How Did Countries Respond to the COVID-19 Crisis? Emerging Patterns on Jobs-Relates Policies

Abstract

This brief investigates the differences in countries’ jobs-related policy responses to the COVID-19 pandemic. Four main patterns emerge. First, the type of labor policies adopted by countries varied greatly according to their income level. Low-income countries were more likely to implement public works programs but not other policies, such as unemployment benefits, labor regulations, wage subsidies, training and placements policies, firm liquidity support, and cash transfers to workers. Meanwhile, countries with more formal workforce and existing unemployment benefits systems were more likely to implement policies such as unemployment benefits and labor regulations. Second, low- and lower-middle-income countries devoted a lower share of their gross domestic product (GDP) to expenditure on new job-related policies. Third, conditional on countries’ income group, the magnitude of the GDP shock did not have a statistically significant correlation with the adoption of different policies. This may reflect uncertainty in the the extent of the GDP shock when the policy response was determined or noise in the measure of GDP. Finally, countries that adopted more stringent COVID-19 restrictions were more likely to adopt changes to labor regulations, specifically changes in working conditions to try to soften the blow on workers. These results suggest that the policy response to the crisis in low- and lower-middle-income countries was constrained by the lack of resources, resulting in lower-cost policies with generally limited impacts on workers.