Different Impact of the Recession on the Labour Market: Less Work Without Increasing Unemployment in Slovakia

Abstract

The paper examines why the pandemic recession hit the labour market in Slovakia differently from previous recessions. Traditionally, the unemployment rose sharply during previous economic recessions. Therefore, it seemed like a novelty when the unemployment rate rose only insignificantly in a pandemic recession. We find that both the demand and supply side of the labour market played their role in it. Labour demand has been affected differently compared to the past: Instead of the usual sharp increase in unemployment during a recession, the rate of utilization of workers’ time capacities fell, with expected impacts also on income differentiation. This is in line with the way more advanced European economies have responded to recessions before. In addition, a new element was also present on the labour force supply side. In previous recessions, the labour force supply had been rising; in the recent pandemic recession, it fell for the first time.