Young, Temporary, and Low Skill Workers Worst Hit by the Pandemic

ALESSANDRA CASARICO, IN AN ANALYSIS OF THE SHORT TERM EFFECT OF COVID ON THE ITALIAN LABOR MARKET, CONFIRMS THAT THE MOST AFFECTED ARE THOSE THAT WERE ALREADY SUFFERING THE CONSEQUENCES OF THE PREVIOUS RECESSION. WITH A GLIMPSE OF HOPE FOR WOMEN

The first wave of the COVID-19 epidemic badly hit the Italian labor market, and especially young, temporary, and low-skill workers employed in the Central and Southern parts of the country, i.e. the same workers that were already suffering the consequences of the previous recession. However, government measures including a firing freeze and a special COVID-related short-term work compensation scheme (cassa integrazione straordinaria COVID-19) did effectively contrast the employment crisis in the short-term, according to research by Alessandra Casarico (Bocconi University) and Salvatore Lattanzio (University of Cambridge), published in Covid Economics.
 
Using administrative data covering 1.95mln Italian workers between 2009 and the first quarter of 2020, Casarico and Lattanzio observe that in the first eight weeks of 2020, before the coronavirus outbreak, hirings had been 10.6% higher than the average of the previous three years, firings 1.8% lower, signaling that the labor market was performing better than in previous years.
 
“When COVID-19 started to spread, a pronounced drop in hirings and a spike in firings and resignations were recorded. In other words, firms started to cut the workforce and probably incentivized voluntary resignations of older, close-to-retirement workers. School closure also forced resignations, especially of female workers”, Prof. Casarico says.
 
When the Italian government introduced a national lockdown for non-essential activities (10 March) and the measures aimed to mitigate its impact on the labor market (17 March), the drop in hirings became even worse, first because of the economic outlook, then also as a consequence of the layoff freeze. Firings, that had been 70% and 33% higher than the three-year average in the previous two weeks, forcibly came to a stop. Resignations experienced a similar dynamic.
 
The probability of losing a job (be it for firing, termination or quitting) between 24 February and 31 March was higher for people on temporary contracts, for younger workers, for people working in the Center-South and for those with lower levels of education. Gender, on the contrary, was not a significant predictor of job loss probability.
 
The result on gender is in contrast with the evidence for the US and the UK and is perhaps due to the fact that in Italy, differently from those countries, women are over-represented in essential activities (67.1%) relative to men (57.8%) and in activities more easily performed from home in times of smart working, and this could have shielded them from the direct consequences of the COVID crisis. On the other hand, available data only cover interruptions of employment; reductions in hours worked by women cannot be ruled out as a factor.
 
Alessandra Casarico and Salvatore Lattanzio, “The Heterogeneous Effects of COVID-19 on Labor Market Flows: Evidence from administrative Data,” in Covid Economics, Issue 52.

by Fabio Todesco