Disruption of the Swiss labor market: 2020 Corona crisis and 2008 Financial crisis compared

Executive Summary

The Corona crisis has led to a sharp increase in unemployment, and unemployment may soon reach the peak of the Financial crisis in 2008; the Corona crisis has led to an unprecedented increase in short-time work. The crisis immediately slowed down the rate at which people find jobs, which did not occur during the financial crisis, and increased the rate at which people lose jobs much more strongly than in the financial crisis.

The economic impact of the Corona crisisis very unequal across sectors and regions. Unemployment rates and claims for unemployment benefits have increased dramatically in parts of Switzerland that have important tourism sectors, while in Swiss manufacturing regions applications for short-time work (Kurzarbeit) dominated. Regions in central Switzerland are less likely to use either of the two instruments, unemployment benefits and short-time work.

The central government took several measures to support unemployed job seekers, e.g. lowered job search requirements to receive unemployment benefits, and prolonged benefit duration. The government also eased access to compensation for short-time work, so firms did not have to lay off workers. Both types of measures are crucial, and have reduced the impact of the crisis on firms, workers, and the unemployed considerably. As the crisis draws longer, other means of support, such as support for retraining, could foster reallocation between sectors, and may become more important in the future. Regional governments took further measures, e.g. a more substantive lockdowns of business (Ticino), stronger controls on construction sites (Romandie), or measures to encourage renters and landlords to split the costs of the lockdown.