The Best Thing Governments Can Do To Mitigate The COVID-19 Impact

The Best Thing Governments Can Do To Mitigate The COVID-19 Impact

Following on from our analysis of global government responses to COVID-19 in Europe, the US and Japan earlier this year and in the Asia-Pacific region in August, we bring you the latest and most extensive update yet on which policies have proven effective and what governments should do going forward.


Focusing on 20 countries, up from 12 in its previous report, from the Americas, Europe, and Asia-Pacific, the COVID-19 Government Response Brief offers a holistic perspective on their diverse policy approaches and ability to mitigate the impact of the pandemic on labour markets and economies, with recommendations from The Adecco Group.

ef offers a holistic perspective on their diverse policy approaches and ability to mitigate the impact of the pandemic on labour markets and economies, with recommendations from The Adecco Group.

Comparisons were made using the following key indicators:

  • Macro-economic impact
  • Pandemic Response Measures
  • Measures to support businesses
  • Measures to support workers, including where applicable specifically also agency workers

Overview

The economic impact of the pandemic continues to be closely related to the severity of the public health crisis, as governments are forced to restrict public life and economic activity when capacity within healthcare systems is reached or exceeded. Government protection of the population resulting in lower deaths per capita helps to cushion economic decline.


Comparison analysis highlighted five countries that have best managed to achieve a balance between public health and the economy, and address the impact of the crisis most effectively. They include South Korea, Sweden, and Germany, which all showed strong results, with a relatively low stimulus over time. South Korea’s strict tracing and quarantine regime were particularly effective in stabilising cases at a low level while maintaining economic activity.

Australia and Japan have also mitigated the economic impact of the pandemic very well, but with the help of larger stimuli to reach that goal.

Three countries projected to face problematic developments across indicators were Spain, Mexico, and the UK, however, the latter two countries have both recorded case numbers per capita that are comparable to numerous countries from all other groups of performers. This suggests that there is scope for a strong governmental response to offset the impact of the pandemic on the economy.



The number of cases in a country is not the only determinant of economic impact, however. Countries with similar numbers of COVID-19 infections, for example, Sweden and the UK, or Mexico and Italy, face vastly different economic impacts. What matters is an effective policy response.

Conclusions

Protecting lives protects the economy.


Countries with higher numbers of cases and mortality rates also face a higher drop in GDP. The data analysis points to a correlation between lower case numbers and deaths per capita and reduced economic impact. Early well-designed policy responses to minimise the spread of the virus also benefit the economy. Keeping cases down early comes at a lower cost than that of having to control a surge of infections, however, contrary to that trend, in particular Sweden, the US, and Brazil have delivered better economic results than the state of the pandemic would suggest.

Keep up economic activity


While workers’ health and safety is the absolute baseline and the unique specificity to this crisis, it is becoming apparent that every week without economic activity exponentially increases the negative economic impact of the crisis, and the potential for economic recovery.

Support employment


Of the 20 countries analysed, 18 have provided some form of federal level employment support. Some governments, like the US, have invested mainly in measures that support businesses, resulting in good stock market performance and high business confidence. Other countries, including Italy, focused on investing in measures to support individual workers, resulting in lower unemployment growth and higher consumer confidence. To date, both strategies have been shown to yield results.

Implement short-time working schemes


Short-time working schemes and other measures to support continuing work are effective. In May, for example, Japan introduced its Employment Adjustment Subsidy, reducing the cost of labour. Subsequently, unemployment rose by 37.5%, far lower than initial estimates of 80%. In practice, the implementation of these schemes varies from country to country in terms of inclusiveness, volume, and duration. Countries that already had adequate social protection systems to create security and predictability are faring best under this indicator.

Recommendations

The way out of the crisis


Maintaining current levels of government support to companies and workers is not a long term option. Countries must facilitate greater labour market mobility and a rapid redeployment of workers to maximise employability and skills development. This includes the upskilling and reskilling of workers. France, for example, incentivises employers to reskill and upskill employees, while Australia has made undergoing skills development a condition for continued government support.



Trigger active labour market policies (ALMP)


With the likelihood of further interventions being required, countries need to incentivise employee skills development by making it conditional for continued access to wage subsidy schemes. Supporting skills development and other elements of ALMPs, such as supported recruitment in essential sectors, and employability-oriented services to maintain labour market attachment, enable faster redeployment of workers whose jobs are at risk, or already lost. Maintaining funding for ALMP providers will ease the labour market transition from the easing of lockdown to the start of economic recovery.

Cooperation between all decision makers


The rankings confirm that those countries with a model of social dialogue based on negotiation and not confrontation are faring best, importantly also with regards to trust in the political process and consumer confidence needed to accelerate the pace towards economic growth.

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