We have listened to many news, read articles and watched videos about the effects of the virus that has recently spread around the world and can not be stopped. This short article is written to discuss the possible effects of the virus on labor markets and society in general. In fact, the study is planned in two dimensions: global effects and effects to Turkey. The study you are reading focuses on global effects. In fututre times (when enough data processing) will also penned the implications for Turkey.
No matter how much scientific method is used in future predictions, it is not correct to make clear judgements. However, when this predictions are constructed in the light of previous experiencesi they may appear as high probabilities of general validity. In our study, there are also inferences from both global reports and experiences from past events.
Since the study is structured within the expectations of international organizations rather than individual assumptions, most of the scenarios in question are also adopted as precautionary policies for global companies.
How does the virus affect the markets?
Many reports have been produced recently on how viruses will affect the ecenomy. On the most notable of these is the Europian Parliament's 26 February Report of the Outbreak and the Economic Impact of the Global Outbreaks. The report is based on the theme of coordination between EU countries and healthcare professional and the exchange of the best practices and the expansions of financal support. However, if we need a simple introduction to how the virus will affect the markets, it is necessary to answer as follows: The virus affcts the economy by slowing it down. As face to face systems are still active in the markets, the virus has caused / will cause a significant slowdown in the economy, excluding online shopping.
The warnings not to go out within thw framework of the preventive measures have caused the active economy to suffer significantly. Shops, bazaars, restaurants and eveb shopping malls came at the closiing point. This situation adversely affected the hot money flow and product circulation. Production of options that are not sold / consumed has also stopped accordingly. This cycle albeit temporarily, led to reduced production potential, contraction in employment, and unemployment that has not yet been officially recorded. When the market revives in the delayed period, we will be able to see how much of temporary dismissals can return and talk about offical unemployment figures. For now taken several measures for temporary suspension from work (such as Turkey's unemployment insurance fund guarantee charges based decision making interim payments from the fund in the streched conditions). As a result, the virus has an impact on the slowdown of active markets, albeit tempoarily.
As will be remembered, there had been important destructions for the labor markets in the 2008 crisis. The recovery of this prosess took 5-6 years with the most optimistic view (in fact, it can still be said that its effects still continue). There are expectations that the experiences gained from the 2008 crisis will produce useful recipes for overcoming the current crises. However, there are also those who state that the 2008 cirsis experiences will not work because the crisis did not occur under the same conditions. We would like to determine the following for both views. People who can analyze economic data clearly know that the arrival of crises is not accidental or unexpected. All aconomic crises result from the effects of uncontrolled expansion in market movements. All the economic crisis in the world so far have occured due to similar enlargements. The effect of similar monetary expansion is clearly visible before the 2008 crisis. When the 2008 crises broke out, the economic or semi-conscious monetary expansion was accelerated considerably in order to eliminate the negative efects occuring woorldwide. Whether this is to provide cheap loans through interest cuts or through tax cuts, the global currency volume has increased rapidly in the period following 2008. Especially by 2015, close to zero interest rates (even negative in some countries), excess in tax and investment subsidies inflated derivative markets more than necessary and positioned the monetary volume above the global gross domestic real product. In such cases, many economistsi can predict that the crisis will come after a certain delay (but there are several predictions about delay times. In this contxt, the average of the time intervals of the monetary expansions that exceed the global real gross domestic product combine in 4 or 5 years). From this point of view, it can be easly seen that an economic crisis is expected in 2019 or 2020 within the framework of the 2015 monetary expansion data. In order to prevent these crises, either interest rates must be lowered (already close to 0 in the world) or artically sustained the market with incentives. Obviously, since the first mesure has been exhausted and the tax leg of the second measure has been used, it is planned to relax the system by increasing the money volume (by printing new money) aas a new approach to the second measure. As we have stated above, when the market is not balanced in the medium or long term, printing money creates the infrastructure of a new crisis while saving day. Failure to get out of the expectations of the crisis causes enterind the office of the faculty and constantly needs new measures (economic packages). Expanding the volume of money initially pleases society. HOwever, it causes inflation in the short term. Since the expenditures will increase in the medium term, the inability to meet the demand (such as transferring the increased money to the static structure rather than the investments in the production of goods and services) causes difficult economic damages. To get rid of all this, either the market is expected to stabilize spontaneously (which is not possible in practice), or a new additional source must be found from inside (through taxes) or from outside (through borrowing). In any environment where production cannot reach consumption, economic crisis and unemployment are inevitable after a while. Moreover, even once the economic contraction and unemployment spiral is entered, it is not as easy as expected to reach the same potential, closing fixed investments, weakening commercial connections, decreasing firm prestige, decreasing labor productivity and performance / aging.
How will the viral economic crisis affect global labor markets?
“This is no longer only a global health crisis, it is also a major labor market and economic crisis that is having a huge impact on people,” said ILO Director-General Guy Ryder.
