With millions of people losing their jobs or seeing their working hours reduced due to the COVID-19 pandemic, the ongoing crisis has disrupted labour markets around the world. According to the latest edition of the ILO Monitor, 114 million jobs were lost in 2020, which, in combination with working-hour reductions within employment, resulted in working-hour losses approximately four times as high as during the financial crisis in 2009. The International Labour Organization estimates that the working hours lost in 2020 (compared to pre-pandemic levels) were equivalent to 255 million full-time jobs, leading to $3.7 trillion in lost labour income. That’s even higher than the worst-case estimate made in spring 2020. Then the ILO had predicted lost labour income between $860 billion and $3.44 trillion for the entire year.
As the following chart shows, the disruptions to the labour market were most pronounced in the second quarter of 2020. This was the result of widespread lockdowns led to working-hour losses equivalent to 525 million jobs. By the end of 2020, as millions had returned to work or switched to working from home, the situation had improved significantly. However, the ILO does not expect global working hours to return to pre-Covid levels in 2021.
Employment losses in 2020 translated mainly into rising inactivity rather than unemployment. Accounting for 71 per cent of global employment losses, inactivity increased by 81 million, which resulted in a reduction of the global labour force participation rate by 2.2 percentage points in 2020 to 58.7 per cent. Global unemployment increased by 33 million in 2020, with the unemployment rate rising by 1.1 percentage points to 6.5 per cent.
Global labour income (before taking into account income support measures) in 2020 was estimated to have declined by 8.3 per cent, which amounts to US$3.7 trillion, or 4.4 per cent of global gross domestic product (GDP). The largest labour income loss was experienced by workers in the Americas (10.3 per cent), while the smallest loss was registered in Asia and the Pacific (6.6 per cent).
While there are expectations that a robust economic recovery will occur in the second half of 2021 with the rollout of vaccination against COVID‑19, the global economy is still facing high levels of uncertainty and there is a risk that the recovery will be uneven. The latest projections by ILO indicate a persistent work deficit in 2021. Drawing on, inter alia, the International Monetary Fund (IMF)’s economic forecasts from October 2020, the baseline scenario projects a continued loss in working hours of 3.0 per cent in 2021 relative to the fourth quarter of 2019, which corresponds to 90 million full-time equivalent (FTE) jobs. In the pessimistic scenario, working-hour losses in 2021 will remain at 4.6 per cent, or 130 million FTE jobs, relative to the fourth quarter of 2019. Even in the optimistic scenario, which assumes more favourable conditions, a loss of 1.3 per cent of global working hours (or 36 million FTE jobs) is still expected in 2021 relative to the fourth quarter of 2019.
The number of workers living in countries with COVID‑19‑related workplace restrictions remained high at the start of 2021, with 93 per cent of the world’s workers residing in countries with some form of workplace closures in place.
Trends in workplace closures vary considerably across the world’s main regions. Restrictions in Asia and the Pacific continue to be widespread, with over 90 per cent of workers in that region living in countries with some form of workplace closure measures in place. However, in line with the global trend, the measures have become more geographically targeted and only a small share of workers are affected by economy-wide restrictions.
In Malaysia, the Department of Statistics conducted a survey of graduates, both degree and diploma holders. The Graduate Statistics 2020 Survey showed that those without jobs rose by 22.5% to 202,400 in 2020 compared to 165,200 in 2019. The rise was observed for both degree and diploma holders. More than 75% of unemployed graduates were seeking work and of this, 50% were unemployed for less than three months. Degree holders also faced a decline in salaries by 9.1% in 2020 compared to 2019 while diploma holders faced a higher decline of 11.5% in 2020 compared to 2019.
With the impact of Covid-19 on SMEs, the unemployment rate will certainly exceed 5% in 2021. Of over 900,000 SMEs, half may face closure by year end. Should these close, more than 1.7 million Malaysians could become unemployed. And that’s the view of the Ministry of Entrepreneurial Development.
There is no easy solution to this phenomenon (unemployment). Private sector needs an enabling environment. That must suggest vaccination and herd immunity achieved by Q3 of 2021; wage support for SMEs; and rental and loan moratoriums for another six months.
We need to look at how best to assist the unemployed graduates with job re-training or re-skilling; new job centres to match employers and prospective employees; and cash support or an allowance (of RM1,000) per month for six months (or so) for each graduate. Otherwise, this could turn into an unwarranted social issue.
References:
Labor market effects of the pandemic, Felix Ricter, 27 January 202,1 https://www.statista.com
ILO Monitor: Covid-19 and world of work (seventh edition), International Labour Organisation, 25 January 2021
Sharp rise in unemployment among grads, salaries fall too, FreeMalaysiaToday, 27 July 2021
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