The global economy and labour markets: Consequences of Covid-19

“I work as a simultaneous interpreter using six language combinations, and my job is usually working for international conferences or accompanying business visits to the region. But with airport closures and conference cancellations as a result of the lockdown and travel bans, I have lost 95 per cent of my work,” said a translator living in the UAE.

 

The spread of the Covid-19 across borders has hit the economies of countries worldwide due to their interconnectedness and effects of globalisation, becoming both a global health and economic crisis. It has disrupted supply and demand chains, with the long periods of lockdown introduced to halt the spread of the virus, labour reductions, business closures, and limited working hours all reducing household incomes and demand for goods and services.

 

GDP and foreign direct investment (FDI) have gone down on a global level. “The Covid-19 pandemic has seriously wounded the world economy, with serious consequences for everyone,” UN Conference on Trade and Development (UNCTAD) Secretary-General Mukhisa Kituyi said.

 

The suspension of imports and exports as a result of the slowdown in international trade and the airlines’ halting their services as a result of falling passenger numbers have had negative impacts on the economies of many countries. According to the International Monetary Fund (IMF), the world economy is experiencing the worst recession since the Great Depression in the 1930s. “The cumulative loss to global GDP in 2020 and 2021 from the pandemic could be around $9 trillion, or greater than the economies of Japan and Germany combined,” it commented.

 

Every country is likely to experience long-lasting impacts of the crisis despite their mitigation and containment strategies, and some of the wealthiest are facing very high rates of Covid-19 infections, battling the spread of the virus and revealing the drawbacks of national healthcare systems. According to the John Hopkins University in the US, the United States, India, Brazil, Russia, the United Kingdom, France, Turkey, Italy, Spain, and Germany rank as having the highest numbers of coronavirus cases.

 

 

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An UNCTAD report, “Global Investment Trends Monitor”, published last October revealed that the world’s developed economies have witnessed the biggest reduction of FDI, reaching an estimated $98 billion drop in only six months and marking a decline of 75 per cent compared to 2019. “Foreign direct investment fell by 49 per cent in the first half of 2020 compared with 2019, due to the economic fallout from Covid-19,” it said, pushing some countries to the verge of economic and healthcare system collapse.

 

According to the Institute of International Finance, (IIF), “global debt rose by more than $15 trillion last year to a record $277 trillion, equivalent to 365 per cent of world output.”

 

It is not clear when things will return to normal, and World Trade Organisation (WTO) economists are not certain of recovery in 2021. According to economics professor Ahmed Al-Safti, “the uncertainty resulting from the sudden halt is causing lots of panic in the international markets and is reflected in large losses in financial markets worldwide.”

 

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Another UNCTAD publication, “The Impact of the Covid-19 Pandemic on Trade and Development: Transitioning to a New Normal”, projects that world income will continue to be below the level of before the pandemic for some time, with increases in unemployment a global concern.

 

Globalisation has accelerated the spread of the virus, and in response states have adopted emergency measures not only to halt people’s movements but also to slow the movement of goods and services on the national and international levels. The resulting economic situation poses threats to the livelihoods of millions on top of the suffering created by the disease itself.

 

LABOUR MARKETS

Leading to the deaths of millions of people worldwide, Covid-19 has also led to the unemployment of millions.

 

The International Labour Organisation (ILO) has said that the economic and labour crisis created by Covid-19 could lead to the unemployment of 25 million people. The pandemic has resulted in businesses closures and job losses worldwide, with World Bank statistics revealing that unemployment in the total world labour force has increased from 5.395 to 5.42 per cent.

 

The US Labour Department has reported that “Americans’ initial claims for unemployment totaled 922,072 in the week ending January 2, an increase of 77,400 (or 9.2 per cent) from the previous week,” for example.

 

The rising number of Covid-19 cases and the continuing containment measures are having severe impacts on the labour market in many countries. Some states are experiencing a rising number of newly recorded cases, despite lockdown measures and vaccine deployments. The Office for National Statistics in the UK, for example, has said that “the percentage of people testing positive for the coronavirus in England has continued to increase.”

 

With the lockdowns, quarantines, and containment and safety measures, government measures have converted the world into an almost virtual one, in order to keep households afloat, minimise job losses and protect people’s jobs and futures. The sudden shift to remote environments has had dire consequences for a lot of people.

 

“I know more than 50 people who have lost their jobs. RSI (remote simultaneous interpretation) was an option for me — but the pay was reduced by 50 per cent and I lost many advantage as conference organisers have opted for engaging interpreters in European countries instead,” the UAE interpreter said.

 

Chandni Rakhra, a 28-year-old freelance designer living in London, said that “I am unable to do my part-time job as it requires me to be face-to-face with the public. I have not been working, but being paid 80 per cent of my contracted hours instead. But this is a very low amount, as the job was only part time in the first place.”

 

Despite bold efforts on the part of many governments, unemployment and poverty have increased. According to reports released by the World Bank and UNCTAD, “global poverty is on the rise for the first time since the 1998 Asian financial crisis.” An UNCTAD report warned that “a viable vaccine will not halt the spread of the economic damage, which will be felt long into the future, especially by the poorest and most vulnerable.”

 

As the pandemic continues, more and more people are finding it harder to obtain or to change jobs. There has been a rash of frozen and halted hiring by companies and enterprises, and people have lost their jobs or had their workings hours reduced. According to the Organisation for Economic Cooperation and Development (OECD), “the impact on jobs has been 10 times bigger than that of the global financial crisis” in 2008. The Covid-19 pandemic has triggered one of the worst jobs crises since the Great Depression. There is a real danger that the crisis will increase poverty and widen inequalities, with the impact felt for years to come.”

 

In December, the ILO Labour Overview for Latin America and the Caribbean said that “some 30 million people are unemployed, and 23 million will have left the workforce due to the lack of opportunities. In 2021, employment will be in ‘intensive care’, and the indicators could worsen.”

 

Despite the fact that the economic consequences of Covid-19 have not fallen with equal severity, all states and regions remain vulnerable to its repercussions.

 

 

According to ILO updated estimates in September 2020, “labour income losses suggest a global decline of 10.7 per cent during the first three-quarters of 2020, compared with the corresponding period in 2019, while labour income losses are highest in middle-income countries.”

 

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Young people have been hit severely by the crisis, especially recent graduates seeking entry level jobs. They are confronting a very tough and competitive labour market, affecting their careers and futures. According to Eurostat, the EU statistics agency, “in the second quarter of 2020, the share of people aged 15-74 facing a potential need for employment amounted to 14.6 per cent of the extended labour force, 1.7 percentage point higher compared with the last quarter of 2019.”

 

 

Source:  Ahram Online, excerpt only

 

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.