Economic consequences of the corona virus on the labor market
increase in unemployment
The economic consequences of the corona virus on the labor market can be seen particularly clearly in the rising unemployment figures. However, this effect does not come as a surprise. In April, the statistics here shot up by around 300,000 to 2.65 million. However, this rapid increase was not due to layoffs alone. Instead, many job seekers had to interrupt ongoing training and other measures. As a result, they could no longer be calculated out of the unemployment statistics.
Early Warning Signs
The Ifo Institute from Munich conducted a survey of German companies at an early stage. This showed that around 20% of all employers had decided not to renew current fixed-term contracts. In addition, the first layoffs have already been decided due to the economic slump resulting from the Corona crisis. Experts from the IAB (Institute for Labor Market and Vocational Research) estimate that it will get even worse. Depending on how soon the economy can return to more or less normal operations, experts expect unemployment figures to grow to more than 3 million in the coming months.
The big losers
The catering and hotel industry as well as the events industry were by far the hardest hit by the consequences of the corona virus on the job market. They suffered and are suffering more than other companies from the restrictions imposed due to the pandemic. 43% of all organizers see themselves forced to make layoffs. In the hotel industry it is even 50%. The unfortunate leader, however, is the gastronomy sector. Here, 58% of all companies are planning to cut jobs in the near future or have already done so. However, layoffs also appear to be inevitable in most other sectors. Even if restaurants and cafés are now open again: Wherever many people come together, the distance rules will probably have to be observed for a long time. This applies equally to gastronomic facilities, hotels and event venues. Hardly any establishment will therefore be able to exhaust its capacities again in the foreseeable future. If the premises are already tight, the operation may not even be worthwhile for many owners. Fewer guests does not just mean less sales. The number of service staff required is also reduced accordingly.
the retail trade
Compared to other sectors of the economy, the German retail trade is hardly affected by the restrictions imposed by Covid-19. Nevertheless, many businesses are suffering severely from the economic consequences. That should be the tense situation of many people. After all, anyone who has to fear for their job or has got into financial difficulties due to short-time work has little desire to make large new purchases unless they are absolutely necessary.
Low earners are particularly at risk
Economists, however, fear a worsening social imbalance. Because of layoffs, the people who earn little anyway are affected or threatened. Political measures must be taken urgently here so that the situation for the people does not deteriorate further.
Significant increase in short-time work benefits during the Corona period
To ensure that the economic consequences do not get too out of hand and to secure as many jobs as possible, the government made important decisions at an early stage. At the beginning of the crisis, for example, support for employers with short-time work benefits was decided. Small and medium-sized companies in particular could and can only keep many of their employees as a result. However, it is uncertain how long this will work. However, the great financial crisis of 2009 already showed that short-time work benefits can at least temporarily keep jobs. While the economy collapsed worldwide and the number of unemployed skyrocketed, it rose by just 0.3% in Germany at the time. The consequences of the corona virus on the labor market are likely to be significantly worse. Between March and April – i.e. at the beginning of the crisis – German companies had already applied for short-time work benefits for more than 10 million employees.
Emergency aid for entrepreneurs
With the short-time allowance alone, the economic consequences of the corona virus on the labor market would have been much more serious than they are now. The various emergency aid programs are an important factor in rescuing companies and the jobs associated with them. Despite the initial chaos and some uncertainties, many companies and self-employed people received financial aid. To this end, the federal government and the individual states had put together several rescue packages. Even if not everyone could be reached, for many companies the short-term economic losses were at least compensated a little.
As can be seen from the infographic, the coronavirus pandemic has had a significant impact on the number of unemployed. According to reports, the effect is now diminishing somewhat. It remains to be seen whether and how quickly the economy will recover completely and to what extent, in particular, the consequences of the coronavirus on the labor market will return to normal. Because a second big wave of new infections is now considered very likely.