IZA COVID-19 crisis response monitoring: short-run labor market impacts of COVID-19, initial policy measures and beyond

The unprecedented COVID-19 pandemic has a severe impact on societies, economies and labor markets. However, not all countries, socio-economic groups and sectors are equally affected. For example, occupational groups working in sectors where value chains have been disrupted and lockdowns have had direct impacts are affected more heavily, while the slowdown of hiring activities mostly affects young labor market entrants. As a result, there has been a steep increase in unemployment rates in many countries, but not everywhere to the same extent. Part of this difference can be related to the different role and extent of short-time work schemes, which is now being used more widely than during the Great Recession. Some countries have created or expanded these schemes, making coverage less exclusive and benefits more generous, at least temporarily. But short-time work is certainly not a panacea to “flatten the unemployment curve”. Furthermore, next to providing liquidity support to firms, unemployment benefits have been made more generous in many countries. Often, activation principles have also been temporarily reduced. Some countries have increased access to income support to some extent also for non-standard workers, such as temporary agency workers or self-employed workers, on an ad hoc basis. A major change in working conditions is the broad move towards telework arrangements and work from home. Nonetheless, it appears too early to assess the relative success of national strategies to cope with the pandemic and to revitalize the labor market as well as the medium-term fiscal viability of different support measures. Future monitoring will also have to trace policies to cope with the imminent structural changes that might result from the crisis or might be accelerated by the crisis

The impact of active labour market policies : an AGE analysis for The Netherlands

We study the impact of active labour market policies (ALMPs) in the context of an applied general equilibrium model for the Dutch labour market. By using a calibrated general equilibrium model we try to narrow down the possible range of the net effect of various ALMPs. We consider the impact of publicly provided relief and training programs, and subsidies in the private sector for low-productive workers ('vouchers') on the steady state of the labour market (the 'long-run'). Our findings are: 1. Relief jobs reduce unemployment and increase production in the public sector. How-ever, higher wage and search costs crowd out private sector employment and production. Overall production falls. 2. Training programs reduce unemployment more than relief jobs. Individuals that par-ticipate in training programs (re-)gain (lost) skills. In this way training programs speed up the process by which workers move into private sector employment. Search costs for firms fall. However, additional wage pressure leaves a negative net effect on private sector employment. Production is hardly affected though, due to the training effect on average labour productivity. 3. Vouchers for low-productive workers reduce labour costs and hence increase private sector employment and production. Unemployment falls by less than under the relief and training programs.

Redistributive Politics and the Tyranny of the Middle Class

The Netherlands has a unique tradition in which all major Dutch political parties provide CPB Netherlands Bureau for Economic Policy Analysis with highly detailed proposals for the tax-benefit system in every national election. This information allows us to quantitatively measure the redistributive preferences of political parties. For each political party we calculate social welfare weights by income level using the inverse optimal-tax method. We find that all political parties roughly give a higher social welfare weight to the poor than to the rich. Furthermore, left-wing parties attach higher social welfare weights to the poor and lower social welfare weights to the rich than right-wing parties do. However, we also discover two anomalies. First, all political parties give a much higher social welfare weight to middle incomes than to the working and non-working poor. Second, all Dutch political parties attach a slightly negative social welfare weight to the rich by setting top rates beyond the revenue-maximizing 'Laffer' rate. Finally, we detect a strong political status quo, since social welfare weights of all political parties hardly deviate from the welfare we