Governments devising packages to support workers amidst staggering unemployment

Anna Triponel

March 30, 2020

Unemployment is soaring. On Thursday, the US Department of Labor announced that 10 million jobs had been lost in two weeks (6.6 million last week and 3.3 million the week before). The New York Times reports that this “speed and scale of the job losses is without precedent”, noting that until last month, the worst week for unemployment filings had been in 1982 with 695,000 jobs lost.

In the UK, close to 1 million people (950,000) applied for universal credit (i.e., signalling unemployment or downward wage adjustment) since the UK lockdown started on March 16. The Financial Times reports that “the coronavirus crisis has wiped out years of employment growth”, with the UK “suffering job losses on a scale and speed unprecedented even in the aftermath of the global financial crisis.”

The International Labor Organisation (ILO) revised its previous prediction of 25 million global jobs lost, stating that “the projection will be much bigger, far higher than the 25 million we estimated.” The Organisation for Economic Cooperation and Development (OECD) also revised prior projections, pointing to “significant short-term declines in GDP for many major economies.”

Source: New York Times, U.S. Jobless Claims Soared to a Stunning 6.6 Million Last Week (April 2, 2020)

Governments are seeking to take action:

  • In the United States, a $2 trillion economic relief plan approved last week includes direct stimulus payments of $1,200 to Americans (provided income isn’t over certain thresholds), as well as an expanded program of unemployment benefits, including for the first time for self-employed people and part-time workers. The relief plan includes other components, such as a suspension of retirement account rules and student loan payments. Small businesses can benefit from government-backed bank loans ($370 billion has been allocated), and won’t have to repay portions spent on paying employees.
  • In the United Kingdom, the Coronavirus Job Retention Scheme commits the government to paying 80% of the wages of furloughed employees (i.e. that have been asked to stop working but not made redundant), up to a maximum of £2,500 per month for an initial 3 months. UK Chancellor Rishi Sunak subsequently announced similar support for self-employed people (80% of average month’s profits over the last three years, up to £2,500 a month provided profits don’t exceed £50,000). Other support includes loan guarantees, distributing cash grants to small businesses and increasing the value of and eligibility for universal credit and tax credits. (Recent studies by the Institute for Fiscal Studies and the Resolution Foundation highlight the advantages and pitfalls of these commitments.)
  • In France, the government has allocated €8.5 billion for two months of state support for temporarily laid-off workers (in an amount higher than current unemployment support), and €300 billion for loan guarantees for business. See this report from the Resolution Foundation for further detail on France, as well as how Denmark, Germany, Ireland and Sweden are seeking to protect employment.
  • In India, the government has issued an order stating that workers must not be terminated nor face a reduction of wages, and that workers are entitled to fully paid leave until the effects of this crisis are mitigated. In Cambodia, the government requests that factories pay 40 percent of minimum wages to suspended workers, and will provide an additional 20 percent to workers that have enrolled in soft skills training programs. The Asia Floor Wage Alliance (AFWA) reports on what other governments from garment-producing countries in Asia are putting in place.
  • You may also be interested in this survey of 109 trade unions in 86 countries by global trade union ITUC which summarises the policies government are putting in place, and states that the early responses of many governments have been inadequate.

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