The three pitfalls for stimulus packages

The economic stimulus packages for the post-COVID crisis must avoid three pitfalls in the labour markets: A sharp rise in structural unemployment, caused by the fact that employees who lose their jobs do not have skills corresponding to the jobs that are being created; A sharp increase in the proportion of zombie firms, if governments maintain employment in companies in long-term difficulty, A decline in job sophistication, increased labour market polarisation and therefore a further decline in social mobility if the jobs created are less skilled than the jobs destroyed. To avoid these three pitfalls, the only solution is to accept redundancies in sectors in lasting difficulty, and to combine retraining with support for the economy's move upmarket.