How Effective were Job-Retention Schemes during the COVID-19 Pandemic? A Microsimulation Approach for European Countries

IMF Working Papers, January 13, 2023

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Objective: Assess the effectiveness of job-retention schemes in stabilizing household income during the COVID-19 pandemic across European countries.
Approach: Microsimulation using EUROMOD and household data.

Job-retention schemes, together with other measures, absorbed nearly 80 percent of market income shocks.
This absorption almost doubled the extent of automatic stabilization provided by the pre-pandemic tax and benefit systems.
Job-retention schemes, along with other fiscal support measures, helped mitigate the rise in the unemployment rate by about 3 percentage points.
The schemes helped mitigate income inequality during the pandemic.
Large observed effects are attributed to:
- Widespread use and scaling up of job-retention schemes.
- A deep but short-lived disruption to labor markets during the pandemic.
Targeting: Job-retention schemes were largely targeted toward households more vulnerable to income losses, including lower-income families, youth, and low-skilled workers, enabling those households to stabilize their income.

Subject: COVID-19, Economic sectors, Financial crises, Health, Income, Income shocks, Labor, Labor markets, National accounts, Unemployment
Keywords: COVID-19, COVID-19 pandemic, EU household, Europe, Global, Income, Income shocks, income stabilization, inequality, job-retention scheme, Job-retention schemes, Labor markets, Okun’s Law, short-time work, stabilization coefficient, stabilization in EU, Unemployment

IMF Working Papers — How Effective were Job-Retention Schemes during the COVID-19 Pandemic? A Microsimulation Approach for European Countries