COVID-19 and the world of work: Contours of policy design for South Asia

The distribution of the COVID-19 package across countries of the South Asian region shows that India has been one of the largest beneficiaries but the per capita package is lower than the Maldives and Bhutan due to the smaller population of these countries, writes Partha Pratim Mitra for South Asia Monitor

Partha Pratim Mitra Jun 25, 2020
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A policy brief  developed by the International Labour Organization (ILO) Employment Policy Department in cooperation with the UN Secretary-General and several UN organizations stated that in  mid-May 2020, 94 percent of the world’s workers experienced some form of workplace closures. Massive losses in working hours, which are estimated to be equivalent to 305 million full-time jobs, are predicted for the second quarter of 2020, while 38 percent of the workforce - around 1.25 billion - became susceptible to high risk of job losses. 

In this backdrop, the policy brief calls for a the three-phrased response which in the short-term aims to provide for a quick  support for  workers who face immediate risks, avoid enterprise closures, job losses and income decline and reduce  the shift in work and labour to the domestic sphere.  In the medium-term,  the policy brief  advocates a comprehensive approach of  returning to work  without compromising  on protecting the health of workers or reducing the  health  gains to suppress the spread of the coronavirus.

For the longer-term, the policy brief calls for the creation of decent and productive jobs for a green, inclusive, and resilient recovery and future of work. It states that policies need to ensure: Investment in social protection of workers, the transition to formality; investments in climate change, green jobs and care work; targeted approaches for the most vulnerable and the hardest-hit through developing job creation programmes and building a sustainable business environment and innovative business models; and to reduce the digital divide and leverage new technologies for human-centred development.

COVID relief packages

We shall see how COVID relief packages address the short- term prescription of the policy brief mentioned above,  through a database of the Asian Development Bank (ADB), which focuses its activities on Asia, including South Asia. The ADB COVID-19 Policy Database displays the measures taken and monetary amounts announced or estimated by the 68 members of the Asian Development Bank, two institutions, and nine other economies (i.e., a total of 79 entries) until June 15, 2020, to fight the COVID-19 pandemic. measures are broadly classified according to (i) the path a given policy measure takes to affect the financial system, spending of households, production, and so forth, i.e., provide liquidity, encourage credit creation by the financial sector or directly fund households; and (ii) the effects on the financial statements of households, businesses, government, i.e., whether the measures create more debt or more income. This gives a total of nine categories (see table 1).

 The nine categories given in the database initially classifies the measures into five types:

1. actions to support the normal functioning of money markets

2. encouraging private credit creation

3.direct long-term lending to households, businesses, and local governments and forbearance

4.increasing equity claims on the private sector;

5. direct support to income or revenue of households, businesses, and local governments.

The database further tracks four additional funding measures that effectively  “double count” measures 1 to 5 from an accounting perspective.

6. reallocation of previously budgeted spending;

7. central bank purchases of national government bonds or direct lending to the government

8. international assistance received by borrower/recipient countries;

9. international assistance given by lender/donor countries. 

Measures 6 to 8, have therefore not been shown in the table(See Table 1)

The world's total package to combat COVID-19 in June sums to $21 trillion, up from $15 trillion in April. Of this, ADB’s developing members total package is $3.1 trillion, while ADB’s other members’ total package is $13.7 trillion. The European Central Bank and the European Union’s total package is $4.9 trillion.

The total package, as used in the database, is the sum of measures 1 to 5 (see Table 1). International assistance is given and measures with no definite breakdown are also included in the total package for individual economies and regions.

Caution needs to be exercised in using and interpreting the data. Measures and packages included in the database are mostly stated intentions and announcements of authorities. Information on actual amounts spent or transacted are not always available. Some measures only have estimated amounts such as liquidity injected to the economy due to lower reserve requirements.

The updates on the ADB COVID-19 Policy Database have shown that economies have remained focused on pursuing income support, liquidity support, and credit creation measures. Central banks of countries continue to play a significant role, not just in promoting liquidity and credit creation, but also in financing government fiscal measures. International assistance, both from ADB and other institutions, has increased significantly since April and may continue to rise in the near future. Direct income support accounts for the highest share, followed by support to the normal functioning of money markets (See Table 1). 

