The (little) reallocation potential of workers most hit by the COVID-19 crisis

Hospitality and entertainment are the sectors worst hit by the economic crisis that followed the COVID-19 pandemic. The possibility for the workers operating therein to find new jobs might be limited as they usually perform basic tasks and have low skill levels. We study the employment transitions of these workers before the COVID-19 crisis in Italy and find that, in the medium run, workers employed in hospitality were as likely to be employed as those in other non-financial private services were. Entertainment sector employees instead had a higher probability of being non-employed compared with other non-financial private services; if they found a job, these workers moved more frequently to other sectors. To get insights into the potential for reallocation during the pandemic and post-pandemic periods, we perform a simple counterfactual exercise based on the similarity in skill demand: the evidence indicates there is little reallocation potential for these hard-hit workers, especially if service demand remains depressed for a long time.