Employment transitions and COVID-19 containment measures: Evidence from a developing country

Abstract

Containment measures implemented to curb the spread of coronavirus (COVID-19) disrupted labour markets across the world. While several studies focus on the impact of containment measures on job losses, this paper documents the effect of containment measures (specifically variation in the strictness of these measures) on employment patterns or transitions. COVID disruption can be viewed as multiple shocks to the labour market (as against a single shock). This is important because labour income is a key driver of aggregate inequality in developing countries, and such disruption has a knock-on effect on the achievement of the Sustainable Development Goals. Therefore, we estimate the causal relationship between coronavirus containment measures and employment dynamics in South Africa. Exploiting the timing of interviews and within individual variation, we find that containment measures impact employment transitions. Specifically, stricter containment measures have a positive effect on the transition into unemployment, and the converse is true for the transition into employment. The implication of this causal relationship for development, ongoing management of COVID-19 and future pandemics is discussed.