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The share (percent) of each measure in the region’s total package shows that among the five Asian regions that the ADB extends assistance, the share of South Asia in income support programme has been one of the lowest (41.1 percent), slightly higher than the pacific region (35.9 percent)as compared to East Asia(49.5 percent), South East Asia(47 percent) and Central and West Asia (76.95 percent). Measures to facilitate the functioning of money markets and credit creation has been the thrust of the package in South Asia, which together constituted almost 59 percent of the COVID-19 package. 

The thrust of the flow of funds in the COVID-19 package in  South Asia, which is one of the poorest regions of Asia, is not fully in keeping with the design envisaged in the policy brief developed by the ILO Employment Policy Department in cooperation with the UN Secretary-General and several UN organizations.

The World Bank’s evidence shows that while 75 percent of the developing world’s poor still live in rural areas, the share of the poor living in urban areas has been growing in a number of countries and has been rising more rapidly than the population as a whole. During 1990–2008 for which a disaggregated rural-urban poverty numbers are available, the urban share of Asia’s poor has risen from 15.7 percent to 21.9 percent, with the urban share of the population having risen from 38 percent to 43 percent over the same period. 

South Asia’s progress on poverty has been moderate,  having reduced its poverty incidence by 22.8 percentage points.  Of the 1.2 billion world’s poor, Asia accounts for 62.2 percent of them, comparable with its share in the total population. Within Asia, South Asia, with a population share of 45 percent, comprises 67 percent of Asia’s poor.

Table  2 Distribution of the ADB COVID-19 Package in South Asia 

Bangladesh: Total Package in USD Million: 11,300                 

Percent of GDP (2019): 3.50 percent

Percent of Regional Total Package: 3.11 percent 

Package Per Capita in USD: 70.03

Note: Measures 9 and 10 are added to the sum of Measures 1-5

Bhutan :Total Package in USD Million: 431

Percent of GDP (2019): 16.60 percent 

Percent of Regional Total Package: 0.12 percent
 Package Per Capita in USD: 570.78

Note: Measures 9 and 10 are added to the sum of Measures 1-5

India: Total Package in USD Million: 350,982

Percent of GDP (2019): 12.48 percent 

Percent of Regional Total Package: 96.64 percent 

Package Per Capita in USD: 259.48

Note: Measures 9 and 10 are added to the sum of Measures 1-5

Maldives:Total Package in USD Million: 163

Percent of GDP (2019): 2.80 percent 

Percent of Regional Total Package: 0.04 percent
 Package Per Capita in USD: 315.43

Note: Measures 9 and 10 are added to the sum of Measures 1-5

Srilanka:Total Package in USD Million: 303

Percent of GDP (2019): 0.36 percent 

Percent of Regional Total Package: 0.08 percent
Package Per Capita in USD: 14.00


Note: Measures 9 and 10 are added to the sum of Measures 1-5.

Pakistan(Central&West Asia)Total Package in USD Million: 8,046

Percent of GDP (2019): 3.46 percent 

Percent of Regional Total Package: 22.99 percent 

Package Per Capita in USD: 37.91

Note: Measures 9 and 10 are added to the sum of Measures 1-5.

Figures for Nepal are not available

Source: https://covid19policy.adb.org/policy-measures(As on June 15,2020)

The distribution of the COVID-19 relief package across countries of the South Asian region shows that India has been one of the largest beneficiaries (see table 2) but the per capita package is lower than the Maldives and Bhutan due to the smaller population of these countries. India, therefore, needs to utilise the assistance effectively to lift the economy out of the demand slump which is possible if it provides direct income support to the poor households instead of depending on indirect measures such as liquidity support and credit creation.

(The writer is a retired Indian Economic Service officer who worked in the labour ministry. The views expressed are personal. He can be contacted at ppmitra56@gmail.com)

References:

Policy Brief on the World of Work and COVID-19, https://www.ilo.org/employment/Informationresources/covid-19/other/WCMS_748323/lang--en/index.htm,June,18,2020

 Forthcoming Asian Development Review37:2, September 2020 ADB COVID-19 Policy Database: A Guide JESUS FELIPE AND SCOTT FULLWILERhttps://covid19policy.adb.org/sites/default/files/pages/ADB-COVID19-P

 The database is updated every two weeks.  article based on the data as of 1 June 2020.

written by Jesus Felipe, Asian Development Bank and Al-Habbyel Yusoph, University of the Philippines: https://covid19policy.adb.org/.

URBAN POVERTY IN ASIA Asian Development
Bank.  Mandaluyong City, Philippines, 2014 Pages,1-20