The impact of coronavirus on macroeconomic variables of income, output, and employment looks as if unemployment will go up with every passing day, and economists argue that involuntary kind of unemployment (total unemployment less frictional and structural unemployment) is going to be more than the two world war (WW1 and WW2) times and global financial crisis of 2008.
Realistic COVID-19 lessons and research literature prove that with coronavirus (COVID-19), the gauge or scale and speed of job losses will coincide with the natural disaster than a classic or typical recession (Dante DeAntonio, Moody’s Analytics in West Chester).
We know that in every economy whether developed or underdeveloped, there is the presence of frictional and structural unemployment which arise due to change of jobs and skill mismatch respectively. Therefore, such unemployment is called Natural Rate of Unemployment.
But, in this pandemic economy, it is the involuntary unemployment (total unemployment less Natural Rate of Unemployment) that exists more and increases at an increasing rate. Such unemployment arises due to lack of demand.
No doubt, COVID-19 increases the level of involuntary unemployment but it is basically educated unemployment that will increase more immensely and exponentially.
And the moment complete measures such as maintenance of proper hygiene (respiratory hygiene in particular), social distancing, proper quarantine method (double and extended quarantine like China and Pakistan), and avoiding contact with eyes, nose, and mouth will be taken we may expect downfall in the COVID-19 cases across the world. We can mathematically express it as:
Lime͢ 0 f (U, ḡ) =K
Where f (U, ḡ) is a function of COVID-19 cases
U = number of unemployed at a particular time.
ḡ =other factors taken as constant
K=constant indicating normal situation or normalcy
It is observed from this virus that youth, educated in particular, are becoming depressed and therefore frustration is overpowering them. Employment, high standard of living, and high quality of life are always dream of a person making him happy and satisfied in life. This makes him love his life and abstains him from making false decisions and doing wrong deeds leading harm to his life and also to society at large.
An unemployed youth has high chances of falling prey to mental sickness making him do what society wants him to do. Different economic and health reports point out towards a high pool of unemployment and signs of depression in different age groups with the onset of this virus.
It is not only economic downfalls that we witness nowadays, but mental breakdowns too have been formed to maintain the principle of the social distancing that governs this virus.
However, such distancing should not be taken otherwise even though kinships and social bonds are affected alongside mental health. Even with the presence of social distancing, we can reduce economic and social problems by providing proper welfare incentives.
The present write-up argues that proper economic and welfare policies are required to reduce unemployment because these policies are critical in the moment economies are caught in shocks and disturbances such as recession and depression.
In fact, the need of the hour is to find a proper mix of fiscal and monetary policy so as to reduce the effect of the virus on aggregate income, output, and employment in the first place and other macroeconomic variables in the second place.
The relationship between economic growth and unemployment is strong and negative which gets progressive the moment all macroeconomic policies work in synchronization or harmony.
In other words, growth and employment connections get boost the moment all macroeconomic policies work in coordination (Bhat & Qadri, 2018). Indian economy then and even now is revolved around one important characteristic of macroeconomic policies viz. these policies acting more as the regulators rather than as development tools.
Therefore, these policies don’t come up to the expectations of the masses and fail to reduce unemployment or create additional employment opportunities. Under COVID-19, what economies need to do is the conversion of macroeconomic policies into macroeconomic stabilization tools. For that matter, it is very important to go back to developmental methodology or strategy to macroeconomic policy based upon the integration of short term fiscal policy and monetary policy targets with development goals of long term (Nayyar, 2011).
If shocks and disturbances (Here COVID-19 in particular) in the economy are to be reduced, we must redefine the elementary views and principles of macroeconomic policy in the framework of existing global problems (Jonathan Harris, 2001).
We can never expect a better understanding of any policy without taking into account or referring historical framework, geography (geographical location in particular), and the general environment (Kanagasabapathy, 2001). Likewise, understanding unemployment policies in light of COVID-19 demands a better understanding of trio viz. history, geography, and ecology.
Binish Qadri is ICSSR Doctoral Fellow pursuing Ph.D. inEconomics at Department of Economics, Central University of Kashmir; Email:qadribinish@gmail.com