The larger the fiscal stimulus, the lower the working-hour losses — ILO

The larger the fiscal stimulus, the lower the working-hour losses — ILO

Wednesday, September 23, 2020

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GENEVA, Switzerland — The latest edition of the International Labour Organization report on the effects of the pandemic on the world of work has assessed the effectiveness of fiscal stimulus in alleviating labour market impacts.

It shows that for Q2 2020, the larger the fiscal stimulus (as a percentage of GDP), the lower the working-hour losses. In that period, globally an additional fiscal stimulus of 1 per cent of annual GDP would have reduced working hour losses by a further 0.8 per cent.

However, while fiscal stimulus packages have played a significant role in supporting economic activity and reducing the fall in working hours, they have been concentrated in high-income countries, as emerging and developing economies have limited capacity to finance such measures, the ILO said.

In order for developing countries to reach the same ratio of stimulus to working hours lost as in high-income countries, they would need to inject a further US$982 billion (US$45 billion in low-income countries and US$937 billion in lower-middle income countries). The stimulus gap for low income countries amounts to less than 1 per cent of the total value of the fiscal stimulus packages announced by high-income countries.

This huge “fiscal stimulus gap” is even more worrying in the light of the social protection deficits in many developing countries. Moreover, some of these countries have also had to redirect public spending from other objectives in order to mitigate the labour market impact of the crisis.

“Just as we need to redouble our efforts to beat the virus, so we need to act urgently and at scale to overcome its economic, social and employment impacts. That includes sustaining support for jobs, businesses and incomes,” said ILO Director-General Guy Ryder.

“As the United Nations General Assembly gathers in New York, there is pressing need for the international community to set out a global strategy for recovery through dialogue, cooperation and solidarity. No group, country or region can beat this crisis alone,” he concluded.

The data was included in 'ILO Monitor: COVID-19 and the world of work', sixth edition, out today.


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