Time for a 'better normal'

Time for a 'better normal'

The continuing spread Covid-19 has reversed the decades-long record of strong economic growth in the Asia Pacific region. As governments continue their struggles to contain the pandemic, the labour market has been affected adversely, with businesses, workers of all ages, and the incomes of women and men throughout the region all feeling the pinch.

Even countries that have managed the health crisis well, such as Thailand, are still reeling from the impact on businesses and jobs and are struggling to return to some semblance of normalcy. The International Labour Organization (ILO) estimates the world lost 81 million jobs in 2020 compared with pre-crisis trends, while another 22-25 million employed people were pushed into extreme poverty, living on less than US$1.90 per person per day.

China and India, which together account for 59% of the region's gross domestic product (GDP) and 65% of the region's employment, have seen severe impact on employment. In China, for example, the urban unemployment rate jumped to 6.2% in February from 5.3% in January as average weekly working hours fell to 40.2 from 46.7.

More recently, the Chinese economy and labour market have seen a gradual recovery, with the urban unemployment rate easing back to the pre-crisis level of 5.3% in October. Working hours have returned to the pre-crisis level of 46.7.

With the second most Covid cases worldwide, India has taken a major hit. Up to 429 million workers have been adversely affected by some of the world's strictest lockdown measures. While the economy is still largely operating in crisis mode, there are early signs of recovery. Exports, for example, rose year-on-year in September for the first time since March.

Governments throughout the region have been doing their best to respond to the needs of workers, businesses and households. Expansionary fiscal policy has been critical to counter the slowdown in economic activity and stem losses in jobs and working hours.

But given the scope of the damage to labour markets, the overall size of the fiscal response is still insufficient.

Among the 38 economies in the region, the median fiscal policy package amounted to 12.4% of GDP. The average fiscal expenditure as a share of GDP in high-income economies was 24%, compared with 7% for low- and lower-middle-income economies. In Hong Kong and Japan, the expenditure as of mid-September was a staggering 52% and 65.5% of 2019 GDP, respectively.

Conversely, less than 1% of GDP had been committed in Laos and Myanmar, where the bulk of the pandemic response has involved international assistance. China announced a total policy response of $2.4 trillion (17.3% of GDP), second only to Japan ($3.4 trillion) in the region. India committed $376 billion or 13.4% of GDP, and Indonesia is spending $115.8 billion or 0.9% of GDP.

Low- and lower-middle-income countries have had a clear disadvantage, given their limited fiscal space. In low-income countries, the fiscal stimulus value in terms of full-time equivalent jobs amounts to only 0.7% of baseline working hours, compared with the 12% average decrease in working hours.

Even middle-income countries with resources to cushion the blow of Covid-19 may not have the capacity to sustain the effort through a prolonged crisis. In the high-income economies, the extra expenditure has been more than sufficient to respond to the 5.4% decrease in working hours.

This regional imbalance highlights the potential of intraregional cooperation and partnership to collectively combat the economic and job impacts of the pandemic. For example, within Asean, numerous pledges have been made to work together on mitigating the impact of the crisis and promoting solutions for recovery.

But as governments move away from short-term fixes to medium- and long-term recovery phases, they need to address outstanding challenges and promote a better-balanced, human-centred approach for a future of work.

First, governments need to increase investment in people's capabilities as well as a life-long learning ecosystem. Various institutions should support people who need help with the transition to new ways of working.

Amid this year's lockdowns, there has been a lively debate about whether remote working will be part of the "better normal" going forward. Whether a person teleworks occasionally or does so on a permanent basis can have important implications for their working conditions.

Ensuring daily and weekly working hour limits as well as developing, implementing and monitoring working time arrangements, in line with medical advice, and with clear assignments of responsibilities on costs, can help employers adapt to the current and new worlds of work.

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