Covid-19 is a global public health epidemic that has crippled most aspects of human operations, including lives, labor market and corporate functioning. All these upshots have a trickle-down effect on the economy, particularly with the announcement of lockdowns to contain the spread of the virus. Other measures that countries have put in place to curb the spread of the virus include canceling of international flights, banning social gatherings, donning masks, enforcing sanitation measures, and encouraging social distance. Different countries have enforced these measures at varying rates and achieved different levels of effectiveness.
Despite these measures, the disease has continued spreading and devastating many countries all over the world. In the US, Covid-19 has affected at least 1,062,446 people, leading to the deaths of 62,406 people (Centres for Disease Control and Prevention). A country that has managed the Covid-19 pandemic effectively is Taiwan with a total of 252 confirmed cases and only two mortalities (HealthManagement.org 2). This observation is contrary to the expectations given Taiwan’s proximity to China, the epicenter of the epidemic. This paper discusses the economic effects of Covid-19 on the US economy with a focus on jobs. This area has a significant direct impact on the economy.
The prevailing economic status pre-crisis could have played a vital role in how different economies bore the brunt of the Covid-19 epidemic. Bell and Blanchflower (p. 52) report that at the start of 2020, the US laboulaboret was not close to full employment, a fact that could be confirmed by a striking increase in the number of unemployment insurance claims together with rates of unemployment and underemployment after the health crisis set in. However, these changes were first detected as slight reductions in wage increase and self-employment, particularly among the young, minorities, least educated, and foreign nationals. The major fiscal policy in place in the US was tax cuts, which were expected to boost the economy by increasing the money in circulation (Gaertner et al, p. 687). In contrast, the Taiwan government did not change its fiscal policy before Covid-19 and maintained the Central Bank’s discount rate at 1.375% (FocusEconomics).
The unemployment rate for the US in December 2019 (before the outbreak) was at 3.5% (Bell and Blanchflower, p. 52), whereas in Taiwan the rate was 3.7% (CEIC). However, the unemployment rate in Taiwan has not changed at all after the epidemic, remaining at 3.71% and indicating some form of cushioning mechanism (CEIC). Nonetheless, the current unemployment rate for the US with the ongoing pandemic is at 4.4%.
Most countries have implemented several fiscal measures aimed at cushioning its ctheirzens and the economy from the effects of Covid-19. The goal of these measures is to maintain decent standards of living while supporting viable businesses to minimize bankruptcy and dismissals. These include the provision of labor market support such as reducing working hours and providing unemployment benefits. Furthermore, there have been tremendous increases in healthcare spending to ensure a steady supply of medications, vaccines, medical equipment, and an adequate workforce of healthcare workers. The US managed its situation by providing extended unemployment benefits to the unemployed and self-employed, deferral of the payroll tax, and salary subsidizations to small and medium businesses.
Taiwan also implemented fiscal policies to help the workforce, including direct and indirect tax measures; reduced working hours, for example, subsidized training and varying scales of employment plans; unemployment benefits of up to 60% of the mean monthly cost of insurance to the unemployed, and tuition subsidies to the unemployed (KPMG Global). Healthcare spending in Taiwan was limited by restricting the export of personal protective equipment such as masks and medical equipment such as fever thermometers. The government of Taiwan also cut down import taxes on vital raw materials such as medicinal alcohol with concentrations of 90% by volume or higher and textile materials for the production of masks. Overall, the Taiwan government appeared better prepared to manage the Covid-19 pandemic compared to the US because of prior experience with the SARS virus outbreak (Wang et al, p. 2). Therefore, this should be an opportunity for the US to learn effective strategies for managing a public health epidemic to prevent economic suffering.
The above-mentioned measures have demonstrated appreciable levels of success in reducing the number of Covid-19 infections. Even though infections have not been eliminated, there is hope that lockdowns will be lifte,d and attempts to rebuild the economy will be made even as the search for a vaccine or cure continues. Nonetheless, there is a need to establish fiscal policies to avert or manage the post-crisis recession. A globally harmonized, broad-based financial incentive may be a successful instrument to promote recovery. A global increase in the debt ratio is anticipated. The World Economic Outlook predicts a decline in global growth to -3% (Gaspar et al.).
The US government should continue spending heavily on its healthcare system by conducting widespread testing and desist from trade sanctions on medical supplies. It should also ensure access to Covid-19 treatment by the rich and poor when a cure is finally available. Additional policies to salvage the situation encompass supporting demand for goods and services, incentivising recruitment by firms and prolonging the legal consent to debtors to defer payment (Gaspar et al.). Another country that has succeeded in managing Covid-19 is Greenland, which has had only 11 cases and no fatality. Greenland implemented lockdown and social distancing measures just like other countries. Other fiscal measures include deferment of tax payments, reimbursement to retain employees, subsidies to take care of reduced incomes and state-guaranteed loans (Deloitte Economics, p. 2).
The management of Covid-19 has taken a similar approach globally. However, different countries have attained varying levels of success in terms of the number of infections, mortalities and recoveries. Nonetheless, all countries have had to increase healthcare spending, execute lockdowns and social distancing to protect its people. An obvious outcome of the pandemic is a rise in unemployment rates and increased healthcare spending. However, Taiwan has managed to keep down its infection and unemployment rates low, despite being geographically disadvantaged by being close to China where the outbreak started. Similarly, Greenland has recovered from the epidemic even though the country continues to feel the economic effects of the scourge. To minimise the burden of economic suffering, the US should continue with fiscal policies such as funding the healthcare industry and refraining from trade sanctions involving medical equipment, deferment of tax payments and provision of subsidies. The country should also support trade activities and encourage re-employment when normalcy returns. By following these recommendations will soften the economic blow caused by Covid-19 and enable recovery.
References
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CEIC. Taiwan Labour Force Participation Rate. 2020. Web.
Centres for Disease Control and Prevention. Cases in the US. 2020. Web.
Deloitte Economics. Coronavirus Impact Monitor. 2020. Web.
FocusEconomics. Taiwan Monetary Policy June 2018. 2020. Web.
Gaertner, Fabio B., Jeffrey L. Hoopes, and Braden M. Williams. “Making Only America Great? Non-Us Market Reactions to US Tax Reform.” Management Science, vol. 66, no. 2, 2020, pp. 687-697.
Gaspar, Vitor et al. Fiscal Policies to Contain the Damage from COVID-19. 2020. Web.
HealthManagement.org. What are the Most Effective Anti-Covid-19 Strategies? 2020. Web.
KPMG Global. Taiwan: Measures in Response to COVID-19. 2020. Web.
Wang, C. Jason, Chun Y. Ng, and Robert H. Brook. “Response to COVID-19 in Taiwan: Big Data Analytics, New Technology, and Proactive Testing.” JAMA, vol. 323, no. 14, 2020, pp. 1341-1342.