The impact of the COVID-19 crisis on the euro area labour market for men and women

Prepared by Vasco Botelho and Pedro Neves

Published as part of the ECB Economic Bulletin, Issue 4/2021.

In the euro area, based on data available up to the fourth quarter of 2020, the coronavirus (COVID-19) crisis led to a decline in the labour force, a fall in employment and an increase in unemployment, with different developments for men and women across time.^[1] Employment in the euro area decreased by around 3.1 million workers between the fourth quarter of 2019 and the fourth quarter of 2020 (Chart A). Around 1.9 million of these workers are estimated to be men and roughly 1.2 million are estimated to be women. This implies a total decline in employment of 2.2% for men and 1.5% for women over this period.^[2] Unemployment increased by 0.9 million over the same period, with 495,000 men and 388,000 women becoming unemployed. In total, there was an 8.0% increase in male unemployment and a 6.6% increase in female unemployment between the fourth quarter of 2019 and the fourth quarter of 2020. The percentage rise in unemployment during this period peaked in the third quarter of 2020, at 10.5% for men and 12.8% for women. Then, during the fourth quarter of 2020, the number of women unemployed decreased more than the number of men unemployed. The large decline in employment was not accompanied by corresponding increases in unemployment for either gender, with 2.2 million people becoming inactive between the fourth quarter of 2019 and the fourth quarter of 2020, of which 1.4 million were men and 0.8 million were women. While female labour force participation was more affected during the first wave of the pandemic, up to the second quarter of 2020, it recovered at a faster pace during the second half of the year.

The unemployment rate for women is higher than that for men, but there is some uncertainty about the size of the gap between female and male unemployment rates (Chart B). The unemployment rate for women is higher than that for men, standing at 8.3% in the fourth quarter of 2020, compared with 7.7% for men. This is not a new development: in the fourth quarter of 2019, before the COVID-19 crisis hit, the unemployment rate was 7.7% for women and 7.1% for men. The female-male unemployment gap thus stood at 0.6 percentage points in the fourth quarter of 2019 and at 0.5 percentage points in the fourth quarter of 2020.^[3] The female-male unemployment rate gap decreased in the second quarter of 2020 before increasing again in the third quarter. However, there is some uncertainty on its path after this point. This uncertainty stems from the use of different statistical indicators from the EU labour force survey (namely monthly versus quarterly time series) and from the ongoing statistical reclassification of workers in job retention schemes.^[4] According to Eurostat, quarterly time series are more robust but less timely than monthly time series. Based on the monthly time series, the female-male unemployment gap remained broadly unchanged in the fourth quarter of 2020, with the female unemployment rate being 1 percentage point higher than the male unemployment rate. By contrast, the quarterly time series suggests that the female-male unemployment gap decreased in the fourth quarter of 2020, with the female unemployment rate 0.5 percentage points higher than the male unemployment rate.

Preliminary evidence suggests that both men and women benefited considerably from the widespread use of job retention schemes. The number of workers citing temporary lay-offs as a reason for being absent from work over a given week is broadly similar across gender, with women accounting for 49.4% of workers laid off in EU Member States in the fourth quarter of 2020. This indicator can be considered a proxy for the number of workers in job retention schemes who are working zero hours.^[5] The widespread use of job retention schemes has broadly supported employment and protected jobs during the pandemic. The number of temporary lay-offs peaked at 38.9% of the total number of absences from work in the second quarter of 2020 and plateaued at 14.1% in the fourth quarter.^[6] Moreover, the female share of workers temporarily laid off increased from an average of 34.7% between 2006 and 2019 to 45.7% in the first quarter of 2020, before increasing further to stand at 49.4% in the fourth quarter of 2020.^[7]

Analysing total hours worked can provide an insight into the different factors affecting labour market developments across gender during the COVID-19 crisis. Total hours worked decreased by 6.4% between the fourth quarter of 2019 and the fourth quarter of 2020. Men accounted for 4.4 percentage points of this decrease and women 2.0 percentage points. For men, the decline in employment was responsible for 1.3 percentage points of the decrease in total hours worked, with the decline in average hours worked accounting for the remaining 3.1 percentage points. For women, these factors contributed 0.6 percentage points and 1.4 percentage points respectively. The pronounced decline in average hours worked by gender can be further analysed by breaking down the changes according to usual hours worked (interpretable as contractual hours) and actual hours worked.^[8] The gap between actual hours worked and contractual hours worked can thus provide additional information on ad hoc factors driving the decline in total hours worked for men and women during the COVID-19 pandemic.

