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M. Ihsan Ajwad The World Bank Informing Human Development: An ESW Fair January 12, 2011

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. Tools to monitor the social impacts of the crisis. Crisis Response Surveys

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M. Ihsan Ajwad The World Bank Informing Human Development: An ESW Fair January 12, 2011

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  1. The Jobs CrisisHousehold and Government Responses to the Great Recession in Eastern Europe and Central Asia M. IhsanAjwad 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-termunemployment increased sharply

  9. There was considerable variation in the employment elasticity of GDP

  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

  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, 2008-2009 (%) Unemployment insurance beneficiaries Registered unemployed

  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)

  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 • Educationbudget protection: most countries • Healthbudget protection: half of the countries

  21. Concluding Remarks

  22. Pillars of an effective crisis response

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

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