to promote the labour market integration of Roma people (Working with the Roma and Vilnius Roma Community Integration into Society Programmes)
New Zealand	Māori and Pacific peoples	Employment Strategy from 2019 with employment action plans for groups with consistently poor employment outcomes, including Māori and Pacific peoples
Portugal	Roma people	National Plan to Combat Racism and Xenophobia for 2021‑25, which includes specific measures to promote the labour market integration of Roma people
Slovenia	Roma people	Several social policy programmes to promote the labour market and social inclusion of Roma women and young people
Spain	Gypsy people	National Strategy for Equality, Inclusion and Participation of the Gipsy people 2021‑30, including measures to support job security and employment of Gipsy people
Switzerland	Yenish, Sinti and Roma people	Yenish, Sinti and Roma action plan which during the COVID‑19 crisis was complemented with measures to support self-employed leading a nomadic life

Note: Other OECD countries did not report specific labour market or social policies for racial/ethnic minorities, but it is possible that some may have such programmes in place.

Source: OECD Questionnaire on Policy Responses to the COVID‑19 crisis.

Emerging from COVID‑19: Challenges and priorities for labour market and social policy in 2022

Even as many OECD labour markets have recovered quickly from the shock of the COVID‑19 crisis, the upswing remains fragile and uneven. Unemployment rates have in many countries returned to their pre‑crisis levels, but employment remains low in certain sectors – see Chapter 1. Simultaneously, many sectors have been dealing with labour shortages, reflecting an increase in the demand for workers with particular skills over the crisis or a drop in labour supply as workers have moved sectors or quit the workforce (e.g. in transport or hospitality). Meanwhile, the COVID‑19 crisis may have accelerated structural labour market transformation as a result of digitalisation and automation, and further profound changes will be needed over the next years as OECD economies advance on their path of rapid decarbonisation.

Russia’s war of aggression against Ukraine – first and foremost a human tragedy – has heightened uncertainty and brought new challenges to labour market and social policy. It has contributed to the highest inflation in decades, notably through increases in the prices of energy and some key commodities. These price increases have been hurting particularly low‑income households, who spend a large share of their tight budgets on energy and food, with often little capacity to reduce consumption, or substitute away from it. The war has also brought the largest number of humanitarian migrants seen in Europe since the Second World War, a challenge particularly for Ukraine’s Central European and Baltic neighbours who have shown great resolve and generosity in welcoming these refugees.

Against this backdrop, OECD countries are therefore having to strike a difficult balance between addressing the remaining labour market challenges resulting from the COVID‑19 crisis, mastering the ongoing and upcoming structural transformation, and supporting a strong and inclusive labour market – all while dealing with the economic and social fallout from the war in Ukraine.

When asked in autumn 2021 – i.e. well before Russia’s war of aggression against Ukraine – about the main perceived labour market challenges for 2022, most OECD countries were still primarily concerned about the immediate crisis consequences (Figure 2.16). Three‑in-four countries (25 out of the 34) pointed to labour supply shortages and the crisis-induced worker reallocation as one of the top‑3 challenges for 2022. Around one‑in-three countries expressed concern about potential scarring risks for young people (14 out of 34) and high numbers of unemployed workers (11 out of 34); also about one‑in-three (14 out of 34) countries pointed to the labour market transformation brought about by digitalisation and artificial intelligence as a main challenge. Climate change and the green transition did not yet make it among the key labour market challenges for 2022 in most countries (6 out of 34).

Figure 2.16. Among countries’ main labour market challenges for 2022, direct crisis consequences trump longer-term structural challenges

Countries’ priorities for their national recovery plans for 2022 – expressed again in autumn 2021 – reflect the need to address the crisis consequences and shape an inclusive recovery while preparing labour markets for the upcoming transformation. A number of key priority areas stand out:

