1. Informing Human Development: An ESW Fair
The Jobs Crisis Household and Government Responses to the Great Recession in Eastern Europe and Central Asia
M. Ihsan Ajwad
The World Bank
Informing Human Development: An ESW Fair
January 12, 2011

2. Tools to monitor the social impacts of the crisis
Crisis Response Surveys
Armenia (HBS, Government)
Bulgaria (OSI)
Latvia (LFS, Government)
Montenegro
Romania
Turkey (panel survey)
Government administrative data
Social policy monitoring

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

4. Crises affect households through four channels

5. Labor market impacts of the crisis

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

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

8. Unemployment: disaggregated
Male representation among the unemployed increased
Youth unemployment at record highs
Long-term unemployment increased sharply
Stronger competition for jobs:
Number of registered job seekers per vacancy increased by 67 percent for 24 Eastern Europe and Central Asia countries
Even greater increases in Latvia, Slovakia, and Estonia

9. There was considerable variation in the employment elasticity of GDP
Notes: ALB: Albania; ARM: Armenia; AZE: Azerbaijan; BGR: Bulgaria; BLR: Belarus; CZE: Czech Republic; EST: Estonia; HRV: Croatia; HUN: Hungary; KAZ: Kazakhstan; KGZ: Kyrgyz Republic; LTU: Lithuania; LVA: Latvia; MDA: Moldova; MNE: Montenegro; POL: Poland; ROM: Romania; RUS: Russia; SRB: Serbia; SVK: Slovak Republic; SVN: Slovenia; TJK: Tajikistan; TUR: Turkey; UKR: Ukraine.

10. Job losses were accompanied more broadly by smaller paychecks
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)

11. Household coping strategies

12. Households Coping Strategies
Source of shock to households
Labor markets
Financial markets
Product markets
Government services
Household responses
Increase disposable income
Labor supply
Dissaving/borrowing
Informal safety nets
Formal safety nets
Reduce household expenditures
Durable goods
Food
Education/health
Insurance
Other
Household welfare impacts
Impact on poverty
Impact on long-term human capital accumulation
Impact on savings and assets

13. Coping Strategy: Households tried to increase disposable income

14. Coping Strategy: Increase Disposable income
Poor households were not as successful as increasing labor supply

15. 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

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

17. Government Responses

18. First response: Unemployment benefits
Year over year growth in total registered unemployment and unemployment beneficiaries, (%) Unemployment insurance beneficiaries Registered unemployed
Unemployment insurance – first benefits to reach crisis-affected households

19. Social Policy Response: Last Resort Social Assistance
Number of beneficiaries of last-resort social assistance (LSRA) programs and total registered unemployed Number of registered unemployed, thousands (left) Number of beneficiaries of LRSAs, thousands (right)
Mixed response of Last Resort Social Assistance Programs (coverage low)
Some countries altered programs to improve the crisis response
Improving performance of existing programs (Armenia, Georgia)
Relaxing eligibility criteria (Bulgaria, Georgia, Latvia, Romania)
Introducing new programs or safeguards to protect vulnerable groups

20. 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
Active Labor Market Programs scaled up
Education budget protection: most countries
Health budget protection: half of the countries

21. Concluding Remarks

22. Pillars of an effective crisis response
Unemployment insurance benefits
Last-resort social assistance
Automatic stabilizers
Unemployment insurance parameters
Social assistance parameters
Binding minimum wage levels
Adjusters
Public works
Other programs (youth apprenticeships, second -chance education programs, etc.)
Starters

23. A good crisis response requires fiscal discipline, planning and data
Build up savings for hard times
Factor in efficiency costs
Collect reliable and timely monitoring indicators