[Blog] THE SOCIO-ECONOMIC COVID : Will Government be bold enough to save jobs?

Worldwide, Covid-19 casts a gloomy shadow of uncertainty. It has brought in its wake unprecedented situations nearing chaos in all domains of life. While we hope for the best, unfortunately, we also must brace for the worst.
 
Covid-19 is not only endangering the lives of people; it is also undermining their livelihood. The ensuing socio-economic tsunami, triggered on a global scale, is washing away millions of jobs. Mauritius will not escape this wave.

While governments struggle to contain the pandemic, ensure economic survival and prevent the breakdown of law and order from descending into the nightmare of social chaos; firms too are fighting for survival, trying in the process to preserve their most precious asset: human resources.

The general view is that governments in most countries, to the exception of past SARS battered countries like Hong Kong, South Korea and Singapore, have been caught in a state of total unpreparedness. They are now operating in a trial and error mode. Also, the fuzzy type of communication is having unintended consequences. In Mauritius, the spin to scare citizens into discipline under lockdown has also scared to death some civil servants from delivering essential services, such as social aid. But now is not a time of moaning, it is the hour for bold decisions and decisive actions.

It is clear by now for many governments around the world that Covid-19 being a black swan phenomenon calls for a complex system approach rather than the traditional linear mode of thinking and tackling problems. Although deaths are no mere statistics, Covid19 extends beyond a health issue as it breaks society into pieces, system-wide. As an analogy, nodes after nodes are failing, bringing to fear the collapse of the entire network. Trying to tackle issues in a step by step approach rather than in locked steps, viz holistic and systemic manner, may before long tantamount to too narrow, too little and too late action.

The socio-economic fabric is cracking as lockout remains a stilled solution to a developing dynamic situation. As Holman W. Jenkins, Jr, writes in a recent Wall Street Journal piece, «We are crushing our economy simply to meter out how quickly these consequences fall on our exhausted healthcare workers… I repeat: We are slowing the economy to a crawl to slow the rate of a thing happening that will have to happen anyway». In other words, what else after lockout? More and more lockouts?

This is food for thought regarding daring strategies governments are called to craft in order to save what can still be saved while the house is under fire. In Mauritius, if any parameter applies, the spike in the exchange rate of the dollar (nearing Rs 40) is a graphic illustration of things to come: in the midst of an imploding socio-economic mess, imports of essential goods, foodstuff and vital drugs included, are bound to be more costly. It is a double whammy.

So far, the Government has reacted by trying to protect the most vulnerable segments of society with a whole array of measures: 35,000 packs of food delivered, deferment of loans repayment for those earning less than Rs 50,000 monthly, interest freeze on loans for the same category, deferment of payment/discounts on public utilities for vulnerable categories, income support of Rs 5,100 for the informal sector, etc. Government is also trying to protect jobs by subsidising salaries in the formal sector. Allying consumption needs is vital in the immediate term; keeping afloat the production apparatus, in the same vein, is as important in the short to medium terms. This is where the Government is expected to take an even bolder, wider and deeper range of actions to keep firms and self-employed in productive use.

The Government may be faced with the following conundrum: (1) continue to subsidise even more substantially wages in the formal sector, while caring in parallel for those in the informal sector; (2) allow firms to practice furlough (see below); (3) facilitate a mix of
both. 

These are no normal times. Orthodoxies are exploding in the face of new emerging realities. Which explains why governments are rushing to pay the wages of private sector employees and recession memory terms such as furlough are resurfacing. For those who are not familiar with the jargon, furlough simply means unpaid leaves, until the situation returns to normal. Under furlough as applied in other countries, the employee is not laid off, but take a leave without pay, while preserving his/her years of service and other rights. Under Covid-19 menace, such leaves may last from three to four months.

Furlough is practised under a set of criteria: vital nature of the job; productivity metrics; and in some cases, last in, first out.

In most countries, where the government is unable to substantially help firms to support jobs, furlough is fast gathering traction. In Mauritius, the only alternative to furlough, which is non-existent in our traditions and laws, is to lay off employees for economic reasons under the new Workers’ Rights Act 2019.

Government, Business Mauritius, Trade unions as well as other informed stakeholders may have to consult urgently and take bold actions in the medium to longer terms interest of job preservation and social stability. Orthodox thinking and ideological grandstanding wouldn’t help; they have already been chewed and swallowed by a new reality.

MYTH BUSTER