Cushioning the impact of COVID-19 on the World of Work

Disaster for many, opportunity for few, COVID-19 is widely disrupting the conventional world system in many aspects. The COVID-19 pandemic, as it has encumbered the health sector, its negative impact on social and economic activities are getting direr as the days pass. Of all the evils that the pandemic has posed on the world economy particularly the business world is uncertainty. It is the major cause for businesses to incur huge economic costs.

The economics scholarship has coined a new term called “Coronomics” to study the negative repercussions of the pandemic on the economy. A merger of two terms “Corona” and “Economics”, Coronomics systematically investigates how the economy became hostage to the world of medicine, states scenarios and puts forward ways out of this ever-complicated challenge that the world is facing.

Though the pandemic indiscriminately affects everyone and every economy around the world, least developed countries with a fragile economy and poor health systems are likely to be hit hard by this colossal economic tsunami. Studies conducted by the International Labor Organization (ILO) indicates that societies with a lower economic status are more vulnerable to rising rates of chronic illness from the COVID-19 further complicated by economic and social welfare hardships. The study states that this condition will further depress productivity and raise health care costs, leading to increased poverty, and hence again more disease. If prolonged for a year or so, slumpflation (a state or period of combined economic decline and rising inflation) and as a result, a ‘disease-driven poverty trap’ is where the economy will find itself anytime soon.

The lockdown and business closure caused by the infection has exacerbated the livelihood of tens of millions of Ethiopians who are already living in a precarious condition. Unemployment and loss of jobs in addition to the temporary lay-offs are among the major threats the economy has been facing thus far.

The effect of the pandemic is estimated based on labor layoffs among the employed and active labor force. According to CSA’s estimate, the proportion of active labor force (aged between 15 and 64) in Ethiopia is about 50% of the total population. This means about 54.5 million people in Ethiopia are within the active labor category in 2019/20. Among the active labor force, about 79% (more than 43 million people) were employed in 2019/2020 (World Bank, 2020). The sectoral share of employment indicates that agriculture accounts for 68% of total employment.

 Meanwhile, a recent preliminary study by the Job Creation Commission of Ethiopia indicates that the pandemic puts a significant number of jobs at risk, especially in the manufacturing and services sectors. The magnitude of job loss depends on the length of the pandemic. For instance, about 37 and 61% of jobs will be lost in the manufacturing and construction in the severe scenario. The services sector will be severely hit, as it would experience a decline in employment by 57 and 74%. For this study, two pandemic durations are assumed: three months and six months. In other words, over 1.4 million jobs are at risk if the pandemic stay infectious for the three months and over 2.1 million jobs if six months. In addition to this, approximately 2 million daily labors are doomed to lose around 8 billion birr, as the Job Creation Commission Ethiopia report shows.

Unemployment or loss of a job is among the evils that befall on mankind. As the saying goes, ‘idle mind is the workshop of evil’, unemployment, besides to the economic cost it makes an economy incur, leads to personal depression and political instability.

Unemployment results not only in a loss of income but also in a loss in production since an economy loses a valuable human resource. People under the current circumstance might get their names on payrolls without actually rendering services or with a zero production, case in point teachers. A loss of income resulting from a lay off cripples the consumer spending, i.e. contracts demand. Unable to produce, on the other hand, contracts supply of goods and services. Unemployment

 is, therefore, a double aged problem that negatively affects the economic growth and the socio-political stability of a given nation.

For economies like ours where the level of unemployment is already growing at an alarming rate, the repercussions this pandemic can bring is direr than ever. Not to mention the additional labor force being released from correctional facilities due to the fear of the Covid-19 pandemic. Loss of the already acquired jobs, lack of job opportunities for those joining the labor force, tens of thousands of Ethiopians that are being deported from Saudi Arabia, those released from correctional facilities and many others raise the number of unemployed people in the country.

In addition to the above cases of unemployment, we also need to be concerned with underemployment which is also likely to soar high. Underutilization of resources, particularly manpower, would cause a fall in the GDP since underutilization of resources leads to underproduction, i.e. contraction in GDP.

In order to cushion the negative impact of the pandemic on the world of work, solidarity among the major stakeholders of an economy – government, financial institutions, employers and workers is paramount, ILO advises.

Covid-19 has in many parts of the world jeopardized the health and safety of millions of people and put immense pressure on businesses, jobs, and livelihoods. In crisis settings, collaboration and dialogue among government, employers and workers can boost economic and social progress

 and enable accelerated recovery.

Past economic crises have demonstrated that constructive and persistent dialogue among these actors plays a crucial role in developing effective policy responses at macroeconomic, enterprise and sectoral level. None of these parties can tackle the socio-economic consequences of the pandemic and ensure stability and help recover the economy through a unilateral effort. A dialogue is, therefore, an irreplaceable tool that helps to manage the crisis and accelerate a speedy recovery.

In addition to the multidimensional dialogue, various economic policy pillars are suggested by scholars in order to mitigate the ominous effects of the pandemic on the world of work. Health protection measures economic support on both demand and supply-side should be the two immediate goals that our policy responses need to pay attention to, experts advise.

Strong occupational safety measures and rescheduling of working hours into three (if possible four) shifts to reduce the number of workers working at a time so as to create space for keeping one’s distance in work lace would help (especially manufacturing companies – the textile industry for instance) continue production. This, doubling of shifts might also create additional vacant positions that can employ those in search of one.

The government through fiscal policy (using tax revenue and government expenditure as tools) and the National Bank of Ethiopia (NBE) through monetary policy (using discount rare, required reserve and open market operations as tools) need to stimulate the economy, boost consumer confidence and spending and then preserve active workers from lay off.

The NBE on its part can decrease the discount rate (usually termed as bank rate) so that commercial banks can get access to money with a lower interest rate. The required reserve rate should also be lowered to help commercial banks have more money to lend. The NBE can also buy bonds from banks to increase the money supply. All these measures enhance the banking liquidity for commercial banks which in turn is for the investor to borrow. If we can keep investments in operation to the level best we can, the economic consequences and unemployment issues can somehow be cushioned.

The Ethiopian Herald April 30/2012

BY WOSSENSEGED ASSEFA

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