The rapidly intensifying economic effects of COVID-19 on employment across the globe are proving to be far worse than the 2008-9 financial crisis. This pandemic has already transformed into an economic and labour market shock, with all businesses, regardless of size, growingly facing serious challenges with a real threat of significant declines in revenue, insolvencies and job losses.

With Malta certainly being no exception, there is no doubt that our primary objective must focus on health protection measures to limit the direct effects of COVID-19. Nonetheless, it is clearly apparent, and will continue to be even more so as we make headway, that it is also about mitigating the indirect economic and social fallout arising from this situation.

The eventual increase in unemployment during 2020 will depend substantially on two considerations. Firstly, considerations on future developments, given the uncertainty surrounding the potential duration of the current crisis. Secondly, on government policy support measures needed to counteract against the far-reaching impact of this crisis.

For businesses to sustain their operations along with their employees, there is certainly the need for careful contingency planning along with the implementation of the necessary measures directed at mitigating the impact of this crisis.

There is no room for complacency, or worse, sole dependency on government support measures. Nonetheless, beyond enterprise-level contingency initiatives, coordinated government policy efforts need to continue to be taken to provide enterprise and employment support in the short term and to stimulate the economy and labour demand in the longer term. 

Here, it is pertinent to make reference to the latest Chamber of Commerce study on the effects of the COVID-19 pandemic. The chamber study noted that “compared to a previous survey, the forecasts for redundancies appear to have attenuated to almost half, around 23,000 workers as compared to 45,000 two weeks ago.”

The chamber added that “the outcome would seem to indicate that the government measures put in place so far have had a positive impact on businesses”. There is no doubt about the correctness of the chamber’s assertion, as there are clear signs that such measures have indeed started to help contain the impact on potential job layoffs, at least in certain sectors.

This recovery will certainly be an arduous task

Nonetheless, there is also another important side to be considered here. There is broad recognition that many businesses consider their employees as one of their prized assets, having invested in their training and development, apart from their invaluable experience gained over their time in employment.

Hence, rather than opting for layoffs, many businesses, so far, and whenever feasibly possible, seem resolute on retaining their workforce. However, at the same time, they have opted for various forms of contingency measures, some exceptional, such as downward adjustments in wages and working hours along with changing working conditions.

This, of course, apart from varying forms of cost containment, whether of a capex or opex nature together with more rigorous cash flow management along with a careful rebalancing, wherever possible, of all fixed and variable cost structures.

Therefore, given the reduced economic activity and resultant shock in labour demand, it is pertinent to also take into consideration the significant rise and impact of underemployment. More so, given that underemployment is often tantamount to underperformance, with all its implications on the sustainability of businesses and their ability to compete.

As we now all start to experience heightened social and economic tensions, the need to build on the commitment of government support, alongside with employers and unions, remains a fundamental prerequisite to continue to effectively respond and successfully lead us through this crisis.

There is broad consensus that the government measures need to not only focus on stimulating the economy and employment in general but also on specifically supporting enterprises, their workforce and respective incomes.

Government policy responses on economic support needs to focus on both the demand and supply side, and while there clearly is already a very tangible level of support to help businesses weather the storm, the extent, applicability and methodology of the measures introduced remain somewhat debatable. Businesses cannot but hope that the measures introduced so far are to be considered as work in progress.

While we presently continue to contain and mitigate the impact of this crisis, going forward, we will need to focus on our economic recovery. So while addressing the immediate priorities, let us not lose sight of the horizon as this recovery will certainly be an arduous task, but something we will undoubtedly achieve, even if the extent and timing will much depend on what we do today for the lasting benefit of tomorrow.  

Norman Aquilina, CEO, Simonds Farsons Cisk plc