Steps taken to combat the coronavirus have severely disrupted public life and have put the livelihoods of millions in jeopardy. The global economy is in deep recession, especially the economies of the developed world; and there is a great deal of uncertainty as to when and how it might end. This is perhaps the deepest crisis human beings are facing after the Great Depression of the 1930s and the Second World War.
In many countries, the recession has already resulted in sharp increases in unemployment. In USA for example, it rose from 3.5 percent in February to 14.7 percent in April. The figure for May is feared to be close to 20 percent.
Some countries are trying to prevent an increase in unemployment by putting workers on furlough. The UK is providing support to private companies by paying 80 percent of the wages/salaries (up to a maximum of GBP 2500 per month) if employees are not laid off. The self-employed are also being covered. And yet, there is doubt if a rise in unemployment can be prevented. McKinsey—a consulting firm—forecasts that the rate of unemployment in the country is likely to go up to 9 percent soon. Of course, the unemployed in such countries can receive support through unemployment benefits.
In Bangladesh, the lockdown imposed in the last week of March brought public life, and with it economic activities, to a standstill. Although economic activities were partially opened in May, it is extremely uncertain when—if at all—life will go back to its normal rhythm. The shutdown has adversely affected employment and the labour market, but there is no data on this because such data is not collected on a regular basis. The latest labour force survey, carried out by the Bangladesh Bureau of Statistics (BBS), dates back to 2016-17; and we don't know when the next survey will be done. If it is not undertaken this year (and soon), we shall never know what the unemployment rate is now because the data is collected on the basis of activities during the week preceding the survey.
In the absence of concrete data, I made a guesstimate and concluded that nearly one crore people may have lost their livelihoods, based on reports found in The Daily Star. To this one crore, one has to add another 30 lakh who were already unemployed before the crisis. That would imply that about one in five members of the labour force were jobless during the shutdown. The question is: how are these people and their family members surviving?
Like in other countries, the government in our country has also announced a package of measures in response to the economic crisis that resulted from the shutdown, and some are already being implemented. The first step announced was support for export-oriented industries in the form of wages of workers so that lay-offs could be prevented. But the component for support to the poor who lost their livelihoods came last. Cash support of Tk 2,000 (later raised to Tk 2,500) for 50 lakh poor was announced on May 1—five weeks after the shutdown was announced.
The cash mentioned above is supposed to cover two crore poor people (at the rate of four members per person). But the amount is just one-fourth of what is considered to be the poverty line income (using data from the Household Income and Expenditure Survey of 2016, my estimate for 2020 is Tk 10,000 per month per household). And the number to be covered would be about 60 percent of the estimated poor in the country—if all the recipients are indeed poor.
In addition to the cash support for the poor, the well-to-do of the society are being exhorted to come forward and help them. Like in crises before, our society—including NGOs, individuals and informal organisations—has come forward with help for the needy. While the size and coverage of such efforts vary, there is no doubt that they are playing an important role in staving off hunger in the country.
This reminds me of the experience of the Asian economic crisis of 1997-98, which had severely affected a number of countries including the Republic of Korea, Indonesia, Malaysia, Philippines and Thailand. During that crisis, countries that were once touted as "tigers" and were enjoying a long period of high growth fell into deep recession. The result was unemployment for millions of people. Basking in the glory of high growth and rapid rates of poverty reduction, those countries did not build up any social protection system. As a result, the sharp increase in unemployment led to a reversal of the trend in poverty. A large number of workers migrated back to their rural roots and had to depend on the support of their families. And it was in that context that the term "Asian values" came into circulation—describing the way the poor were provided with support and protection. Of course, the experience was regarded as a wake-up call and steps were taken later to build up social protection systems.
When one talks about social protection and safety nets in Bangladesh, one is usually referred to the hundred plus government schemes for a variety of target groups—though not the unemployed. To get an idea about the amounts and coverage involved, take the old age allowance as an example. The amount is Tk. 500 per month, which, incidentally, is lower than one day's wage of an unskilled labourer. In 2018-19, the coverage that was budgeted for was 40 lakh persons, which is about 40 percent of the people over 65 years of age.
There are a number of employment programmes for the poor which are basically like public work. For example, in 2017-18, the targeted coverage of the Employment Generation Programme for the Poor was 967,051 persons. Looking at the work-months mentioned, it seems that the allocation was for about one month's work per person. On the other hand, if one uses the household survey data of the BBS, the number of extreme poor households in the country seems to be around 40 lakh. Putting the above figures together, one can conclude that about one fourth of the extreme poor were able to get one-month's work through this programme.
In addition, there are other programmes like food for work and cash for work programmes. Using the government's data, I estimated their total coverage to be about 45 percent of the extreme poor.
In the context of the employment programmes mentioned above, another experience may be worth recounting. When the countries of East and South East Asia attained success with growth and poverty reduction, they had terminated such programmes. But in the wake of the economic crisis in 1997-98, they found such programmes to be relevant again and revived them—at least temporarily. They had to do so because there was no institutional mechanism for providing social protection to the unemployed. In the current context of Bangladesh, there seems to be a good case for expanding and strengthening the employment programmes for providing income support to the poor and jobless. India legislated a nationwide employment guarantee programme in 2005 which is also designed to act as a mechanism for providing unemployment benefits.
A common refrain about social protection in developing countries is that it is a luxury that they cannot afford. There are also those who consider this to be pure dole and hence not desirable. But such arguments no longer sound convincing in Bangladesh—a country that has moved from annual per capita income of USD 100 to about USD 2,000, and is now aspiring to reach USD 4,000 in another ten years (the target date for reaching the upper middle-income status). Universal access to basic health care and income support for all aged and the unemployed should no longer be considered a luxury. Of course, the entire cost does not have to be borne from the government's budget. For example, unemployment benefits can be contributory. These are matters of detail that can be worked out if policymakers are interested.
The key question that is staring at us today is whether we shall continue our single-minded pursuit of GDP growth and fall back on Asian values (or a Bangladeshi version of that) at times of crises or look at ways of improving the quality of life for all. It is a matter of priorities and for policymakers to decide. Once the choice is made, the details and modalities can be worked out.
Rizwanul Islam, an economist, is former Special Adviser, Employment Sector, International Labour Office, Geneva.