Coronavirus: A labour market earthquake

Activity has contracted dramatically in the commercial aviation sector as most freedoms of movement have been curtailed in order to limit transmission of the virus. In addition to the Flybe collapse – which will result in 2,000 direct job losses throughout the UK – significant job losses have been announced by airlines KLM and airBaltic in recent weeks, as well as at many airports, including Budapest Airport (by Malév GH) in Hungary, and Gatwick and Edinburgh Airports in the UK. Not only air travel has been affected. Stena Line, the ferry operator, has announced 950 job losses in its Swedish operations due to the anticipated impacts of COVID-19 on summer season sailings.

Leisure and tourism have been hit for similar reasons. The northern European gym-operator Actic has announced 900 job losses across its 131 Swedish outlets due to reduced footfall. Hotel groups Meliá (Spain), Nordic Choice Hotels (Sweden) and Scandic (Sweden) have announced over 6,000 job losses between them as bookings are cancelled and summer demand has collapsed.

The first large-scale manufacturing job losses have been in the auto sector. Over 400 jobs are to go at the big Ford plant near Valencia. Negotiations with the union on these job losses had to be deferred when the plant was forced to close down after three workers tested positive for the Coronavirus.

Selected recent ERM restructuring cases related to the COVID-19 pandemic

Of course, the 16,000-odd announced job losses so far explicitly attributed to the COVID-19 outbreak represent a tiny proportion of the disruption that the crisis will inevitably cause in Europe. And the impacts are bound to be felt across all sectors rather than being concentrated in just a few particularly vulnerable areas.

Thus far, temporary lay-offs and short-time working have been the principal recourse of firms in dealing with the pandemic in its early stages – and not terminations, as covered by the ERM’s restructuring database. Temporary lay-offs crucially preserve the employment relationship and facilitate resumption of activity when the crisis abates. There are significant time-limited state supports in many Member States to assist companies and workers in this way. And most governments are extending existing short-time working schemes ^[1] to deal with this crisis, having learnt lessons on how such schemes operate best from the global financial crisis just over a decade ago. The social partners at Austrian Airlines, for example, have speedily agreed short-time working arrangements for 7,000 employees as planes are grounded.^[2] Other initiatives can also help, such as temporary employee transfers from more affected to less affected sectors. Over 500 staff from Nordic Choice Hotels have been temporarily assigned to work with PostNord, a Scandinavian postal operator.

How severe the impacts of the current crisis will be can be gauged from German Federal Labour Office predictions that nearly one million more workers will be accessing short-time working benefits ( Kurzarbeitgeld) in the coming period than during 2008–2009 (2.35 million compared with 1.4 million). ^[3] Workers and companies will need all the help they can get in the coming months if the potential long-term social and economic damage of this pandemic is to be contained. But one key message from the last crisis for this one is that countries that had well-resourced and well-functioning short-time working schemes were the same countries where unemployment rates rose least.