Introduction
Within the economic context, unemployment is defined as a situation where individuals who are employable and actively searching for jobs or works are unable to find a job. Unemployment lowers the economic output. Unemployment is a crucial economic index because it signals the capability (or incapability) of employees to get profitable jobs, thus contributing to the economy’s overall production. Economically, the higher the number of unemployed workers, the lesser the overall economic production takes place. A myriad of research has been undertaken in order to uncover the economic impacts of COVID-19 especially considering that it has spread to all corners of the world as a result of the globalization process. Similarly, because of the spread of the virus, governments have taken quick and abrupt actions in order to curb the spread of the virus, and this is where most of the economies are hit, and the effects are transferred onto each individual. With the advent of the pandemic, unemployment will significantly increase, and in turn, the economy will be affected significantly.
Impact of COVID-19 on Employment
The incursion of the 2019-2020 coronavirus pandemic has led to a myriad of adverse global outcomes. According to Crayne (2020), millions of individuals have contracted the virus resulting in a significant number of fatalities around the globe. Because of the substantial impacts of the virus, it has received public attention and concern from both the research community as well as the general public. In this manner, many nations have engaged in a form of obligatory social distancing and lockdown in a bid to curb the spread of the virus (Fairlie et al., 2020). While the risks imposed on one’s health are substantial, the specific risks that result from the pandemic’s disruption to the individual work lives are momentous. For instance, in the US alone, more than 30 million individuals have filed for unemployment benefits, thus showcasing a national rate of unemployment that is akin to that of the Great Depression. Similarly, economists have predicted a global recession which will lead to the significant contraction of the global economies, thus putting several industries at elevated risks. The economic as well employment effects are highly likely to persist past the peak of the pandemic and may take up to several years to return to normalcy. Therefore, this means that millions of individuals around the globe would be incapable of accessing a permanent job for the foreseeable future, and this may persist even after returning to normalcy.
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Fairlie et al. (2020) discuss the impacts of the pandemic on unemployment, especially in minority groups in the US, and one of the things that they point out is how they are greatly affected. To provide a context, they state that the unemployment rate among the blacks in the US has been approximately double that of the whites, which is 11.7% and 5.4%, respectively, and this has been a trend since the 1950s. One of the reasons that help explain this trend is because the employment of Blacks is more volatile than those of whites, and this pattern is maintained even when the economy shrinks because typically, Blacks are the first to be fired when the cycle of business weakens (Yu and Sun, n.d). This is also the case with other minorities, such as the Latinx. When analyzing the impacts of the pandemic on the minority groups, their research showed that even though the unemployment rate of blacks incremented to 16.6%, they were not disproportionately affected relative to the whites because the pandemic seemed to have a unique effect because it is a global health-related issue. However, the Latinx perceived greater impacts as the unemployment rate jumped to 18.2%.
How COVID-19 Increased Unemployment
According to Chetty et al. (2020), when the pandemic hit, there was considerably less consumer spending and many of the sectors in which the spending fell most were non-tradable goods produced by small local businesses. Therefore, the revenues of such businesses fell by more than 70%, and subsequently, most of the affected businesses were from regions with high rent. This is especially the case with non-tradable goods, which usually necessitates physical interactions such as restaurants and accommodation services. Therefore, as these businesses lost a significant chunk of their revenues, they passed the shock incidence to their employees, especially low-wage workers, leading to a more than 34% decrease in the rate of employment for low-wage workers compared to 10% for those with top wages. In the same manner, in the highest-rent regions, more than 65% of the small business workers were laid off within two weeks of the COVID crisis, while those in the lowest-rent areas had only 30%. Those working in large firms and in tradeable sectors were less likely to lose their jobs compared to those working in small businesses and producing non-tradeable goods. Besides, some of the mandates from the government to curb the spread of the virus, such as mandatory working from home and social distancing, have accelerated the unemployment rates as a result of the pandemic (Kniffin et al., 2021). This is because states restricted access to in-dining restaurants, concert halls, theaters, some stores, as well as non-essential businesses where there would be risks of increased infections as a result of people coming into close contact with one another when interacting with the business (Miller, 2020). Furthermore, experts and public health officials warned people to stay at home as much as possible to avoid coming into close contact with others. Other businesses closed voluntarily in a bid to protect their employees and the public in general (COVID-19: Impact on Employment and Labor, 2020). Because of such alterations of the labor market, unemployment claims increased significantly as more people lost their sources of livelihood.
