Headline Diplomat eJournal – Issue 1
The perilous lenses of COVID-19: The impact on the economy
Writes Catherine Hamilton, Content Writer, Headline Diplomat eJournal, LUDCI.eu
The pandemic has wreaked havoc on every facet of life. In particular, the job sector has been hit hard, with ‘hours worked’ being at a record low in numerous countries globally.
In the US alone, over 30 million people have filed for unemployment in the last two months, and this is only going to increase, especially since the US government expects a recession to materialise in 2021, in the wake of the coronavirus.
Similarly, South Africa’s rate of unemployment has skyrocketed to 30%, with the national treasury forecasting 1.8 million jobs to be lost, at worst – an unemployment rate of 50%.
Continentally, working hours in the Americas are reported to have been most affected by the pandemic, as working hours have been reduced by 18.3% compared to the pre-pandemic period, according to the International Labour Organization.
While official unemployment in a number of countries – including in the US and UK – is not as high as originally predicted by data analysts, this is thought to be due to the financial schemes put in place by their respective governments.
In the UK, for example, businesses have received aid from the government worth up to 80% of employees’ salaries, as incentive to keep their workers employed during these financially trying times.
When this aid comes to a halt – after a few months of ‘phasing out’, which a number of countries are planning to begin in September – it is likely that most businesses will not be able to afford, or even need, the workforce they had prior to lockdown, and unemployment is expected to soar.
The Americas, in particular, are likely to suffer a surge of people filing for unemployment as the financial aid schemes are lifted, if their plummet in ‘hours worked’ is any indicator.
On the other hand, as the New York Times reports, while workers in some countries are receiving up to 90% of their wages during this time – such as in the Netherlands – others have no option but to use their hard-earned savings to survive, such as in Malaysia, where there is little to no financial relief for workers.
Worldwide, the International Labour Organization estimates that $10 trillion dollars have been directed towards supporting workers and struggling industries.
Unfortunately, these financial efforts – made to lessen the disruption and instability that people experience as a result of the pandemic – are concentrated in countries with advanced economies, as these regions account for 88% of the funds spent. On the other hand, developing economies make up for 2.2%, and for less developed economies, the percentage is essentially negligible.
As a result, right now the unemployment rates in these countries are higher and the weight of the pandemic is heavier on workers’ and businesses’ shoulders. Many workers will experience career upheavals later down the line, as employers are forced to weigh up the value of each employee against the possibility of their businesses closing for good.
Since social distancing will be necessary until a vaccine is produced – if a cure-all vaccine is produced – many businesses, such as cafes, bars and restaurants, will have to operate at lower capacity, resulting in less profit, and less hands needed to carry out the work, especially since hospitality and leisure were some of the sectors that were hit the hardest by the lockdown.
Indeed, many businesses simply will not have the funds to keep their pre-lockdown workforce on. By the time, autumn rolls in, when most governments will begin withdrawing their financial aid for businesses, we can expect that unemployment will skyrocket.
One segment of the global population, which is set to be hit particularly hard is the younger generation, especially school leavers, or graduates exiting higher education – dubbed ‘the corona class of 2020’ by think tanks – who are entering the job market in the midst of an economic crisis.
One striking example of a country whose young people are being wounded particularly by the coronavirus, is Greece. Young people up to the age of twenty-four have a 37.5% unemployment rate, and represent the most unemployed age population in the country, a figure which is 5% higher than last year.
As The Guardian reports, people leaving education this year enter into the worst economic climate in the last decade, and ‘could face years of reduced pay and limited job prospects’, says research and policy analyst for the Resolution Foundation, Kathleen Henehan.
Conclusion
Even for countries with advanced economies, we can expect that the unemployment problem will get worse before it gets better, as countries across the globe only expect to see a full economic recovery in a number of years. On the other hand, the world will recover, as will the job market, including the dire rates of unemployment we can expect to see over the rest of the year.
