The COVID-19 pandemic has resulted in a jobs crisis in developing countries in East Asia. The International Labour Organization estimates that in the second quarter of 2020 working hours across East Asia will decline by around 8.4 percent relative to the last quarter of 2019. As some countries in developing East Asia gradually reopen to a “new normal”, moving from jobs crisis to jobs recovery becomes the next big focus. What is needed during the recovery are policies that address labor demand, labor supply and the link between the two.
A good place to start is to support firms that retain and hire workers. Time-bound, conditional wage subsidies can serve as an effective policy tool to enable the hiring of workers. Singapore recently announced the “Enhanced Hiring Incentive” which provides an employer that hires a local worker who has gone through an eligible reskilling or training program with a wage subsidy, the amount and limit of which varies depending on the age of the worker.
As businesses resume and expand operations, there will be more job opportunities. Thus, strengthening employment services to match workers and jobs is key. Public employment services in partnership with private providers can play a big role in reducing unemployment and underemployment.
In many developing countries in East Asia, more can be done to facilitate job matching during recovery. These efforts should involve the deployment of more advanced services for both job seekers and employers as well as stronger collaboration with industry and education or training institutes. Developing East Asia can take a leaf out of the book of some best practice experiences among Organization for Economic Co-operation and Development (OECD) countries. This includes the profiling of jobseekers and facilitating hiring by offering specialized services to employers while leveraging the use of technology.
Changes in the nature of work that began prior to the crisis, with increasing numbers of “gig” economy jobs outside of the standard employer-employee relationship, are here to stay and might even accelerate. Physical distancing requirements mean that businesses will have to implement appropriate operating procedures, including increased digitalization. Businesses may also resort to hiring more informal workers on shorter-term employment contracts to increase agility and financial sustainability during the recovery. These trends suggest that the types of jobs that will be created after the crisis will be different from those that have been destroyed by it – for instance, they are more likely to require digital skills but also socio-emotional skills such as collaborative skills, motivation, and grit.
Therefore, implementing broad-based training with a specific focus on skills that show promise in the economic recovery can raise developing East Asia’s competitiveness in the long run. For instance, in February Malaysia announced subsidies for short courses in digital skills and increases in the country’s employment insurance system’s training subsidy for an expected 100,000 workers. Subsequently, the training subsidy was extended to displaced workers outside of the employment insurance system and a dedicated fund was set up to support the reskilling and upskilling of youth and the unemployed. In parallel, Indonesia has doubled the budget for its “Kartu Prakerja” program, which provides job-seekers with subsidized vouchers for upskilling and reskilling.
As countries across developing East Asia seek economic recovery, there is an urgent need for introducing or extending training initiatives to prevent human capital degradation and accelerate economic recovery once consumer demand picks up and firms start hiring again. It will be particularly important to ensure that training is available to all workers, including those in informal jobs.
Developing countries in East Asia must act swiftly to recalibrate their human resources so that they will not miss out on the transformational effects of jobs on their economic and social development. The COVID-19 crisis coupled with demographic shifts, technological progress, and changing trade patterns is leading to a rapidly evolving world of work. If developing East Asia is able to successfully adapt to these changes and meet its jobs challenges it can come out of the crisis strengthened and can achieve significant gains in living standards, productivity growth, and social cohesion.
This is the fourteenth blog on ways to protect workers and jobs in the COVID-19 (Coronavirus) crisis, based on a World Bank Jobs Group Note: “Managing the Employment Impacts of the COVID-19 Crisis, Policy Options for the Short Term.” Stay tuned for more blogs in the series.