## Rethinking the World of Work

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**Canonical URL:** [Rethinking the World of Work](https://www.imf.org/-/media/files/publications/fandd/article/2020/december/rethinking-the-world-of-work-dewan.pdf)

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### Pandemic acceleration of preexisting trends
- The pandemic has accelerated shifts toward more informal and precarious work that were already driven by long-term megatrends: changing demographics and technological upheaval.
- Developing economies are expected to lose at least $220 billion in income, according to the United Nations Development Programme.
- The crisis has transformed from a health shock into both a health and an economic crisis, increasing uncertainty in the business climate and fear among employees.

### Changing demographics and the "youth bulge"
- Advanced economies (examples: Germany, Japan, United States) face aging populations; many developing economies face a swelling youth population.
- Some developing countries (examples: India, Indonesia, Nigeria) will approach the peak of their demographic bulge during the next two decades; smaller countries (examples: Angola, Zambia) are in earlier stages of the demographic transition.
- The demographic dividend holds only if economies create productive jobs with rising wages.
- India’s youth population of 362 million, ages 15–29, is higher than the entire population of the United States.
- The unemployment rate for India’s 15–29 cohort was 17.8 percent—three times that of the overall working population—before the pandemic.
- Without large-scale job creation, surplus labor in developing economies will exert downward pressure on wages and working conditions, capping economic growth and constraining middle-class expansion.
- Survey evidence: a survey of more than 12,000 young people conducted across 112 countries in April and May found severe disruption to social, educational, and economic prospects.

### Fast and furious technological change: automation and platforms
- Automation had been advancing prior to COVID-19 and is accelerating as firms seek to reduce vulnerabilities of human workforces and global supply chain exposures.
- Automation is gaining ground faster in developed economies and in China, where labor costs are relatively high and firms have capital to invest.
- Developing economies face a triple shock: increasing domestic labor substitution via automation, at least moderate reshoring of production to the United States and Europe, and slowing exports as demand remains low.
- The platform economy (e-commerce, gig work) is expanding as consumers shift online during the pandemic.
- Low barriers to entry in the gig economy create employment opportunities but also hazards: an oversupply of young and low-skilled workers may exceed demand, producing underemployment and downward pressure on wages.
- Evidence on platform workers: a 2015 study by Perkumpulan Prakarsa and the JustJobs Network surveyed 205 on-demand motorbike taxi drivers using Gojek and GrabBike; of respondents who were previously employed, 51 percent had been engaged in the formal economy before joining the gig economy.
- Distance learning and remote work trends widen inequalities between those with and without access to computers, internet, and digital skills.

### Growing precarity and labor income losses
- The pandemic is driving a shift toward more informal and precarious work; informal employment, previously stagnant or declining in some countries, is likely to rise.
- Informal or contractual jobs can reduce measured unemployment rates while increasing job insecurity, lowering pay, and reducing productivity—so falling unemployment may not indicate recovery.
- The International Labour Organization (ILO) found in a youth-focused survey that 17 percent of previously employed people ages 18–29 stopped working after the pandemic hit, and 42 percent reported a drop in income.
- The ILO estimates workers around the world lost $3.5 trillion in labor income in the first three quarters of 2020.
- Workers in informal, contractual, or self-employed arrangements generally lack employer-provided social security, leaving them vulnerable to shocks.
- Companies may be less inclined to build permanent workforces, preferring cheaper gig, temporary, or contractual labor—reducing long-run worker protections and productivity.

### Policy solutions and recommendations
- Reorient priorities from blind pursuit of aggregate growth to job-rich growth that creates productive employment with rising wages.
  - Advance sectors that employ many people and raise growth capacity (example: infrastructure).
  - Invest in productive, labor-intensive sectors and move up the value chain (examples: from assembly to full-package apparel production; from subsistence farming to food processing).
  - Ensure wage growth aligns with productivity increases.
- Reject the idea that “any job is better than no job.” Poor-quality jobs exacerbate inequality, waste productive potential, and reduce aggregate demand.
  - Resist indiscriminate weakening of labor regulations.
  - Implement appropriately formulated minimum wages, social security, and active labor market policies, including job search assistance and apprenticeship programs.
- Regulate technology and platform firms to protect public interest and workers.
  - Mandate data sharing and transparency from tech companies operating digital platforms.
  - Ensure platform workers have access to public benefits and services.
  - Provide governments with data for evidence-based policymaking.
  - Enforce competition law more stringently to curb the power of large corporations.
  - Revisit corporate taxation for tech companies engaging in rent seeking and labor arbitrage to help finance social security coverage for informal and contract workers.
- Invest in human capital reforms to educate and train young people for employability amid technological and demographic changes.
  - Support worker retraining and retooling as the pandemic alters sectoral opportunities.
- Build resilience through public investments and countercyclical policies.
  - Invest in health, education, public employment, and social protection systems.
  - Use fiscal and monetary stimulus to create policy space and enable rapid responses in uncertain times.

*SABINA DEWAN and EKKEHARD ERNST — authors of the IMF Finance & Development chapter "Rethinking the World of Work."*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2020/december/rethinking-the-world-of-work-dewan.pdf_