The problem of unemployment during and after MCO

At a time when everything seems to be falling, whether global oil prices, gross domestic product or the global economy, there are a few macroeconomic indicators in which values are rising, one of which is employment.

Earlier this month, the Department of Statistics Malaysia (DOSM) released the results of a survey titled “The Effects of Covid-19 on Economic and Individuals (Round One)” with a total of 168,182 respondents nationwide.

According to the study, almost 47% of self-employed workers had lost their jobs – about 19,677 respondents. As for those who still had jobs, 35.5% reported a decrease in income by over 90%.

If the percentage is taken on an actual scale, this means that out of 2.86 million self-employed workers, 1.34 million workers have lost their jobs and almost 540,000 experienced a 90% decline in income.

This is only for those who are self-employed, not even taking into account workers who have employers.

Although DOSM said these are not the official statistics, they can still be used to explain the current situation.

By definition, the self-employed group involves farmers, breeders, fishermen and those who have their own businesses without hiring workers. This includes Mak Cik Kiah, who sells pisang goreng at a stall on her own.

At the same time, on the global front, the International Labor Organization estimates that nearly 25 million workers will lose their jobs, with loss of incomes of approximately US$3.4 trillion (RM14.8 trillion) if the virus is not controlled.

Meanwhile, the Malaysian Institute of Economic Research estimates that about 2.4 million Malaysians will lose their jobs due to the Covid-19 crisis.

To make things worse, these estimates are based on a one-month implementation of the movement control order (MCO). This means that the numbers are likely to increase given the recent extension until May 12.

Of course, the extension of the MCO has helped Malaysia deal with the spread of the virus outbreak, but it will also exacerbate the economic crisis that had begun worsening even before the Covid-19 outbreak.

Direct fiscal injection worth RM35 billion through the Prihatin stimulus package would help Malaysians cope with the outbreak, but this might not be the case for the long term. And Malaysia cannot prevent a rise in unemployment rate.

As a result, the increase in joblessness will indirectly put pressure on the government and Bank Negara to revive the economy, whether by providing compensation to the affected workers, or by convincing employers to keep their employees until this pandemic is fully mitigated.

Failure to construct well-designed policies will result in a more severe recession, resulting in the possibility of the government having to consider additional stimulus packages to improve the existing stimulus.

The increase in unemployment is happening not only in Malaysia but also across the world. The unemployment rate in the US rose to 16.25% in just five weeks, which equals to 26.5 million Americans.

In Spain, the unemployment rate has surpassed 14%, the highest among developing countries.

So what can be done?

The government, particularly the health ministry led by Dr Noor Hisham Abdullah, has been recognised as one of the best institutions in curbing the spread of the pandemic.

The government, with strict implementation of the MCO, assisted by various parties including the armed forces, has provided some flexibility for essential services to continue operating. This is to ensure that the economy still runs despite the ongoing MCO.

So far, there are no cases or new clusters from these essential services. This deserves our praise.

The same measures should also be imposed on other services in stages, to ensure the survival of the nation’s economy without compromising precautionary measures – social distancing, no direct contact between individuals and the compulsory use of face masks for business owners who wish to continue operations.

These measures would help reduce the burden shouldered by the employers from earning zero income, to provide an opportunity for them to retain their employees as well as to indirectly reduce the unemployment rate.

Besides this, an economic recovery plan needs to be created on an urgent basis which includes short-term, medium-term and long-term measures in order to diversify the economy and create new employment opportunities.

It should include measures to strengthen national food security, to provide means for digital transformation such as the Fourth Industrial Revolution, to develop green technology and others.

For individuals, the increased number of free online classes like those offered by Harvard University that have been made available during the MCO should be fully utilised in order to enhance existing skills and as additional preparation for finding jobs.

Until now, we have no clue of the level and intensity of the Covid-19 outbreak. But what is certain is that when the MCO is fully lifted, the health crisis will continue to haunt us in many ways.

Many expect the global economy to experience a V-shaped recovery, in which economic collapse occurs when everyone is prohibited from leaving their homes. When they are allowed to leave their homes, the economy will recover drastically.

However, in reality I think the economy will experience a W-shape recovery, in which after the MCO is over, the economy will turn around for a while, but will fall again due to the debt burdens that are overdue, then followed by a rise after the economy is able to run normally.

Amir Jalal is a research associate at EMIR Research.

The views expressed are those of the author and do not necessarily reflect those of FMT.

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