Corona Caused Job Losses: How Bad is it?

The Coronavirus Pandemic has worsened the financial stability, economy, business, and human force of many countries like the USA, China, India, Italy,etc.

Millions of people all over the world got infected due to the virus and lakhs have lost their lives. The whole world had almost stopped and everyone stayed indoors to stay protected from the spread of the virus. With it, the major parts which got affected were the businesses and the whole cycle below it.

None of the companies, whether Multinational or Local, were functioning properly in this period and owners of the company had to bear huge losses because of the same. There was a loss of production with no working power and no profits.

In the early period of the pandemic, almost every employee was getting paid by the corporates and the companies under which they were working and there was a rise in the WORK FROM HOME system. But in the later period, companies started deducting salaries by 50% to 60% of all of the employees working under them. Some companies even removed many of the manpower from the work and the work burden of this manpower was put on the other remaining employees.

For Instance,if a company has 100 employees and 4 branches, which means 25 employees for each branch. Here, the company will remove 5-5 employees from each sector. The result being 5 employees will be losing employment and hence JOB LOSS will increase. The workload on the remaining 20 employees is increased. There is already a 50% to 60% salary cut to these employees. As a result, the remaining employees will not be satisfied with the job and tend to change the company and job.

FURTHER, Big Corporate giants who have a good reputation, decreased only the salaries of Top-Level Management and Employees by 20% to 25%. Benefits seen by this step were:
• Top Level employees had salaries more than ₹35 - 40 Lacs per annum and if this was deducted by 20-25 percent, there will be very less or no effect on that person’s lifestyle.
• The amount of Cost-Saving to the company was also more as a salary cut of top-level employees leads to saving of a huge sum of money as they earn in lakhs, as compared to middle-level employees.
• The normal and low salary-earning employees of the middle class and poor class were safe as they have not to suffer from salary cuts.
• This helped to maintain the goodwill of the Corporate Giants.

Basically, there is a growth in unemployment,losses, and great stagnancy. The expected recovery from the losses and unemployment is almost two years long as the cycle runs in the format of: -
1]Opening of Markets and Businesses: The Procedure for opening the small markets and businesses have been started worldwide after it was closed for almost two quarters of the year and will be fully opened till the end of the year.
2] Cash and Fund Flow: The more the liquidity in fund flow, the faster the growth in the economy. As the markets and businesses will start to conduct their activities,banks and NBFCs will also start working and the transactions will also increase which will lead to an increase in Liquidity.
3] Recovery of the businesses: Increase in business transactions will lead to making profits of the businesses and hence will recover from the losses which were borne in the last two quarters.
4] Reducing Unemployment: Once the businesses will start functioning, there will be a need for companies and industries to conduct their work and hence will need manpower and hence new hiring and hence an increase in employment.
5] Circular Flow of Income: After all this household sector will also be earning and the industrial sector will also be earning and hence there will be a proper circular flow of income.
6] Economic Recovery: Finally, this whole long process will take the time of a year or so and the economy will be recovered and will be growing.

Figures: -
• 41 Lakh Youth Lose Jobs in India due to COVID-19 Pandemic [Economic Times]
• Every Third Person Has Lost his Job since COVID-19.
• 400 Million Jobs Lost in 2nd Quarter of 2020 [International Labour Organization]

Thank you.

Regards,

Nirmal Trivedi,

Kautilya,

IBS Mumbai.