This article discusses how in the context of a rushed program to inoculate the front liners, the vulnerable and the rest, there has been no sign of the virus slowing down in its outreach. Pessimists even fear a third wave. Others hope that a partial economic recovery kicks in by September but there is no guarantee that “normality” will return so soon.

Ideally, the popular (yet expensive) furlough policy should shift gradually from protecting old jobs to getting people back to work, by reducing measures like wage subsidies in favour of training to give people skills to find new employment. Globally, the spread of the Covid 19 virus has brought havoc to the airline and hospitality sectors (among others).

In the US, last May saw nearly 60% of the 17.8 million Americans out of work being furloughed — the third-largest share in history. Moving on to the UK economy, we note how the initial impact of the coronavirus crisis was seen primarily in the labour market, with several sectors of the economy fully shut down and others heavily affected by the lockdown and social distancing.

The furlough plan, introduced in March as the UK entered an initial lockdown earlier last year, had been extended this year due to new variants mutating and showing little sign of abating. But the facts show that 9.9 million people have benefitted from furlough, at a cost to the government of €51.4bn. In a noble act of job solidarity the government continues to contribute 80 per cent towards wages – giving businesses and employees – certainty.

This was well received and quoting the chancellor Rishi Sunak, he was praised for extending support to firms to help them sail through the economic disruption. He also confirmed, the Treasury would be extending the business loan scheme. Such a crisis has badly affected the UK’s unemployment rate. This rose to 4.8 per cent in the three months to September, up from 4.5 per cent, as the coronavirus pandemic continued to impact the jobs market.

In the UK (now out of the EU) the Government faced a daunting challenge in maintaining a balance between preventing unemployment from rising sharply but allowing some labour market flexibility to enable workers to move from shrinking sectors to growing sectors in the economy. Obviously, the intention is not to try to protect failed businesses, but to facilitate the people who work in them moving on and having good employment prospects for the future.

Will the nine million furlough British workers eventually return to work or face redundancy?  Certainly, there is no magic silver bullet that will reduce the risk of higher job queues this year. An interesting announcement in the UK is the Plan for Jobs. This announced a number of measures aimed at addressing the risks of rising unemployment. One such initiative includes enhanced work search support – £895 million to fund work search support by doubling the number of work coaches in “Jobcentre Plus”.

A novel idea is the “Kickstart Scheme” – a £2 billion fund to create “high quality” six-month work placements aimed at those aged 16–24 who are deemed to be at risk of long-term unemployment.

Finally, to spur Keynesian policies is the move to reinstating a £5.6 billion cache to fund national infrastructure project “shovel ready” schemes. This introduction about job stimulus and retention schemes in both the USA and UK compares favourably with the structured approach to the job market by the Maltese authorities.

One may start by analysing the scale of the problem by noting that up to last September, the registered full-time employment increased by 4.6 per cent while part-time employment as a primary job decreased by 9.9 per cent when compared to September 2019. On the other hand, one read in the Labour Force Survey estimates that during the third quarter shows gains in total employment. This stood at 259,731 which amounts to 59.4 per cent of the population aged 15 and over. Out of this, about 47k workers are directly or indirectly paid by the state. This is contrasted with a cohort of unemployed persons at 12,589 (4.85%) while inactive persons reached 164,659 (37.7 per cent).

These statistics lead us to question why Malta Enterprise (not JobsPlus) was engaged to administer a wage supplement scheme. Quoting minister Silvio Schembri, this furlough policy paying €800 monthly (now tapered according to a loss of business formula) is funding some 100,000 private sector workers which work out a staggering 47% of total employment in the private sector. This looks generous but the question arises – if some employers are not topping up the furlough rate then workers are living from hand to mouth.

What are the views of employers? A survey conducted by the chamber of SME’s shows inter alia some concern by 230 business respondents as regards sales orders. The level of turnover went down to 26% while cash flow went down to 17% of pre-Covid levels.

Will the retail sector survive once the furlough scheme is tapered down? According to deputy president Marcel Mizzi, a total of 13% said they will only last three months, while another 28% hope they will survive until summer.

In conclusion, the cavalier efforts of Western governments to sustain employment is a noteworthy gesture and has cost billions over the past year. Such heavy expenditure had to be financed partly by internal borrowing (eventually by increased taxation), and in the case of EU countries out of a stimulus package that hopes to restore normality.

Author: George Mangion
Published on Business Today on 15 April 2021
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