By Christiana Ioannou
The global COVID-19 pandemic is generating another crisis that isn’t hidden but one with an impact that is still not totally understood. Of course, we are talking about the massive economic cost of lockdowns and slower economic activity. Around the world, government budgets are under strain for two primary reasons: Rising unemployment and the costs of maintaining order, stability, and social cohesion because of that. But it isn’t just unemployment that governments are facing but also increased costs associated with combating the disease, supporting businesses impacted by it, and coming up with a working plan to get the economy back on track.
Unemployment and the Informal Economy
First, the issue of unemployment is the most prominent one in the media and for good reasons. Unemployment is not only at the highest levels it is also structurally supported and thus harder to overcome. In other words, much of the unemployment governments face is created and sustained by the policies they have crafted to contain the virus and stop the pandemic. Naturally, as this thinking goes, things should get right back to normal when things resume yet, as we have already seen, this is easier said than done.
The United Kingdom’s Programs to Save Businesses and Jobs
For example, in the United Kingdom, a country that has had fits and starts with lockdown measures, the governmental support for industries such as restaurants, pubs, and shops is nearly equal to or matching aid being delivered to unemployed workers. Why? Because, without this aid, these businesses will not be around to help with the structural recovery when the pandemic does subside. Further complicating matters is the issue of the informal employment system used by freelancers and tradesmen. The impact of the pandemic on this cohort is harder to assess but this has also proven a challenge for multiple governments around the world as they realize just how much their economies rely upon this kind of informal working arrangement.
Tokyo 2020 Olympics and Other Major Events Suffering Still
Beyond simple employment scenarios and schemes to save businesses are concerns on the level of the 2020 Tokyo Olympics, already once postponed and now facing another delay or even cancellation. The hesitancy to cancel these games mainly stems from the massive costs in terms of lost economic opportunities as well as the huge insurance bill that will come due if the games do not proceed.
Estimated to be in the billions of dollars, this kind of expenditure when so many budgets are already under strain would best be avoided but the realities of the economic situation and the crisis caused by the pandemic are limiting the options of Japanese lawmakers as well as International Olympic Committee officials. Further, analysts highlight how the Olympics is just the canary in the coal when it comes to the potentially larger and much more devastating losses we could witness if the pandemic doesn’t end soon. Indeed, major events of almost any size have faced challenges this past year that is becoming increasingly tough to weather from a business standpoint.
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