COVID-19 year 2020 Scrambled European Country Rankings for Unemployment and Inactivity

By Ghent University

By Ghent University

Ghent University has found that overall the labor market in Europe got through 2020, the year of COVID-19, without much damage, according to the analyses of Professor Stijn Baert. That is, the percentage of unemployed among 25-64-year-olds in the EU-27 rose from 4.8% to 5.0%, i.e. with 0.2 percentage point (pp). By comparison, between 2009 and 2010, when the labor market digested the Financial Crisis of 2007–2008, this number increased by 1.3 pp at the EU-27 level.

This average obviously hides differences between EU countries. Most strikingly, in the Baltic states, the increase in the percentage of unemployed is more than 1.5 percentage points and therefore substantial: Estonia (1.7 pp), Latvia (1.8 pp), and Lithuania (1.7 pp).

Furthermore only Romania (1.0 pp) and Sweden (1.2 pp) exhibit growth in their unemployment-to-population ratios in excess of 1 pp. Thereby, Sweden, often seen as a "model country" even drops to 23rd place by unemployment (out of 27 countries).

The research also looked at how inactive people were affected in 2020. While the unemployed search for a job, this is not the case for inactive people. Focussing on them is important because some of the unemployed might have become discouraged, thereby partly masking the shift from employment to unemployment with a parallel shift from unemployment to inactivity.

In this animated video, 4 important labor market indicators are explained: the unemployment rate, the employment rate, the unemployment-to-population ratio, and the inactivity-to-population ratio. While doing so, the metaphor of the iceberg on the labor market is introduced.

Overall, the increase in inactive persons at the EU-27 level also remained rather limited. In 2019, 20.0% of the population was inactive; in 2020, that percentage rose to 20.3%—an increase of 0.3 pp. A small number but an absolute number of citizens, this still implies an increase of about 720,000 persons.

Again, we see important differences between countries. Inactivity rose more sharply in Southern Europe: Spain (1.1 pp), Italy (1.5 pp), Portugal (0.6 pp), and Greece (1.0 pp). Bulgaria (0.8 pp) and Ireland (0.8 pp) are also close to 1.0 pp increases in inactive persons.

Overall, the labor market of Poland experienced the most favorable evolution: despite the crisis, both the percentage of unemployed and inactive fell.

Does the small overall effect of the COVID-19 year 2020 mean that the ominous reports at the start of COVID-19 should be classified as misconceptions?

"Not necessarily. The labor market almost always follows the pattern in economic growth at some distance. During the Financial Crisis, unemployment peaked about a year after the deepest decline in economic growth. If the current downturn in economic activity continues, it might not be possible to sustain the current level of labor hoarding, especially if support measures are removed. Much also depends on how the European countries deal with their accumulated debt: hard savings can be expected to deal an extra blow to the labor market, while well-considered investments could, through their multiplier effect, provide stimuli." - Professor Stijn Baert

To download the research article, click here.

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