Understanding and Predicting Job Losses due to COVID-19 : Empirical Evidence from Middle Income Countries

This paper utilizes firm survey data to understand which formal private sector jobs are most atrisk from COVID-19 or similar future crises, based on empirical evidence from two middle-income economies. Inparticular, it estimates the importance for formal private sector job losses of various COVID-19 pandemic-related labormarket shocks and mitigating factors, such as the closure of non-essential industries, workers’ ability to perform theirjobs from home, infection risks to workers, customers’ infection risk, global demand shocks, input supplyconstraints, employers’ financial constraints, and government support, in determining the level anddistribution of job losses. This provides an empirical identification of the main risk factors for job loss and abasis for predicting the level and distribution of these losses due to the crisis for permanent formal private sector(PFPS) jobs in core productive manufacturing and service sectors (captured by World Bank Enterprise Surveys) inJordan and Georgia. Comparing the empirical findings across the two countries, the paper assesses the degree ofcommonality of these risk factors. Job losses are projected for different groups within the employed population prior tothe outbreak of COVID-19 and compared with post-crisis labor force data. The results indicate that in these countries thelevel of job losses is predominantly due to a reduction in demand rather than a reduction in the supply of labor.Closures, global demand shocks, supply disruptions, and other unexplained demand-side shocks are significantdeterminants of jobs lost. The sensitivity of employment to closures, supply disruptions, and sales shocks was ofsimilar magnitudes in both countries; however, variation in infection risk was a significant determinant of sales onlyin Georgia. At the same time, Georgian formal firms were better able to rebound their sales and hire back workersthan formal firms in Jordan. Finally, the paper finds no evidence that firms with workers performing tasks that canbe performed from home were better able to preserve jobs, given the dominant role of firm-level demand and supplychain shocks.