What will be the Impact of Job Losses Upon the Global Economy?
Most of us are still able to recall the economic trials and tribulations associated with the financial crisis of 2008. In fact, it is estimated that this worldwide depression cost the United Kingdom alone at least 1.3 million jobs. While there is no doubt that such figures brought the seriousness of the downturn into light, the fact of the matter is that many analysts and economists are now wondering just how serious and in fact disastrous the COVID-19 pandemic will be in terms of the impact on the global economy job market. Here is my COVID-19 job losses update:
It first needs to be mentioned that this is a rather loaded question. We are not yet fully aware of the true extent of this pandemic and it is nearly impossible to tell when it may completely subside (particularly within areas of the world that are now only beginning to experience high infection rates). It is nonetheless important to take a look at a handful of key predictions as well as why other segments of the global marketplace could likewise be impacted by such job losses.
What do the Experts Have to Say?
Let us begin by painting a rather grim picture. Industry professionals have stated that as many as two out of every five jobs might be permanently lost because of the pandemic. This is primarily referring to employment within the western hemisphere. One interesting point to mention here is that this observation has been solely focused upon the short-term impacts of COVID-19 job losses and more. A more concerning scenario would be if the virus begins to resurface in waves around various regions of the world at different times. Such levels of unpredictability will obviously cause even more businesses to fail. The bad news is that this might represent only the tip of the proverbial iceberg.
Taking the Marginal Workforce Into Account
We need to remember that a large majority of the global workforce (over 1.6 billion individuals) are considered to be marginal workers. To put this another way, they survive on day-to-day wages as opposed to a long-term contract. Some examples include:
- Migrant workers.
- Gig-based work (such as within the music and entertainment sectors).
- Manual labourers.
- Part-time retail employees.
- Cash-in-hand positions.
Surprisingly, these 1.6 billion individuals represent half of the total global workforce. Assuming that these jobs are placed in jeopardy, the resulting social and economic turmoil could indeed be severe. We have already begun to witness the problems that this situation has caused within certain regions of the world such as India and Brazil. When we then consider poor contact tracing and fragile healthcare systems, these and other countries might only be experiencing the beginning of a long and drawn-out battle.
The Direct Impacts Upon the Global Economy
While it is not always a good idea to paint an entirely grim picture, we need to be realistic in regard to how the global economy may be affected. It is a foregone conclusion that both global and regional stock markets have seen significant volatility. Assuming that such negative economics continue throughout the remainder of 2020, there is no doubt that we will enter into a global recession; arguably a much worse situation when compared to the downturn of 2008.
In turn, this will put even further pressure upon regional economies as well as multinational businesses. Chances are high that they will be forced to streamline operations further, more job losses are likely to accrue. We have already seen the beginnings of this trend.
The problem here is that such actions could very well lead to a “knock-on” effect. As large firms tighten their proverbial belts, hesitance within the marketplace can lead to additional instability; causing even more companies to founder. The impact of Covid-19 job losses is huge and it is everywhere.
In order to truly appreciate the impact of the current global employment situation, it is wise to take a look further outside of the box. In other words, there are other areas of the economy that will be impacted as an indirect result of the scenario. The good news is that not all of these consequences are necessarily negative.
One pronounced trend which was observed well before the pandemic involved more flexible working hours and WFH practices. These changes actually made a great deal of sense. Employee satisfaction would increase, companies are provided with the opportunity to reduce the overhead associated with in-house tasks and operational costs as a whole could often be reduced. The notion of working from home is now more of a reality than ever before. This is indeed good news for those who have the means and the expertise. Unfortunately, such opportunities are not likely to be felt across the marginal workforce outlined earlier.
A Paradigm Shift in the Future?
One of the main reasons why analysts are struggling to predict the longer-term impact of COVID-19 upon the global economy is the simple fact that they are uncertain whether or not a peak has been reached. What if this virus begins to reemerge after lockdown restrictions are lifted? Might countries be forced to return to the measures previously imposed? What if the deaths and infections in the United States rise again? How will the pandemic impact trade and shipping from a long-term perspective? These questions have yet to be answered with any sense of clarity and unfortunately, only time will tell.
It is nonetheless a fact that the notion of “business as usual” is no longer applicable to the current state of global economic affairs. While home-based jobs, technology and digital retail businesses (such as Amazon) could very well benefit, billions of subsistence workers could see their livelihoods irrevocably damaged. This is why we need to adopt a cautious stance in order to deal with such unpredictable times.
If you are worrying about the impact of covid-19 job losses, then you must start to act today to ensure you and your family are as prepared as possible.
About Mike Coady
Mike Coady is an expat expert based in Dubai and is on hand to help with all of the above and more.
Mike is an award-winning money coach and industry leader in the financial sector.
Qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Fellow of the Institute of Sales Management (FISM), a Fellow of the Institute of Directors (FIoD) and featured as a highly qualified Financial Adviser in Which Financial Adviser.
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Blog published by Mike Coady.