Unemployment cursing Economy after COVID-19 struck Asif Rahman, Deepti Jahan, Sumaiya Fahmida and Musfiqul Alam Chowdhury
Shocking scenarios keep coming towards Bangladesh as unemployment is shooting upwards, with the onrushing coronavirus pandemic forces the economy to shut down. Millions of people are losing their job and facing financial crisis. The CPD report is a flavor of what is to come-though because the definition of unemployment is complicated; it is likely to give a misleading view of the true situation. How bad could the labor market get?
Bangladesh’s unemployment rate rose to around 9% from 4.3% pre pandemic. Recent forecasts, though beset by uncertainty, put the probable peak rate in 2020 somewhere 20%. The rate would be even higher, but for the million workers it assumes will become discouraged and leave the workforce (in order to count as unemployed, people must participate in the labor market by actively seeking work). Some places and groups will fare worse than others. During this pandemic, peak unemployment rates across cities ranged from just over 2% to nearly 20%, depending upon the density of population. The rural areas have 1.82 million unemployed people, more than double the number of those 0.77 million, in urban areas, according to the latest Bangladesh Bureau of Statistics (BBS) labor force survey. The urban-rural population ratio is 30:70 in Bangladesh.
GDP growth and the unemployment rate tend to move in opposite directions. The coronavirus-induced shutdowns are expected to lead to a year-on-year GDP decline of about -5.2% to -4.2% in 2020 and -6.1% to -4.4% in 2021. Such a steep fall in economic output implies an unemployment rate of about 9% in this quarter, based on past relationships, which would be roughly in line with the peak reached during post independence famine. Modelling based on recent analysis of the macroeconomic effects of the coronavirus reckons that unemployment will rise to 12% in the second quarter of this year, and peak in the third quarter at around 15%. Researchers from Dhaka University’s Institute of Health Economics estimate that around 15 million people from different sectors will become unemployed in Bangladesh due to the slowdown of trade and business caused by. Moreover, some Bangladeshi economist and analyst estimated that nearly 20 million people might lose their jobless due to COVID-19 crisis.
The figures are staggering, even to those hardened by the experience of the past political and financial crisis. According to World Bank data, only 15% of Bangladesh’s population makes more than 500 taka ($5.90) a day. When 10 million rickshaw drivers, day labourers, factory workers, maids and others raced to get home before the start of the shutdown, it threatens millions of livelihoods in the country imminently.Deal cancellation of more than 3 billion usd in global RMG markets results more than 4 million of employability and 350 million usd of exports in trouble. The labour unions of industrial areas keep protesting as wage cut and workforce reduction continue.
Since more than 3 months of shutdown and 66 days of government holidays, limited economic activities and lack of safety programs are creating employability crisis for millions of private job holders. Unemployability is forcing people to leave cities as housing rents and other costs are hardly being paid.as more than 80% of urban polpulation live by rents, property owners are equally suffering due to income shut and increasing debt. Non government and private educational institutions may slash its staff by a large number due to salary crisis as the institutions are closed for more than quarter of a year.
Covid-19 has spread large-scale economic disruption around the country. Apart from government employees, It is increasingly clear that the pandemic confronts Bangladesh with a labor-market crisis severe than ever. A large group of people that used to live above the poverty line before the outbreak of Covid-19 tends to fall into the poverty trap. According to BIDS, 52% of population has an income cut, along with income shut of 16%’s, contrary to 31% remained unchanged. be inferred from this possible exacerbation of the poverty situation that an overwhelming majority of the population does not have sustainable livelihood and thus fails to rise to the challenges of economic crisis induced by the ongoing pandemic. Moreover, families of educated unemployed people are not normally poor as per the poverty line. However, due to the current critical period, they have fallen into poverty. Therefore the demand of employability shoots to sky.
Prime minister’s relief package of 8.5 billion dollar will be economic-stimulus initiative which is more than a genuine check on rising joblessness. According to our calculations, making it less likely that bosses will let them go. Other measures in the package should support consumption, and thus demand for labor. Around 60 million people have become poor due to the adversities of the current pandemic situation. The government’s cash support program of providing TK 2500 to 5 million poor families needs to be at the next level by increasing both allocation and tenure of the existing allowances. There would be 7.7 billion dollar package for government employees in upcoming budget, more than 7% from the existing one. The coronavirus has already left 15-20 million people unemployed in the country. If their families are counted, this number is about 50 million. As a result, they need instant help. The stimulus package of 12.2 billion dollar (3.7 per cent of GDP), which is the second highest among peer countries, should be implemented immediately to these targeted people to make them able to avail themselves of the benefits to face the challenges of the pandemic.
But the coronavirus epidemic is not like other recessions. For one thing, hiring could be even lower than is typical. Delivery firms notwithstanding, surveys suggest that firms’ hiring intentions are lower than previous and applying for a job is especially difficult with cities in lockdown. Online job portals are facing a 60-70% drop of recruitment advertisements and worrying those things may remain unchanged for next couple of months. HRDs’ are asked to manage pay cuts even potential workforce reduction if the crisis continues. Similar situation is in banks and other financial institutions, these institutions are suffering from incidents of loan frauds and liquidity crisis. Every year, more than 2 million of youth enters into the job market. A large portion of it tries to get government job after graduation. For instance, young people entering the labor market for the first time now would struggle to find work which leapt the youth unemployment rate much higher than what we have already of 11.3%.
Many of the factors implicated in this change in recovery patterns are likely to apply as the pandemic recedes. Easing could prove insufficient as that would bring the health issue up. Though the government has largely taken initiatives to avert the havoc, but its ability to revive economic growth may be hampered by Household and company debt, already high before the pandemic, will grow more burdensome as the economy shrinks, reducing the scope for new spending once the recovery gets under way. Because of the coronavirus, the job market in Bangladesh, as in other countries globally, is likely to shrink further over fears of an imminent global recession. It will not return to normal until the economy of Bangladesh returns to its previous state. And there is no certainty as to when that will happen. Firms may come to view the pandemic as an opportunity to streamline production—through the use of remote-work and automating technologies, for example—potentially reducing labor demand down the road. Such structural shifts during downturns have contributed to the joblessness of recent recoveries. Ultimately that will worsen the situation already distorted with more than 3 million of unemployed and 7 million of pseudo unemployed in the country.
A big jump in unemployment is not a big problem if it quickly falls once the lockdown ends. Whether the economy will prove so elastic this time or not is another matter. Everyone needs to be cautious until some sort of vaccine or treatment is widely available; social-distancing rules, even if relaxed, will continue for some time. But researchers reckon that it will take a while for unemployment to fall back pre pandemic stage. The lockdowns should be temporary, but the economic consequences will feel much more permanent.
The authors are studying in the Department of Development Studies, University of Dhaka.