Modernising public employment services and strengthening employment support for jobseekers. Improved support for unemployed workers is one of countries’ top priorities coming out of the COVID‑19 crisis, notably in southern European, Nordic and Baltic countries. Measures foreseen include changes to the profiling of jobseekers and the targeting of services (Latvia, Spain), the further digitalisation of service provision (Finland, Ireland, Latvia, Lithuania, Poland, Spain, Switzerland), increases in staff numbers (Finland, Ireland), decentralisation of service delivery (Finland) and the improved collaboration with private employment services (Spain, Sweden). In Italy, a national programme to strengthen support for jobseekers and workers in companies undergoing restructuring (Garanzia di Occupabilità dei Lavoratori) also foresees a comprehensive reform of public employment support with the aims of reducing geographic disparities in service provision and improving regional integration, strengthening the co‑operation with private providers, better tailoring and targeting, and improving monitoring and evaluation.
Supporting worker reallocation and the upskilling of the workforce. Labour market transformation and population ageing have been causing skill shortages in certain sectors in many countries, and the COVID‑19 crisis has exacerbated this trend. Policies to support workers of all education levels to develop their skills and help them to move into sectors with high skill demand are therefore a priority in the recovery plans of many countries. One focus is strengthening and modernising vocational education (Germany, Hungary, Poland, Portugal) and adult learning (Portugal, Slovenia). Belgium and the Czech Republic plan the introduction of individual learning accounts; France further increased the budget of its national skills investment initiative (Plan d’Investissement dans les Compétences) to EUR 15 billion over five years to support the (re‑)training of young people, jobseekers and workers in jobs affected by structural transformation. Countries are also responding to labour shortages through initiatives to attract and retain skilled workers from abroad (Australia, Denmark, Germany, New Zealand, the Slovak Republic, Switzerland).
Improving labour market inclusiveness. Given persistent labour market inequalities, the uneven impact of the crisis, and arising labour and skill shortages, many OECD countries are planning to extend their support for specific disadvantaged labour market groups to improve their employability and labour market outcomes. Addressing the scarring effects for young people is one main priority, including by intensifying outreach (Austria), expanding active labour market support or training (Australia, Ireland, Korea, Mexico, Norway) and offering financial incentives for hiring or training young people (Australia, France, Germany, Slovenia). A few countries (the Czech Republic, Korea, Iceland, Latvia, New Zealand, Norway) have initiatives to improve labour market inclusion more broadly by supporting the employment of women and parents with small children, older workers, people with disabilities, and migrants or racial/ethnic minorities.
Shaping structural labour market transformation. The megatrends of digitalisation and the green transition will profoundly transform labour markets in OECD countries, and in a few countries monitoring, forecasting and managing this process is high up on the policy agenda for 2022. Most notably, Denmark’s decision to dramatically accelerate its path to a low-carbon economy through a legally binding target to cut greenhouse gas emissions by 70% by 2030 means that climate policy is a top priority in all policy areas, including labour market and social policy. According to the government’s own assessment, for the ambitious goal to be realistic, all major political decisions towards that target will have to be taken by 2025 at the very latest. In Korea, policy initiatives relating to both digitalisation and the green transition are among the priority actions for 2022. This includes a plan to create service centres that provide counselling and coaching to support labour market transitions as part of the green transition, and initiatives to develop future‑oriented industries in the areas of data, networks and artificial intelligence and to strengthen vocational education at leading employers in digital industries.

Given the geopolitical developments, and the rise in inflation, the main perceived challenges will have certainly shifted since the end of last year, putting the labour market and social impact of high prices and the challenge of integrating millions of refugees from Ukraine high up on the policy agendas. OECD countries have taken widespread action to soften the impact of rising energy costs using measures that increase household disposable incomes, e.g. through transfers or income tax reductions, or reduce energy prices. Both income and price support measures can be designed so that they target households on low incomes or certain groups of consumers; in practice, most income support measures have been targeted, while price support measures, which have been the more widely used form of support to date, have been mostly non-targeted (Figure 2.17). Targeted support may take more time to implement, but comes at lower fiscal costs and expands demand less at a time when inflation is running high. It is also less at odds with the ambition of transitioning to carbon neutrality (OECD, 2022[79]).

Figure 2.17. A majority of OECD countries has taken measures to soften the increase in energy costs

Concluding remarks

Two and a half years after the onset of the COVID‑19 pandemic, even as the public-health situation has much improved and most crisis measures have expired, the economic and political environment remains challenging in many OECD countries. The pandemic continues to cause uncertainty, including by affecting trade with China, and could flare up again in the second half of 2022. And while OECD economies and labour markets have been recovering remarkably swiftly from the crisis and significant worker shortages have arisen, Russia’s unprovoked war of aggression on Ukraine is bringing new, massive challenges. First and foremost a human tragedy, the war has caused large numbers of humanitarian migrants, notably in Central Europe, contributed to the highest inflation in decades, which affects particularly low-income households, and is impacting supply chains in many sectors.

Labour market and social policy is once again at the forefront to address these challenges. Smart action through collective bargaining, minimum wages, taxes and transfers can lessen the impact on the cost of living of low earners, while also reducing the risks of a wage‑price spiral. Budgets for active labour market policies, which are expected to remain at COVID-crisis levels in 2022 despite tight labour markets, are testimony that policy makers recognise the importance of necessary support for labour reallocation and upskilling.

