How Did the Great Recession Affect Different Types of Workers? Evidence from 17 Middle-Income Countries

Abstract

This paper examines how different types of workers in seventeen middle-income countries were affected by labor market retrenchment during the great recession. Average employment growth slowed dramatically, particularly for wage and industrial sector workers, with corresponding increases in unemployment. Impacts on different types of workers varied by country and were only weakly related to the severity of the recession. Among active workers, youth experienced by far the largest adverse impacts on employment, unemployment, and wage employment, particularly relative to older adults. Percentage employment reductions were greatest for youth in each sector, as firms throughout the economy reacted by substituting away from youth. As a share of the population, male employment rates also plummeted. Larger drops in male employment were primarily attributable to men’s higher initial rate of employment, partly to their concentration in the hard-hit industrial sector, but little to greater percentage declines within sector. Added worker effects among women appear to be mild, and unlike past crises, this holds for less educated workers. Differences in labor market outcomes by education and urban or rural residence were smaller. These findings suggest that displaced youth and wage employees can benefit from targeted support during the downturn, that programs targeted to women did not reach the majority of those that suffered employment loss, and that timely data is crucial to design policies that support those most affected by the shock.

Keywords: Great recession, labor market, youth, gender

JEL Classification: J21, J22