Has COVID-19 distorted international comparability of unemployment rates? Benoît Arnaud (benoit.arnaud@oecd.org), Statistics and Data Directorate, OECD
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OVID-19 has had a profound impact on economic activity across the globe, with GDP falling precipitously almost everywhere where stringent confinement measures have been implemented. However, official statistics on unemployment paint a more differentiated picture. In some countries, unemployment rates increased when lockdown measures were imposed but in others they fell. Differences in the immediate impact of the crisis on unemployment rates across countries have also translated into differences in the evolution of rates as the impact of the crisis has unfolded. In the United States, for example, unemployment rates spiked significantly at the height of lockdown measures in April and have gradually, and significantly, fallen since then, whilst in Europe, rates increased steadily through to July, with a marginal decline appearing only in recent months (Figure 1). The casual observer might conclude from this that the employment situation has been improving in the US but deteriorating in Europe, and that differences in underlying economic structures and conditions – for example, resilience of firms, the regulatory environment, government support packages, the strength of the economy, etc. – can explain the divergence. But is there another explanation? Could differences in measurement, at least in part, be a factor?
Furloughed workers: What do the international guidelines say? Broad comparability of unemployment data across OECD countries is achieved through adherence to International Guidelines from the International Conference of Labour Statisticians (ICLS). One aspect of those guidelines, of particular relevance to current official estimates of unemployment, concerns the treatment of persons on temporary lay-off or furloughed workers, i.e, those ‘employed’ persons who, in their present job, were ‘not at work’ due to economic reasons for a short duration but maintained a job attachment during their absence (ILO, 2013 and 2020). The guidelines treat furloughed workers as being employed when: • the expected total duration of the absence is up to three months (which can be more than three months, if the return to employment in the same economic unit is guaranteed) OR • workers continue to receive remuneration from their employer, including partial pay, even if they also receive support from other sources, including government schemes.
Figure 1. Official unemployment statistics point to diverging trends across countries United States (aged 16 and over)
European Union (aged 15 and over)
16 14 12
In turn, furloughed workers not satisfying the criteria above are classified as unemployed, if they are actively looking for work and are available for work, or, otherwise, as outside of the labour force. i.e. neither employed nor unemployed.
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Furloughed workers: What do countries actually do?
8 6 4 2 0
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
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In practice, departures from these guidelines in national practices do exist. In the United States for example, persons on temporary layoff are classified as ‘unemployed’ if
Source: US Current Population Survey; Eurostat, Monthly Unemployment Rate
Issue No. 73, December 2020 - The OECD Statistics Newsletter 3