Some economists believe that the lack of sales creates liquidity problems for the affected firms, reducing the demand for labour. Some of this has resulted in permanent firm closures and some in reductions in demand for labour by survivors or as a consequence of temporary workplace closures.
Klaus F. Zimmermann
Klaus F. Zimmermann, economist and emeritus professor of economics at Bonn University, shared an article on the effects of Covid-19 on employment, labour markets, and gender equality in Central America. A new Global Labour Organization (GLO) discussion paper based on data collected by the World Bank has suggested that a significant number of organisations in Central America are at a risk of permanently closing.
The ability of firms to retain labour depends on sales which are severely impacted by both the pandemic and government containment measures. Only some firms have received government aid, with evidence suggesting that it could help firms survive as well as retain labour. There is doubt that countries like El Salvador, Honduras, Guatemala, and Nicaragua, have the institutional capacity to provide effective support. If these doubts turn out to be true, external support maybe required.
The Covid-19 pandemic has impacted many industry sectors, with small businesses being adversely impacted due to their financial issues and limited access to commercial financing. Many studies have confirmed the negative impact on small firms in terms of revenue losses, reduced production and employment, layoffs, business closures, liquidity, and gender inequality.
At the time of the first Covid-19 survey, firms for all four countries reported an average temporary closure of just over five weeks, indicating an overall loss of just over 322,000 labour weeks. Average firm closures were lowest for Nicaragua and highest for Honduras, although the total number of lost labour weeks was highest for El Salvador. The longest average temporary closures were recorded for the textiles and garment sectors and at the lowest was for the food.
The Effects of COVID-19 on Employment, Labour Markets and Gender Equality in Central America https://t.co/xPDSbRwI96
— Klaus F. Zimmermann (@kfzimmermann) July 1, 2021
Rafael Domenech, head of economic analysis of BBVA Research and professor of economics at the University of Valencia, retweeted a paper by Monika Piazzesi, a Joan Kenney professor of economics at Stanford University on why the European Central Bank (ECB) should rethink its corporate bond buying strategy, typically meant to stimulate the economy hit by the most recent Covid-19 shock, in order to support greener firms. She stated that by taking a market neutral stance, it has unintentionally favoured the most polluting firms.
In her view, policymakers have based their decisions on the survival of their own generation. Therefore, future generations will now have to think about all the accumulated debt that is being used to overcome the Covid-19 crisis. The pandemic lockdowns led to school closures, failure to meet the climate crisis and increased debt, she added, which has to be corrected by the future generations.
Monika @piazzesi gave the 2021 JEEA-FBBVA @FundacionBBVA on June 29. She explains why the @ecb should rethink its corporate bond buying strategy in order to support greener firms. Watch the lecture at https://t.co/W7wyufRj53
— EEA (@EEANews) July 1, 2021
Richard Murphy, a political economist and professor of accounting at the Sheffield University Management School, shared an article on not treating Covid-19 like the flu, as a flu would not be fatal for the UK. He further tweeted that it is time to stop pretending that death imposed by government policy is acceptable.
Citing his concern and distaste over the government stating that living with Covid was the only way forward, he stated that this is just an excuse for withdrawing support for businesses this summer and move towards a more severe policy as it tries to shrink its role in the economy again.
Opposing the governments stance on treating Covid-19 as the flu, he stated if that were the case, the mortalities should be equal to that of the flu but they were not. A report, for instance, emphasised that 48,168 deaths were linked to Covid-19, compared to 13,619 deaths caused by pneumonia and 394 deaths due to influenza out of all the deaths that occurred between January and August 2020.
Covid 19 is not like flu, not least because flu hardly kills anyone in the UK https://t.co/uBqdvNlBHO Let’s stop pretending death imposed by government policy is acceptable.
— Richard Murphy (@RichardJMurphy) July 1, 2021