M. Ihsan Ajwad The World Bank

1. The Jobs CrisisHousehold and Government Responses to the Great Recession in Europe and Central Asia M. IhsanAjwad The World Bank

2. Crisis monitoring • Crisis Response Surveys • Assess primary transmission channels • Determine household responses and welfare impacts (health/education expenditures and food security) • Armenia (HBS, Government), Bulgaria (OSI), Latvia (LFS, Government), Montenegro, Romania, Turkey (panel survey) • Government administrative data • Social policy monitoring

3. Outline of the presentation • Anatomy of the crisis • Labor market impacts • Household coping • Government responses • Concluding remarks

4. The GDP contraction was harsh in some countries but not others Source: Staff calculations based on IMF, World Economic Outlook Database, October 2010

5. Crises affect households through four channels

6. Labor market impacts of the crisis

7. When output demand falls, firms use several strategies to control labor costs

8. Unemployment increased sharply in most European and Central Asian countries

9. Unemployment: Some groups affected more than others • Male representation among the unemployed increased • Youth unemployment twice the adult rate • Long-term unemployment increased

10. Decreases in earnings were more common than job losses in many countries studied

11. The dynamics behind earnings reductions varied across the region Part-time employment Temporary employment (Latvia, Hungary, and Czech Republic) Real wages fell sharply in the Latvia, Lithuania, Slovenia, and Slovakia, but rose in Bulgaria, Czech Republic, and Romania Wage arrears and administrative leave used in some countries in the CIS (e.g. Russia) Remittance flows fell sharply

12. There was considerable variation in the employment elasticity of GDP Sources: Staff calculations based on IMF, World Economic Outlook Database, October 2010 and ILO, LABORSTA database;

13. Household coping strategies

14. Households Coping Strategies

15. Coping Strategy: Increase Disposable income Households tried to increase labor supply

16. Coping Strategy: Increase Disposable income Households tried to increase labor supply But many, especially poor, were not successful (evidence from Bulgaria)

17. Coping Strategy: Reduce Expenditures • Food expenditures – fell along with expenditures on non-essential items • Education consumption – generally protected • Health spending – fell • Health utilization decreased • Expenditures on medicines decreased • Some evidence of health insurance disenrollment

18. Coping Strategy: Reduce Expenditures Households adopted risky coping strategies

19. Government Responses

20. First response: Unemployment insurance Year over year growth in number of registered unemployed and unemployment insurance beneficiaries between 2008 and 2009 Unemployment insurance beneficiaries Registered unemployed

21. Active labor market programs were scaled up in several countries

22. Social Policy Response: Last Resort Social Assistance Number of beneficiaries of last-resort social assistance programs and number of registered unemployed Number of registered unemployed, thousands (left) Number of beneficiaries of LRSAs, thousands (right)

23. Social Policy Response • Minimum Pensions • Scaled up or introduced to protect the poor: Armenia, Russia, Romania, Turkey • High pension coverage in Eastern Europe and Central Asia: potential for immediate poverty relief • Educationbudget protection: most countries • Healthbudget protection: half of the countries Source: Ministry of Finance of relevant countries and IMF, World Economic Outlook Database, October 2010.

24. Concluding Remarks

25. Improve crisis responses with proactive measures

26. A good crisis response requires fiscal discipline, planning and data • Build up savings for hard times with prudent fiscal policies during good times • Factor in Efficiencycosts • Collect reliable and timely monitoring indicators