Insights Gleaned from the Pandemic Shaping Future Labour Policies
In the wake of the COVID-19 pandemic, South Korea, Australia, and New Zealand have stood out for their strong economic performance, a fact rooted in their success in minimizing infection. These countries, being islands, may have had an advantage in controlling movement of people, but their handling of the pandemic and subsequent economic recovery is a testament to effective government intervention.
According to a study by The our Group, an organisation that has been closely tracking the course of the pandemic and the economic recovery across 20 countries, countries that invested heavily in supporting labor markets saw the best results in terms of minimizing unemployment and returning quickly to growth.
Bettina Schaller, President of World Employment Confederation and Senior Vice President and Head of Group Public Affairs at The our Group, authored an article highlighting the key lessons learned from government interventions in labor markets during the pandemic.
One of the most significant findings was the role of government transfers and cash support programs in stabilizing household incomes and labor participation. Programs like the Paycheck Protection Program helped businesses sustain employee wages during the pandemic, aiming to preserve jobs and prevent layoffs. Cash transfer programs, including stimulus checks and expanded Child Tax Credit payments, provided immediate financial relief to families, highlighting the practical benefits of flexible cash assistance in crisis times.
However, despite these government interventions, labor force participation dropped significantly, especially among groups disproportionately affected by increased caregiving burdens, such as women. The labor market recovery showed substantial mismatches, with a higher number of job openings needing to fill the same unemployment gap as compared to pre-pandemic levels, indicating challenges in matching workers with available jobs.
The pandemic's economic impact was unequal, hitting lower-income and disadvantaged groups hardest, resulting in increased inequality and slower recovery for these populations. Local and state governments experimented with guaranteed income pilots funded partly by federal relief funds, showing interest in more permanent cash-based support mechanisms to address labor market vulnerabilities.
Border controls were the key lockdown measure that showed a clear link with the impacts of the virus. However, border controls during the pandemic may quickly become counterproductive due to potential labor shortages. Countries that invested most in "above the line" support (public spending or tax reductions) and enjoyed the strongest economic recoveries include Singapore, USA, Australia, New Zealand, and Canada.
The finding that border controls were key may have limited use for the future due to potential changes in the virus and the need for adaptability in response. Saving lives saves the economy, as demonstrated by South Korea, Australia, and New Zealand, which spent only 6.4% of their GDP on economic support, a quarter of the amount spent in some other countries, such as the USA.
In summary, government interventions mitigated some immediate economic harms and supported household incomes, but labor market frictions, inequalities, and participation challenges remain key lessons for future policy design in pandemic or crisis contexts.
Science can play a crucial role in analyzing and addressing the labor market challenges that emerged during the pandemic, particularly focusing on health-and-wellness issues such as the impact of increased caregiving burdens on labor force participation. For instance, research could be conducted to evaluate the effectiveness of government interventions, like guaranteed income pilots and cash transfer programs, in addressing the vulnerabilities of lower-income and disadvantaged groups in similar crisis situations. Additionally, the benefits of investing in sports programs for promoting physical and mental well-being could be explored as part of broader strategies for enhancing overall workforce health and productivity in the post-pandemic era.