One of the most important things to note about the pandemic is that it has accelerated the rate of automation of certain industries, especially in developed countries like China. According to the IMF, more companies will automate as the pandemic highlights the vulnerabilities of a human workforce as well as a geographically dispersed global supply chain (Dewan & Ernst, 2020). The pandemic is also shifting workers toward the gig economy as consumers are increasingly tapping the internet in order to connect with services and goods from their homes. However, the low barriers to entry to the gig economy mean that the supply of workers will likely exceed their demand for their services.
How COVID-19-Accelerated Unemployment Rates Affected the Economy
According to the World Bank predictions, there will be a 5.2% contraction in the global GDP, notwithstanding the extraordinary efforts of jurisdictions to counter the downturn with monetary and fiscal policy support (The World Bank, 2020). Over the long term, the significant recessions that are stimulated by the pandemic are anticipated to have more lasting impacts via lower investments, an erosion of human capital due to lack of employment and schooling, as well as the disruption in the global trade and supply linkages. As the spread of the virus is likely to continue, the disruption of economic activities across the globe will have adverse impacts on financial markets as it is expected to be volatile (Pak et al., 2020).
Conclusion
There is no doubt that the pandemic has had adverse impacts on the economy, which has in turn affected labor in a myriad of industries, thus leading to significant unemployment rates across the globe. While the spread is likely to have a more lasting impact, the introduction of the COVID vaccines might play a role in bringing about normalcy around the global economies, although the process might be slow and could take years.
References
COVID-19: Impact on Employment and Labor. (2020). Retrieved 13 April 2021, from https://www.ncsl.org/research/labor-and-employment/covid-19-impact-on-employment-and-labor.aspx
Chetty, R., Friedman, J., Hendren, N., & Stepner, M. (2020). The economic impacts of COVID-19: Evidence from a new public database built from private-sector data. Opportunity Insights.
Crayne, M. P. (2020). The traumatic impact of job loss and job search in the aftermath of COVID-19. Psychological Trauma: Theory, Research, Practice, and Policy, 12(S1), S180.
Dewan, S., and Ernst, E. (2020). Rethinking the World of Work. Retrieved 13 April 2021, from https://www.imf.org/external/pubs/ft/fandd/2020/12/rethinking-the-world-of-work-dewan.htm
Fairlie, R. W., Couch, K., & Xu, H. (2020). The impacts of COVID-19 on minority unemployment: First evidence from April 2020 CPS microdata (No. w27246). National Bureau of Economic Research.
Kniffin, K. M., Narayanan, J., Anseel, F., Antonakis, J., Ashford, S. P., Bakker, A. B., ... & Vugt, M. V. (2021). COVID-19 and the workplace: Implications, issues, and insights for future research and action. American Psychologist , 76 (1), 63.
Miller, H. (2020). Reopening America: A state-by-state breakdown of the status of coronavirus restrictions. Retrieved 13 April 2021, from https://www.cnbc.com/2020/04/30/coronavirus-states-lifting-stay-at-home-orders-reopening-businesses.html
Pak, A., Adegboye, O. A., Adekunle, A. I., Rahman, K. M., McBryde, E. S., & Eisen, D. P. (2020). Economic consequences of the COVID-19 outbreak: the need for epidemic preparedness. Frontiers in public health , 8 .
The World Bank. (2020). The Global Economic Outlook During the COVID-19 Pandemic: A Changed World. Retrieved 13 April 2021, from https://www.worldbank.org/en/news/feature/2020/06/08/the-global-economic-outlook-during-the-covid-19-pandemic-a-changed-world
Yu, W. H., & Sun, S. Falling in and Getting Out of Unemployment: Ethnoracial and Class Differences across Business Cycles.
