The worker in the post-COVID-19 economy

Wednesday, 29 April 2020 04:04 -     - {{hitsCtrl.values.hits}}

Losing employment causes greater damage to workers in countries like Sri Lanka, compared to the West – Pic by Shehan Gunasekara

By Vidura Prabath Munasinghe

Today the world economy is at a standstill for the first time after World War II due to the impact of the COVID-19 pandemic. Many reasons have contributed to this, including decreased demand for goods, suspension of international transportation and factories. 

Predictions are already being made that economic crisis resulting from these will create far reaching consequences. The World Trade Organization (WTO) has warned that the scale of economic downturn would be similar to that of the economic recession in the 1930s. The global economy collapsed by 32% during the economic crisis of the 1930s. It is predicted to be 13% at best this time. But with the information received each day it is hard to be optimistic anymore. 

According to the International Labour Organization (ILO), by the end of 2020 total loss of worker’s income would be $ 3.4 trillion due to COVID-19. This would affect the jobs of four-fifths of the global workforce, that is 2.7 billion employees. About 195 million employees will be unable to work due to decreased working hours in the second quarter of 2020. More than 125 million will permanently lose employment by the end of the year. 

In addition to lay downs, under employment and salary cuts will also be a result of this crisis. Countries where the garment industry consists of a significant part of the economy, such as Bangladesh, Vietnam, Cambodia and Sri Lanka, will feel the economic downturn severely, as they are connected to the global demand and supply chains. Also their productions are connected globally from procuring raw materials up to the end market. 

It has been calculated that Bangladesh, the biggest producer of garments in the world after China, will lose at least one million jobs in the garment sector. It is estimated that 4.1 million people will face hunger due to under employment and salary cuts, in addition to lay downs. All these estimates are about an evolving global crisis. Therefore, it is not possible to predict with certainty as to what extent the crisis will evolve. 

Garment sector in Sri Lanka

In this background, on 5 April the Sri Lanka Apparel Exporters Association (SLAEA) has stated that at least 30% of the workforce in the garment sector needs to be laid down temporarily. According to the BOI, garment industry represents a significant portion of our economy. This amounts to 44% of the total exports and 33% of the workforce in industrial sector, according to them. 

Fifteen per cent of the country’s work force is employed in the Export Processing Zones (EPZ). Production has already been suspended in most of these factories. Although the State has instructed the factory owners to pay the salaries of employees, only a small group of them have implemented it. Some factories have not paid salaries at all, while some others have only paid the basic salaries. 

Manpower employees who have been subject to much debate in the past due to the vulnerable nature of their working arrangements are not at least considered in this respect. They are not qualified even for the Rs. 5,000 allowance that the Government is paying to Samurdhi recipients and those who cannot engage in self-employment.

Dark prospects

In the present context, the Employers’ Federation of Ceylon has requested the Minister of Employment and Labour relations to lay down employees by paying reduced salaries lower than their basic salary until production becomes normal. Also reforming the salaries, working conditions and holidays in the months after resuming production, to pay extended work hours not as overtime but as normal working hours were also among their proposal. 

The next demand of the employers would be to abolish or relax the legal provisions that govern the dismissal of employees at their will (in particular, Termination of Employment Special Provisions Act). These are signs of a dark reality that are already visible, and which will affect a significant portion of the Sri Lankan workforce in the near future. 

Lay downs or reducing salaries and privileges of workers are the main steps that producers have taken to face economic recessions around the world. This is due to labour being the factor of production that is in their control the most. However, the consequences of this would affect a country’s economic and social set up in multiple ways. Failure to analyse the steps taken in this context in a broader perspective could lead to negative consequences which will ultimately hinder the economic stability of the country for many decades.

Bigger picture of the crisis 

Recent statistics shows that an individual in the country needs minimum Rs. 29,100 per month and a family of three needs Rs. 42,900. It is well known that the employees of EPZs receive salaries below that. Thus, these employees already meet their monthly expenses with great difficulty. 

Their quality of life would plunge by easing requirements on dismissal from work, paying below the basic salary (most of their current salaries consist of basic salary and other allowances), or paying the rate for regular hours for overtime work. Most of them are currently just above the poverty line. They are in a situation where a subtle change in their economic condition will drag them below the poverty line. 

On the other hand, losing employment causes greater damage to workers in countries like Sri Lanka, compared to the West. The unemployed in the West are entitled to Government welfare benefits throughout their phases of unemployment. 

Further, under normal circumstances the gap between two jobs is relatively shorter in these countries. Not only are those losing jobs in Sri Lanka not entitled to Government benefits, it is very hard to find a new job after losing a one. Sometimes, they never find another job. Such persons are pushed into under employment, unstable/vulnerable employment and unemployment under these conditions. In short, they will be unable make ends meet. 

It will greatly curtail their capability to spend for their basic needs including their health, housing and children’s education. Increased poverty creates an additional burden to the welfare responsibility of the State. On the other hand, their reduced spending capacity affects the financial flows of the country, thus weakening a cluster of businesses which rely on their spending. Ultimately it will affect the whole financial flow of the country. 

All of these are to be borne by an economy that is already under a slow economic growth (the lowest growth in South Asia) in addition to being under a huge foreign debt trap. Also the country is facing a constitutional crisis (due to the Parliament being dissolved) of having difficulties in receiving World Bank’s $ 128 million (in order to receive it, Parliament needs to increase the credit limit of the State).

The most recent lesson on mismanaging similar situations can be learned from the way the East African countries in the face of the Ebola pandemic. Although it was not as serious as the current global pandemic, the loss of jobs and livelihoods in those weak economies resulted devastative outcomes in terms of development, peace and social integrity in those countries. 

A worker-centred approach

The existing legal provisions on dismissal of employees have been created in the face of previous economic crisis situations with the intention of protecting employees from tendencies of removing employees. Therefore, it is a paradox to talk about abolishing or relaxing the said provisions during an economic crisis. 

On the other hand, the factories were in operation during the period without GSP Plus, and they did not share with the employees the profit they earned after receiving the GSP Plus. In this context, it is difficult to accept the argument that employees should bear the brunt of disadvantageous situations, as the benefits of advantageous situations are not equally shared with the employees. When dealing with the emerging economic crisis we need to take all these aspects into consideration. 

The steps taken in this background should have a trajectory of long-term economic progress. They should not be merely short-term solutions to the problems faced by the factory owners today. It is absolutely necessary to keep in mind that the worker needs to be the main focus of any action. 

ILO Director General Guy Rider stated as follows: “In times of crisis like the current one, we have two key tools that can help mitigate the damage and restore public confidence. Firstly, social dialogue, engaging with workers and employers and their representatives, is vital for building public trust and support for the measures that we need to overcome this crisis. Secondly, international labour standards provide a tried-and-trusted foundation for policy responses that focus on a recovery that is sustainable and equitable. Everything needs to be done to minimise the damage to people at this difficult time.”