The impact of lockdown policies on labor market outcomes of the Chinese labor force in 2020: Evidence based on an employee tracking survey

Abstract

This paper uses data from an employee tracking survey in China for about 6000 incumbent workers to document their dynamic labor market outcomes throughout the year 2020. I find that the employment situation worsened sharply during the lockdown period and then recovered gradually, showing a “V” shaped pattern. However, by the end of November 2020, about 4.4 per cent of 2019 incumbent workers were still unemployed, with few social protections. By adopting a Difference-in-Differences approach, I further estimate the impacts of city and community lockdowns on labor market outcomes of surveyed employees and their mental health. The estimation results show that lockdowns reduced the probability of resuming work by 13.2 percentage points, which in turn worsened their mental health status. My findings suggest that stringent measures to counter the virus brought about negative shocks in the labor market and reduces the welfare of workers, at least in the short run.