The impact could be severe in low-income countries, which have more workers in the informal sector and significant foreign debt.

The continuing lockdowns and economic fallout of the Covid-19 pandemic could leave tens of millions of workers jobless in coming months and have an outsized impact on the most impoverished countries if immediate steps aren’t taken, international organisations have warned. 

Global unemployment, which stands at 190 million, could see a sharp rise as businesses lay off workers and cut working hours. The impact on those working in the informal sector, mostly in the poorest countries, would be worse as they lack social protection such as unemployment benefits. 

Since lockdowns were enforced, manufacturers of cars, clothes and shoes have seen a sharp drop in demand, which could have a cascading impact on employment rates far beyond these sectors. 

It could be a vicious cycle that has rattled supply chains, which links the buying habits of a Wall Street banker shopping at Zara with a textile worker living in a congested slum of Dhaka, Bangladesh. 

While it's still too early to come to a firm figure, the International Labour Organization (ILO), a UN agency, says that more than four out of five people (81 percent) in the global workforce of 3.3 billion are affected by the partial or full workplace closures. 

Just three weeks ago, it had estimated that around 25 million could lose jobs this year because of the pandemic. 

But within that time the virus has ripped through the United States, Italy, Spain and many other countries, killing thousands and forcing governments to enforce stricter curfews and limit the movement of people. 

In the past three weeks, more than 16 million Americans have filed for government support meant for those who have lost their jobs.

Coronavirus lockdown forced millions of workers in India to leave cities and head for their ancestral homes in villages.
Coronavirus lockdown forced millions of workers in India to leave cities and head for their ancestral homes in villages. (AP)

The ILO now sees the impact as such that an equivalent of nearly 200 million full-time workers could take a hit in the next three months. 

“Workers and businesses are facing catastrophe, in both developed and developing economies,” said ILO Director-General Guy Ryder. “We have to move fast, decisively, and together. The right, urgent, measures, could make the difference between survival and collapse.”

The worse affected sectors are those where employees are mostly low-skilled and underpaid, such as construction workers. 

Around 1.25 billion people, making up almost 38 percent of the global workforce, are employed in sectors that face severe stress, including hotels, restaurants and shops in shopping malls. 

The retail and wholesale sector, which employs 482 million people across the world, would be worst hit, according to the ILO. 

That is particularly troubling for countries such as Egypt which generate a substantial amount of their GDP from the sector. 

A lot will depend on what measures governments take to support the labour market, but many of them have limited options. 

In most of the developed countries including the United States and Germany, interest rates were already low. That means there were plenty of funds to finance businesses and credit growth yet it wasn’t enough. It did not lift the economy from the doldrums even before the crisis hit earlier this year. 

Yet, governments in the US and Europe have pledged to pump trillions of dollars as part of a stimulus package by increasing government spendings, introducing tax cuts, cash handouts and loan guarantees. 

The longer the stores remain shut in developed countries, the more uncertain the future of textile factory workers in the likes of Pakistan, Cambodia and Vietnam, becomes. Garment makers in half a dozen countries have already made appeals to the buyers such as Walmart not to cut orders or demand price reductions. 

In Bangladesh, more than a million garment industry workers, 80 percent of them women, have been sacked after Western clothing brands cut orders, according to reports

Around two billion people work informally - they are not covered by proper employment contracts which can offer social benefits in times of a crisis. Think of domestic workers in India, the roadside mechanics in Pakistan or construction labour in Dubai. 

“In India, with a share of almost 90 percent of people working in the informal economy, about 400 million workers are at risk of falling deeper into poverty during the crisis,” the ILO said in a recent report

Chaotic scenes of thousands of recently-fired workers crammed at bus and railway stations in New Delhi have highlighted the severity of the situation. 

Oxfam, the international aid group, says that more than half a billion people, representing 6 percent to 8 percent of the global population, can be pushed into poverty as a consequence of Covid-19 if the world’s richest countries do not act to help its poor peers. 

The African continent backed by the International Monetary Fund and the World Bank has already called for a moratorium on debt repayments. This year alone, Africa - including some of the most indebted countries such as Ghana - has to pay $44 billion in interest payments alone. 

With already fragile health infrastructure, a lack of ventilators, or government ability to help those in need, the consequences of economic recession can be manifold in developing countries.  

Oxfam has called for the immediate cancellation of developing country debt payments in 2020. 

“Cancelling Ghana’s external debt payments in 2020 would enable the government to give a cash grant of $20 dollars a month to each of the country’s 16 million children, disabled and elderly people for a period of six months.”

Ghana spends 11 times more money on servicing its debt than on healthcare. 

Of the $2.2 trillion stimulus package announced by the US government in late March only 0.05 percent, or $1.1bn, will help address the crisis in economically weak countries. 

“That is shocking and shortsighted: unless rich countries are ready to quarantine themselves forever, this crisis will not end without international solidarity,” says Oxfam. 

Source: TRT World