Meanwhile, lessons from the COVID‑19 pandemic, which revealed weaknesses in labour markets and gaps in social protection, point to an “unfinished policy agenda” to make labour markets more resilient and inclusive. The crisis brought to the fore the poor job quality in many frontline occupations and large worker shortages for frontline jobs. Support for the self-employed, young people and workers with short contribution records was often insufficient and in some cases fixed with emergency measures most of which have now expired. The comprehensive policy support rapidly rolled out during the crisis in various areas of labour market and social policy provides an opportunity to learn for the next crisis, but evaluations of the effectiveness of these policies, and their distributional impact, will be important. As this chapter shows, policy makers in several countries are taking a hard look at these issues to draw lessons from the crisis and assess where reforms are needed to reduce weaknesses and gaps that the COVID‑19 crisis evidenced. Policy makers in other countries may consider to follow their lead.

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Notes

← 1. This chapter has benefited from drafting contributions by experts across the Directorate for Employment, Labour and Social Affairs: Raphaela Hyee (unemployment support for the self-employed); Rachelle Cohen and Christopher Prinz (paid sick leave); Ailbhe Brioscú, Anne Lauringson and Theodora Xenogiani (active labour market policies); and Veerle Miranda and Shunta Takino (spotlight on young people). Statistical analyses were provided by Dana Blumin, Rodrigo Fernandez, Maxime Ladaique, Jongmi Lee, Eliza-Jane Pearsall and Agnès Puymoyen.

← 2. The OECD Employment Outlook 2020 (OECD, 2020[5]) provides a more detailed discussion of early crisis responses.

← 3. Recipient numbers of means-tested minimum-income benefits and of disability benefits have also remained largely unchanged in most countries with available data (see https://www.oecd.org/social/soc/recipients-socr-hf.htm).

← 4. However, the role of the job retention scheme in Korea was not marginal. On average about 5 900 workers benefited from the employment maintenance subsidy in Q1 2020; by Q3 2020, the number of beneficiaries had risen to more than 330 000.

← 5. The term paid sick leave refers to both employer-provided sick pay and government-provided sickness benefits. Most OECD countries offer a combination of both, with large variation in the duration of employer‑provided sick pay.

← 6. State requirements exist in nearly one‑third of US states, including some which introduced these requirements during the COVID‑19 epidemic (e.g. Colorado (Colorado State Legislature, 2020[80]), New Mexico (New Mexico Office of the Governor, 2021[81]) and New York (New York State, 2021[82])). However, not all employers are required to provide sick leave and some states require coverage only when the employer has more than a certain number of employees (typically 50 employees) for example.

← 7. In Ireland, the new statutory sick pay fills a gap for many workers not currently entitled to voluntary sick pay before becoming entitled to Illness Benefit. In New Zealand, the entitlement to the new social insurance payment would replace current entitlements to income‑tested Jobseeker Support and supplement employer sick pay which was also extended during the pandemic.

← 8. Such pandemic laws could even go further and include automatic extensions for other types of social protection, such as workers’ compensation and job retention schemes.

← 9. The criteria for the recognition of COVID‑19 as an occupational disease differ between countries. For example, in the Czech Republic, the disease must be clinically manifested and the requirements for occupational disease must be met (Eurostat, 2021[29]). In Korea, the scope of work-related activities and the infection route must correspond, and the worker must be recognised as exposed to the virus and not be infected from other sources besides work-related settings. In Japan, health care and long-term care workers are entitled to workers’ compensation when the infection route is clearly or very likely work-related.

← 10. Classification according to the methodology of the OECD Employment and Labour Market Statistics database (https://doi.org/10.1787/data-00312-en) and the European Commission Labour Market Policy database (https://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=8126&furtherPubs=yes).

← 11. Public employment services are public organisations implementing employment services and private organisations implementing employment services using public funding.

← 12. These issues are also considered as the top priorities among the PES in the EU (European Commission, 2021[30]).

← 13. In the fourth quarter of 2021, more than half (55%) of students in higher education below the age of 30 worked while studying on average across 29 OECD countries, an additional 3% were actively looking for a job. The shares are 35% and 3% for students in upper‑secondary education.

← 14. These 12 OECD countries are: Australia (Aboriginal and Torres Strait Islander people), Belgium, Costa Rica, Estonia, Finland, Germany, Greece, Hungary, Iceland, Ireland, the Slovak Republic and Slovenia. In Germany, as well as possibly in other countries, these trends may reflect patterns stemming from immigrants, since public organisations, including the public employment services, do not normally collect information by race or ethnicity.

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