Latest evidence on the indirect impacts of C19 –14 December 2020
Rachel Glennerster, Chief Economist of the Foreign, Commonwealth & Development Office (FCDO), Anna Rudge, Senior Economic Adviser and Andy Hinsley, Senior Economic Adviser & Growth Research Team Leader
See below for our latest select set of new results, research and commentary on the indirect socioeconomic impacts of C19 on households and firms globally.
Results
1.Jordan’s labour force: Cefalà, Gechter, Tsivanidis and Young report findings from a phone survey conducted in July-September on the labour force outcomes before, during, and after the most stringent lockdown in Jordan (including among Syrian refugees). Key findings:
- Adult unemployment rose from 7% to 16% during the lockdown, before partially recovering to 11% by September.
- Wage earnings fell by 42% of the pre-pandemic levels during lockdown, and remain 19% below the baseline. Impacts were much worse for refugees, whose earnings fell by 87% in lockdown (a combination of more unemployment and fewer hours for those who kept employment) and remained 31% lower afterwards.
- Half of workers faced difficulty buying food during lockdown and even afterwards 10% of workers were skipping meals or reducing portions
2. Small businesses in 50 countries: The World Bank, OECD & Facebook have released the final report of their Global State of Small Business study, which conducted 6 survey waves between May and October, documenting the experiences of more than 150,000 business owners, managers and employees in over 50 countries.
- Firm closure rates ranged between 20–40% across all regions in May at the height of the first wave of the pandemic. There has since been an improvement but the pace of the recovery has slowed significantly in recent months
- Globally, female-led businesses are 4 percentage points more likely to close as they are concentrated in consumer-facing sectors (services, hospitality, retail trade)
- In Wave VI, 55% of firms reported lower sales compared to the same month in 2019 (down just 7 percentage points since May). Business run by women have experienced slightly larger reduction in sales.
- At the time of the Wave VI survey, 34% of SMBs stated they had reduced employment in response to the pandemic, virtually unchanged since Wave I (33%), with no difference between male/female-led business.
3.New panel data on Young Lives’ life chances: Young Lives has released findings from their second Covid-19 phone survey, which interviewed 9,704 young people (in two cohorts — aged 26 & 19) over August-October in Ethiopia, India, Peru, and Vietnam, based on their now 18 year longitudinal panel. The results suggest that the economic and social impact of the crisis are halting progress made over the last two generations and may also be reversing life chances and deepening inequality for many young people, hitting those living in poor communities hardest. Key findings:
a. Higher food prices have resulted in increased household expenditures for 83% of respondents in India, 74% in Ethiopia and 63% in Peru but only 12% in Vietnam. Household income has reduced for 82% of respondents in India, 77% in Peru, 58% in Vietnam and 55% in Ethiopia. Rural and poorer households have been hit harder, exacerbating pre-existing inequalities.
b. Employment dropped considerably during lockdown for the 25–26 year old cohort in India, Peru and Vietnam, but has mostly recovered since. Ethiopia & India have seen an increase in employment for 18–19 year old cohort relative to pre-Covid, which may indicate reduced education opportunities. There are also marked shifts towards self-employment (in all countries) and towards agriculture (in all but Vietnam), possibly indicating reduced labour market opportunities and requirement to meet basic food needs.
c. In times of stress families turn to more traditional gender roles with 67% of women in India increasing their unpaid care work, compared to 37% of men
d. Strong reversal in subjective well-being among the younger cohort in Ethiopia, India & Peru.
4. Interactive data for 1 year, 44 countries across 93 indicators: The WB has been conducting high-frequency phone surveys to track Covid-19 socioeconomic impacts on households & individuals in 44 developing countries. Survey rounds are being conducted every 4–6 weeks for a period of 12 months. The data is now all presented on their COVID-19 High-Frequency Monitoring Dashboard. They also have a helpful ‘What’s New’ update here.
5. Households and businesses in the DRC: FCDO DRC’s Private sector development programme is funding a series of household and business surveys in DRC as a contribution to the limited evidence base on the socio-economic impacts of Covid.
a. Household survey in collaboration with a local data company. It is a phone survey which will run for 5 iterations in total (3 done so far) and reaches around 2000 households each iteration. Some key findings — The economic crisis in the DRC caused by Covid-19 is set to continue even as the number of cases fall. The economic outlook for many households remains challenging. E.g. 89% households feel the pandemic will have a long-term negative impact on their finances (10% more in Oct than in Sept). People have made hard choices about what they buy, 90% of households have seen their consumption of basic items decrease since prior to the pandemic.
