According to a recent report by the International Labour Organization (ILO), the COVID-19 pandemic has already infected over 170,000 people in 148 countries, resulting in more than 6,500 deaths. Some estimates suggest that 40-70 percent of the world’s population could become infected. The crisis has induced an economic and labour market shock that has impacted both supply and demand for goods and services (production of goods and services; and consumption and investment).
Prospects for the economy and the quantity and quality of employment are deteriorating rapidly. Swift and coordinated policy responses are needed at national and global levels, with strong multilateral leadership to limit the direct health effects of COVID-19 on workers and their families, while mitigating the indirect economic fallout across the global economy (ILO, 2020).
To that end, the protection of workers and their families from risk of the infection should be a top priority. It follows therefore that income protection mitigates the disincentives against disclosing potential infections, especially amongst low-income families and other disadvantaged groups of workers. In this regard, tripartite social dialogue: between Governments and workers and employers’ organizations, is a key tool for developing and implementing sustainable solutions from the community level to the global level. This would require strong, independent and democratic social partner organizations.
The impact on global unemployment and underemployment
Initial ILO estimates point to a significant rise in unemployment and underemployment in the wake of the virus. Based on different scenarios for the impact of COVID-19 on global GDP growth, preliminary ILO estimates indicate a rise in global unemployment of between 5.3 million (low scenario) and 24.7 million (high scenario) from a base level of 188 million in 2019.
Protect employment and incomes for enterprises and workers negatively affected by the indirect effects, such as factory closures, disruption to supply chains, travel bans, cancellation of public events etc.,
Social protection through existing schemes and/or ad-hoc payments for workers, including informal, causal, seasonal, and migrant workers and the self-employed (e.g. through access to unemployment benefits, social assistance, and public employment programmes);
Employment retention schemes, including short-time work arrangements / partial unemployment benefits and other time-bound support for enterprises, such as wage subsidies, and temporary cuts to payroll tax/exemptions from social security contributions, provision of paid leave and extension of existing entitlements to workers, grants and related schemes.
Time–bound financial/tax relief and income smoothing measures to support business continuity, especially small and medium-sized enterprises and the self-employed (example, subsidies, credit mediation, refinancing to overcome liquidity constraints).
Relief measures in developing economies’ context
In the face of COVID-19, the priority of public policy should be geared towards implementing pragmatic and realistic public health measures (WHO 2020d). Economic policy should therefore accompany these public health measures, making them financially feasible through health care funding and socially acceptable, inter alia, compensatory measures for people and businesses. One of the first measures should be to increase public expenditure to increase the capacity of the health care system and to provide free or subsidized medical attention for preventative and curative purposes (ECDC 2020b; WHO, 2017). Secondly, provide direct income support to vulnerable populations through cash transfer instruments, especially during containment measures being in place. This ought to be done quickly to mitigate householders suffering severe financial constraints. The third measure needs to be directed towards affected productive sectors and firms – assistance that is in the form of temporary tax cuts, moratoriums on debt payments, and temporary credit lines.
Some countries have successfully responded to the COVID-19 imposed economic challenges by administering a special fiscal budget allocation centred around three main categories: (1) where 10% of the budget is for disease prevention and treatment, which includes funding for treatment and isolation, testing, and quarantine; purchase of medical equipment; and loans to hospitals; (2) 25% support for households and young adults through such means as cash vouchers for low-income families, childcare subsidies, and an expansion of existing employment support package for young adults; and (3) 65% to support small and medium- sized enterprises and local economies through loans and guarantees, as well as wage subsidies to preserve employment (World Bank, 2020).
These basic principles can be replicated in developing economies like Guyana, while noting, importantly, these are relief measures. When it comes to recovery measures, those would be different altogether; and those would be addressed in forthcoming articles.
By: JC. Bhagwandin, MSc., Exec Ed.
(The author is an experienced macro-finance and research analyst, Lecturer and Business & Finance Consultant. The views expressed are exclusively his own, and do not necessarily represent those of this newspaper or the institutions he represents. For comments, send to [email protected]).