The decline in average contractual hours worked accounts for one-third of the decline in average hours worked for men, whereas contractual hours worked have remained broadly unchanged for women (Chart C). The decline in contractual hours worked by men accounts for 1.2 percentage points of the decline in total hours worked between the fourth quarter of 2019 and the fourth quarter of 2020, while contractual hours worked by women remained broadly unchanged during this period.^[9] Changes in contractual hours are mostly driven by composition effects, which differ across gender. Preliminary data from the EU quarterly labour force survey suggest that women saw a stronger decline in part-time employment and in the number of permanent employees than men. Conversely, for men there were more pronounced declines in the number of people working full-time and in temporary employment, and a stronger increase in the number of underemployed part-time workers. The broad absence of changes in usual hours worked by women is related to composition effects such as the decline in part-time employment, which has affected women to a larger extent than men.^[10] As part-time employees work fewer hours compared with their full-time counterparts, this induced a composition effect that increases the number of contractual hours worked. By contrast, the decline in usual hours worked by men was driven by a relatively stronger decline in the number of men working full-time and by an increase in the number of underemployed part-time workers.^[11]

The gap between actual and usual hours worked disproportionately contributes to the decline of total hours worked across gender, offering some insight into labour supply decisions at the household level. The gap between actual and usual hours worked accounts for around two-thirds of the decline in average hours worked for men and for all of the decline in average hours worked for women between the fourth quarter of 2019 and the fourth quarter of 2020. Changes in the gap between actual and usual hours worked by men contributed 2.0 percentage points to the decline in total hours worked, whereas changes in the gap between actual and usual hours worked by women contributed 1.4 percentage points.^[12] Job retention schemes incentivised labour hoarding and allowed for flexibility through adjustments in hours worked, leading to a larger gap between actual and contractual hours worked for both men and women.^[13] This suggests that the disproportionate declines in average actual hours worked are in part also driven by ad hoc partial reductions in the working time of employed workers, which can affect women more than men.^[14] This outcome can also provide insights into labour supply decisions at the household level. These are explored in more detail by Fuchs-Schündeln et al.^[15], who show that an increase in the need for in-person childcare following the closure of schools and care services in response to the COVID-19 pandemic could affect up to 35% of the workforce (and up to 12% of usual hours worked) in Europe.

The decline in total hours worked was linked to heterogeneous sectoral developments across gender (Chart D).^[16] Both men and women were significantly affected by the pandemic when considering changes in total hours worked between the fourth quarter of 2019 and the fourth quarter of 2020 across sectors. The effects of the pandemic were relatively stronger for men in the trade, transportation, and professional services sectors, when compared with the share of total hours worked by men in each sector in the fourth quarter of 2019. By contrast, contributions to the decline in total hours worked were relatively higher for women in the accommodation and food services, administrative and support services, and recreation and personal services sectors. In most sectors, the decline in total hours worked was driven by a decline in employment and by a decline in average hours. Employment losses between the fourth quarter of 2019 and the fourth quarter of 2020 were mainly concentrated in the wholesale and retail trade and transportation sectors for men and in the recreation and personal services sectors for women. Conversely, the employment gains in public administration and in education were tilted towards female workers. The fall in average hours worked complemented the sectoral asymmetry and within-sector gender heterogeneity in the observed declines in employment and accounted for most of the decline in total hours worked.

In summary, this box documents the impact of the COVID-19 crisis on the euro area labour market based on data available up to the fourth quarter of 2020, highlighting that both men and women were significantly affected. More men than women lost their jobs and became inactive during the COVID-19 crisis, while job retention schemes seem to have broadly protected employment and significantly benefited workers from both genders. The decline in average hours worked was somewhat more pronounced for men than for women. However, the factors behind this decline differed across gender. The decline in average hours worked for men was driven in part by a decrease in contractual hours, whereas ad hoc reductions in hours worked, which increase the gap between the actual hours worked and the contractual hours of work, contributed to the decline in average hours worked for both men and women. These developments can be attributed to the asymmetric sectoral impact of the COVID-19 crisis.^[17] The effects documented in this box only refer to the aggregate impact on employment, unemployment, labour force participation and hours worked across gender, and do not take into account welfare losses that workers incur when another member of their household loses their job. Moreover, Bluedorn et al.^[18] argue that the extent and persistence of a differential employment response for women during the COVID-19 crisis varies significantly across countries and that gender differences in employment are typically short-lived.