Background interview with Diego Viana, reporter of the Brazilian daily Valor Econômico, who publishes a story on the relationship between the #Coronavirus Crisis and the future of work. Valor Econômico is the largest financial newspaper in Brazil.
A Federal Reserve official estimated a hike in unemployment of up to 30% in the second quarter for the United States. Is this the kind of figures we should be expecting worldwide? How calamitous is this? If the economy recovers quickly, does it leave long-term scars?
Klaus F. Zimmermann: The impression currently is that the damage will be much larger than during the Great Recession in the financial market crisis where the effects were substantially smaller and much more selective to economies and societies. There cannot be a fast recovery, and society will have to carry a long-term burden.
Can the incentive measures announced so far in the US, Europa, Asia, aimed at reducing the dimension of the economic slump, avoid a depression-like scenario of mass unemployment?
Klaus F. Zimmermann: A focus is on compensation (“whatever it takes for everybody”) and to stabilize jobs; but at the same time public life and large parts of production and consumption have been stopped on command. This is not the setting to avoid mass unemployment, just to make it more acceptable. The pressing question, however, is how long the available financial reserves of countries will allow governments to keep such a policy going.
With many people around the world working from home, some analysts see the epidemic as precipitating a trend towards an increase in remote working. Is this the case? Once the coronavirus crisis is over, will home office have become much stronger, maybe to the point where half of the time spent working is outside the office?
Klaus F. Zimmermann: Remote working will get some push, since the available technology now meets the forced increased demand with some persistence. But I nevertheless expect the adjustments to be small. Since two decades people speculate about the rise of the home office and the end of the traditional firm, with only slow practical changes. For instance, digital communication is no substitute for personal social interactions. Also the recent financial market crisis did not sufficiently change the constraints of the banking sector.
As autonomous workers are particularly exposed to a halt in activities, some analysts see the crisis as demanding – or rather precipitating a preexistence demand for – improved forms of social protection for these workers. What could be done for them in the short term, i.e. the acute moment of this crisis? And in the long term, is there anything in view that would correspond to unemployment insurances?
Klaus F. Zimmermann: Social protection for freelancers as the rising work model including health and unemployment is since long recognized as a challenge issue for the future of work. In the current acute crisis, many governments have already decided to offer self-employed individuals and all types of companies generous credit lines or even fixed amounts of non-repayable transfers.
Hong Kong, and now probably the US as well, are adopting a strategy of depositing a lump sum for everyone, which sounds like an emergency basic income. I reckon you are not in favor of a universal basic income, but how do you evaluate an emergency mechanism such as this one?
Klaus F. Zimmermann: All kinds of helicopter money and government transfers to everybody may help to stabilize consumer demand. But such measures are not helpful at this very moment where most government commands aim at social distancing and lower consumption. Such measures could be useful, however, to jump-start the economy after the end of the Corona pandemic.
Maybe I should wrap up the themes of all the previous questions into a more general one: for some, this pandemic will usher in a new “great transformation” in Polanyian terms, with a new form of welfare state, adapted to the 21st century. Could this be the case? Is it possible to give the outlines of what such a welfare state would be like?
Klaus F. Zimmermann: The much I am a believer of the old saying, “Never let a good crisis go to waste”, I am afraid that the Corona Crisis will not initiate the new welfare state needed for the 21st century. What we see will strengthen anti-globalism, nationalism and populism. One can only hope that the global threat of this disease reminds us of the benefits of collaborations and solidarity.
Another attempted response is the reduction of working hours and pay, but many economists consider that this is not a regular crisis and the effect of reduced hours would not be as expected (and may even backfire). Do you see this as a sound possibility?
Klaus F. Zimmermann: Creating jobs for all and re-distributing income through the current reduction of working hours and pay is a bad strategy in the middle and longer perspective, since it can only backfire to keep the most productive underemployed.
Labor conditions in the developing world are already much worse than in the developed world. Do you envisage an even more dire scenario in these countries?
Klaus F. Zimmermann: Core in this crisis is the strength of the health care system of the countries. Given the large differences between the developing and the developed world in health care, I am afraid, global inequality will rise with the Corona Crisis.
Another vulnerable category is that of immigrants, as they often occupy the worst positions in the labor market and also frequently lack any rights at all. How hard can we expect them to be hit?
Klaus F. Zimmermann: Refugees and labor migrants will both be affected strongly, since the short-term effects will be followed by even more powerful long-term consequences. Migrant workers, in general, have to fear a higher risk of unemployment and a stronger wage depression if at work. Further: It was now demonstrated that it is (at least seemingly) possible to close country borders, or even the European Union in general. Labor migration has to be expected to further decline with the end of the Carona Crisis.