In the report titled "COVID-19 and the world of work: Impacts and responses" published by the International Labor Organization (ILO) on March 18, 2020, there is a warning that approximately 25 million peopla may lose their jobs worlwide due to the virus. In addition to this, it has been stated the new people will be added to the millions of working poor who are not working enaugh to sustain their lives. In the report, various estimates are made according to the scenarios of decrease in the global gross domestic product (GDP) growth rates. Accordingliy, when the global GDP growth decreases by about 2% (wich is called the low scanerio), global unemployment is expected to increase between 3.5 and 7 million (estimated an average increase of 5.3 million in calculations). In the so-called middle scenario (where GDP growth decreases by 4%), global unemployment is estimated to increase between 7.7 and 18.3 million (average calculations are about to increase by about 13 million). In the high scenario, it is estimated that global unemployment will increase between 13 million and 36 million (average 24.7 million) if GDP growth decreases by 8%, assuming serious destructive effects.
In terms of market production potential, the total value added of industrial enterprises in China, which is regarded as the spreading center of the virus, has decreased by approximately 13.5% in the first two months of 2020. Of course, this situation negatively affected global and regional supply chains. In addition, the report also warns that millions of people employed in the service sector may remain unemployed, as there is a 25% reduction in arrivals by 2020 within the framework of the statements made by the tourism council.
It is estimated that the monetary loss currently calculated due to the virus causes will be between $ 860 billion and $ 3.4 trillion in the global framework. Assuming that the total global GDP is at the level of $ 88 trillion, $ 3.4 trillion corresponds to approximately 4% of this size (3.86%). Even if this situation does not reflect the production potential of global economic actors at the same level, it can be expected that there will be a global economic contraction between the low / medium level scenario.
Of course, it is clear that with the effect of this contraction, the workforce will suffer significant losses. We see that ILO has also reported some measures to prevent labor market losses, along with measures such as turning to lower consumption and production of goods and services, which include flexible structures to reduce economic losses.
To summarize them briefly, it is possible to collect them under three headings. 1) protecting workers in the workplace, 2) promoting economy and employment, 3) supporting work and income.
“These measures include expanding social protection, promoting continued employment (eg short-term work, paid leave, other subsidies), and financial benefits and tax relief, including micro, small and medium-sized businesses. In addition, monetary and fiscal policy measures and lending and financial supports for certain economic sectors are also recommended ”(ILO, COVID-19 Report).
Who is more vulnerable in terms of labor in the world?
It is clear that temporary workers without permanent income are at higher risk. However, if there is a systematic grouping in the light of global experiences within the framework of the ILO report, it can be said that age, gender, mode of work and immigrants are more vulnerable. In this context:
1. The elderly and especially those with health problems are at higher risk.
2. “Young people” are more vulnerable as groups most affected by reduced labor demand (after MERS broke out, older workers were found to be higher than individuals of primary age in terms of higher unemployment and underemployment, as well as reduced working hours).
3. Women especially employed in the services sector are at risk. In the global service sector, 58.6% of women work and 45.4% of men work. In this context, women are likely to be more affected in terms of sector employment. Moreover, it is among the important problems that women have less room than social protection coverage.
4. Other unprotected workers, including self-employed workers, temporary workers and other migrants, are also at significant risk.
The increasing number of different types of employment and the expansion of precarious employment areas leave the workforce significantly vulnerable in such crises. Although the ILO takes measures at various levels within this framework (eg Social protection base advice 2016/202 or part-time employment contract 1994/175), these groups are more likely to lose their jobs in the current economic system.
What can be done?
In the virus-based economic crisis, the three-dimensional measure cycle can be put into effect, no less important than each other. The first of these is to raise and protect everyone as much as possible against health risks (such as warnings about social isolations such as curfews and the dissemination of effective diagnosis and treatment systems). Of course, these measures require a large amount of investment capacity.
The other is to support both the workforce and employers with employment and income support. This situation can be effectively carried out under the condition of suppressing consumption patterns paired with the destruction of losses in workers' productivity capacities. Because consumption depends on production and if the decrease in production is not taken under control, high inflation and chaos can create an environment. If uncontrolled consumption is provided by providing income support to the workforce, the system will be locked and market damage will occur. Stockists and monopoly benefit from this situation.
Finally, an active and reliable policy must be followed for each segment. The importance given to social dialogue should gradually increase. Increasing respect and trust between the parties are among the important measures to combat such crises (ILO, COVID-19 Report).
We clearly see that the economic crisis caused by the virus has many things that tell us globally. This process, which is also considered as the stages of preparation for a new social structure, can only be overcome without harm and awareness. Of course, as it is now, there will be many social problems of being closed. For example, unrest in home life may be one of them. It is feared that as a result of staying at home, marriage institutions that are not established with strong ties can be shaken. Increasing divorces than the previous period may cause us to lose the advantages of the family institution in the coming years.
We think that societies, which have a slow understanding of the warnings about digitalization, are obliged to adapt quickly with such shocks. It is not a distant dream to be living in a society reconstructed with the rules of the digital world in the near future.
It seems difficult to get out of the "global powers" who believe that the global population is more than necessary, without destroying / changing the effort (or threat) to guide the world. A new economic system, a new social structure and new habits… We hope everything will not deteriorate faster than our forecast until 2030.