a. Business survey is a panel survey with 200 businesses (mainly SMEs) done in collaboration with the EIU and the local Congolese business federation. It will run for 8 iterations (4 done so far, the fifth due to be published later this week). Some key findings — Business leaders are beginning to see green shoots of recovery in the Democratic Republic of the Congo’s (DRC) economy. E.g. 46% of business leaders say conditions improved in Oct (only 20% said they’d deteriorated). The return to normality, however, is taking longer for some types of firms and disruption persists across the country. 33% small businesses said their situation worsened in the last month and 90% are still experiencing lower revenues than at the same time last year, and is worse for women in business, and certain locations e.g. in Kinshasa, 50% of firms who say their situation has deteriorated blamed falling sales (national average: 28%)
Research
6. Two World Bank working papers from September & October examined impacts of the pandemic on firms:
a. Small and Medium Enterprises in the Pandemic: Impact, Responses and the Role of Development Finance uses data covering small and medium enterprises from WB Enterprise Surveys in 13 countries. It highlights many structural issues that mean SMEs are less likely to survive than larger firms:
- SME sales shrink by more and their cash drains faster than large firms in the same sector and country & they tend to have weaker access to credit
- a range of responses that firms could take to the downturn seem to be out of reach for SMEs
What about “high productivity SMEs”?
- The loss of these disruptive, innovative SMEs may cause permanent scars to the post-COVID recovery but targeting is inherently difficult
- the job-creating and productivity enhancing SMEs that matter more for recovery are more exposed to international trade disruptions, and are more exposed to supply and finance shocks. Saving these SMEs is likely to require addressing a range of constraints beyond liquidity.
b. Unmasking the Impact of COVID-19 on Businesses — Firm Level Evidence from Across the World uses pulse survey data covering 51 countries and 100,000 firms. It highlights that:
- the average drop in sales was 60–75% in the first 4 weeks following the peak of the crisis, though with wide variation
- South Africa had the largest expected drop in sales, followed by Bangladesh, Nepal, Honduras, India, and Jordan, all with average estimates larger than 60% for the drop in sales
- 80% of the variation in the drop of sales appears to be explained by unobservable factors, like management practices, use of technology and others
- in the short-term firms are more likely to grant leave, reduce hours of work or wages compared to lay-offs (though larger firms more likely to lay off workers)
- Significant differences in liquidity constraints across countries (nearly 88% of firms in South Africa have fallen or expect to fall into debt, while only 13% report so in Indonesia), but within country differences are larger than those between countries, smaller firms are disproportionately affected
- 49% of firms made greater use of digital technology, changed the product mix, or both.
7. A 6th essay in the EDI programme COVID-19 Series — ‘How the Zimbabweans pay for the war against Covid-19’
8. Jobs in a crisis — in an IGC policy brief, Umulisa & co-authors examine the role that public employment programmes can play in the pandemic response, through assessing two PEPs in Rwanda. The discuss the importance of:
a. setting wages at the “Goldilocks” level (not too low and not too high), to avoid labour market distortions and to aid in ‘self-targeting’
b. Community engagement during the design phase (particularly consulting with women) and using a gender quota to increase female participation
c. Building up capacity to flex the programme up and down as labour market conditions & fiscal capacity dictate
9. Using data to inform the COVID-19 policy response — IGC policy brief on how to use data to target public resources, forecast future needs or evaluate policy decisions. Where detailed data collection and complex analysis are not viable, simple proxy measures are suggested, including merging datasets, the use of administrative data, and predictive modelling.
10. Poverty estimates — Brum & De Rosa develop an approach to ‘now-cast’ the short-run effect of the crisis on poverty rates. It combines household level micro-data, estimates on the feasibility of working from home, information on key public policies (e.g., cash-transfers, unemployment insurance), and forecasts of GDP contraction. Applied to Uruguay, they find that
a. the poverty headcount has increased by over a third, up from 8.5% to 11.8%
b. government cash transfers have had a positive but very limited effect in mitigating this poverty spike
c. additional transfers worth under 0.5% of Uruguay’s annual GDP could entirely reverse the increase
Commentary
11. IGC had a series for Africa Industrialisation Week 2020 on Covid & industrialisation:
a. Industrial development, trade, and COVID-19 — IGC hub economists review recent patterns of SS Africa’s industrialisation and what Covid impacts on trade and supply chains is likely to mean for this
b. Policies for the future — summarises video interviews with three industrialisation experts
- Dr Carlos Lopes, University of Cape Town, on the potential for an agricultural-based industrial policy
- Max Walter, Centre for Development Alternatives, on re-thinking import substitution for essential goods in the light of Covid
- Bogolo Kenewendo, Former Minister of Investment, Trade and Industry, Botswana, on how continental integration and digitalisation can help develop the needed economies of scale
12. Reimagining the global economy: Building back better in a post-COVID-19 world — A set of 12 Brookings think pieces from fairly eminent authors on recovering from the pandemic, including:
- how to use the SDGs to guide the recovery,
- rebooting the climate agenda,
- redesigning the international monetary and financial system,
- the future of global supply chains
- how to rekindle global productivity
Follow Rachel Glennerster on twitter @rglenner
Follow @FCDOResearch for the latest FCDO research news, jobs and funding.
