As COVID-19 spreads from China to the United States and Europe, the International Labour Organization (ILO) forecasts that the outbreak could leave 25 million people out of work across the globe, which is the highest since the Great Depression. During the 2008 financial crisis, 22 million lost their jobs.
It is already materializing in some countries. In China, the first country hit by the novel coronavirus, about 4.6 million people lost their jobs in February. In the United States, on the second week of March, the number of people who applied for unemployment benefits increased by 30 percent from the previous week, while its unemployment rate, which stands at 3.5 percent, is expected to double in the second quarter of the year with 3.5 million job losses. Meanwhile, Europe has seen large-scale layoffs by heavily affected industries such as the airline sector.
South Korea is also seeing signs of massive layoffs that have resulted from a sharp decrease in demand, the closure of shops and factories and companies that have gone bankrupt. Local governments are witnessing a 20 to 30 percent increase in applications for unemployment benefits while more businesses are applying for the job retention scheme. The situation is also grim for job seekers with many companies freezing or cancelling hiring while part time jobs are equally scarce.
The global recession is difficult to know how long this will last, but will unlikely be over in the near future. “South Korean economy might experience negative growth in the first quarter of the year,” South Korean Economy Minister Hong Nam-ki said at a foreign press conference on Friday. “Some experts suggest that it could take three to four years for the global economy to recover to pre-coronavirus levels.”
At this time, job retention is the best benefit the government can provide. Although the government should do everything it can in its power to overcome the economic crisis, its priority should be to prevent job losses as it is more effective than providing unemployment benefits. It should provide emergency funds and defer tax payments for the self-employed, small and medium-sized companies and the industries that have been hit the hardest so that they will not go bankrupt.
In order to prevent or delay layoffs, more financial support should be provided to help companies to retain their employees. Considering this is an unprecedented crisis as President Moon Jae-in said, the government should also consider lowering the minimum wage temporarily for job retention. Companies should also stand by their employees as the government stands by them while labor unions should also be willing to share the pain and endure periods with reduced income so that the nightmare of the 1997 Asian financial crisis will not be repeated.