In virtually all countries, the Covid-19 pandemic triggered one of the most severe economic downturns in modern history: lockdowns and government restrictions sharply curtailed economic activity, consumers were held back by fears of infection, and missing childcare and health concerns weakened labor supply. Do individuals still look for jobs in such an economic environment?
On the one hand, individuals may believe there is no point job searching, given the recession and the unprecedented nature of the crisis, which have made forming expectations particularly difficult. For instance, workers in or at high risk of unemployment in the midst of the pandemic may feel particularly discouraged. On the other hand, the pandemic has also changed the structure of the economy and caused substantial employment losses. As a result, individuals may search more, now being able to take advantage of the increased ability to work from home or to pivot into a less-affected industry.
We explored job search patterns during the pandemic using data from a long-running panel survey in the Netherlands (LISS), complemented by a specific survey on job search behavior (conducted in June 2020). Job search during the pandemic recession differed strongly from that in previous economic downturns: the unemployed searched significantly less than what would have been expected during a recession of this depth, while the employed searched slightly more.
A pandemic recession is indeed different from a “normal” recession. Unemployed individuals from sectors most affected by economic restrictions search significantly less compared to normal times, while employed workers facing pandemic-related work changes tend to search more. In addition, uncertainty about the duration and severity of the economic downturn seems key to explaining the observed divergence in job search behavior. Consistent with people substituting work away from bad times and toward good times, individuals who expected a short and temporary impact of the coronavirus pandemic on the labor market searched relatively little compared to individuals who expected this impact to be long and severe. On the other hand, health concerns, a pervasive feature of the pandemic, are not related to search effort, despite the fact that the average individual believes the probability of becoming infected is large.
The results have important policy implications. First, the atypically low search effort of the unemployed during the Covid-19 recession bears the risk of amplifying detachment from the labor market during the pandemic. With the health crisis continuing well into 2021, such temporary detachments could lead to long-term scars on the affected workers and dampen the speed of recovery of the labor market. Policymakers might design policies that counteract this problem, for example, by providing additional job search assistance, retraining, or other preparatory measures for the unemployed to facilitate a swift recovery of the labor market once the impact of the pandemic recedes. This is particularly important if the post-pandemic economy looks substantially different from before: in that case, job search will become a crucial part of the transition to the new normal. More broadly, understanding job search is crucial to forming a complete picture of this extraordinary economic event; and it may provide valuable insights for economic policy making in potential future pandemic-induced recessions.
© Maria Balgova, Simon Trenkle, Christian Zimpelmann, and Nico Pestel
Maria Balgova is a Research Associate at IZA.
Simon Trenkle is a Research Associate at IZA, and an affiliate of IAB.
Christian Zimpelmann is a Research Associate at IZA.
Nico Pestel is a Research Team Leader at IZA.
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