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The economic impact created by the COVID-19 pandemic is nothing less than disruptive. Its adverse effects are felt by all industries, particularly travel, shipping, manufacturing, and financial. The most noticeable effects are visible in the stock market. Global shares are constantly fluctuating. Shares in companies are being sold and bought- affecting the value of individual savings accounts and pensions.
Another economic consequence of the current pandemic is the rise in unemployment rates. According to the International Monetary Fund, the current rate of unemployment in the United States is 10.4%. Millions of laid-off employees have applied for unemployment insurance benefits and government-backed job retention programs since the onset of the pandemic in March.
The travel industry was hit the hardest. Due to travel restrictions applied by several countries, many airlines cut their flights or shut operations altogether. Customers are also canceling vacations and business trips.
In addition, the demand for oil has nearly dried up. The price of crude oil has dipped quite low due to the coronavirus. Lastly, consumer confidence is at an all-time low. Many shoppers prefer to stay at home.
How can we mitigate the consequences of the pandemic on our economy?
Lessons From the Past
When we examine successful government responses to past crises, there are three themes that emerge. These are:
1) Governments give priority to human capital and human welfare.
Economic recovery depends on protecting public health and boosting human capital. The latter is accomplished by helping individuals acquire skills to find new work or help them retain employment. The best evidence for this approach occurred during the Great Recession.
In 2009, state workforce centers increased registration in government training programs by 56%. Registration was further bumped up in 2010. These programs offered training and founded partnerships with various educational institutions.
2) Government policies consider existing trends and plan for long-term policies.
People who were financially vulnerable before the Great Recession, were the most affected when the 2008 slump hit. They also faced the hardest recovery. Research conducted by McKinsey showed that Black Americans are 5% more likely to face layoff, reduced hours, or furloughs, than white Americans in the current Covid-19 crisis. As governments plan for economic revival, they must consider current trends such as the growing shift towards online consumption and workplace digitization.
3) Effective long term strategies for economic recovery start early and alongside acute pandemic-relief efforts.
Recovery from this pandemic may be uneven. As history suggests, world leaders should pace their policies over time. For example, it took five years for New York City’s international tourism to fully recover from the 9/11 terrorist attacks.
A successful response should also foresee a permanently affected world. The GI Bill is the best example of an ever-lasting policy. First introduced in 1944, it supported veterans with home loans, professional, and educational training. The GI Bill is still in effect today. Policymakers should consider long-term measures that will rebuild the future.
Where do we go from here?
What will help post-COVID 19 recovery?
Here are some current initiatives to-date:
- Connect recently unemployed individuals with talent-seeking companies. e.g. Creating a job portal that connects unemployed individuals with short-handed companies.
- Tap into assistance from existing institutions.
- Supplement federal relief programs. For example, California state has introduced $50 million into a micro-lending program for businesses that are not eligible for Small Business Administration loans.
- States can adjust their taxation systems to give relief. e.g. extending property tax or income tax deadlines.
- Restore public assurance through confidence-building measures such as Plexiglas shields and cashless transactions at stores, providing PPE kits for low wage earners, etc.
The Effect of the Crisis on the Economy
According to the IMF, the global economy is expected to contract by 3% next year. This is the worst decline since the Great Depression. Although the corona-virus has pushed the world into an unprecedented crisis, growth is still expected to occur in the second of 2020. This will be driven by countries like China and India. Recovery in services-dependent countries like Italy or the UK will be slow.
At The Click Experts, we are adjusting to the new economy, and so should you.
>> Get in touch with us to launch your business in a post-COVID world.
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