The new year has arrived, but the situation is worse than in the last months of 2020. The pandemic is still unleashed: the end of the year holidays, the official permissiveness, and the slowness of the distribution of vaccines seem to announce that the disease will continue to wreak havoc for several months in most of the world, particularly in America, Europe, and parts of Asia like India. It has therefore been required to redouble preventive measures: a new lockdown and the disruption of almost all economic and school activities. Therefore, the recovery looks still uncertain and distant.
On the health front, we can expect that infections will decrease thanks to the confinements and a greater number of vaccinated people, but the economic recovery will need more energetic action from governments. There is hardly any room for optimism, especially if you trust that things will be fixed by the inertia of the market forces.
On the one hand, it will be necessary to substantially expand the funds earmarked for programs already launched last year to support the neediest individuals and companies. In addition, it is urgent to design new measures that can ensure a faster recovery and prevent new crises.
Among the latter, various institutions and specialists (e.g., the Nobel Prize Joseph Stiglitz), have pointed out how enormously helpful would be the issuance of at least 500 billion dollars of Special Drawing Rights (SDRs) by the IMF to launch an aid program for the poorest and developing countries. This program would not overwhelm the existing sovereign debts and would serve to finance the balance of payments and imports necessary for food, health, and improvement of the environment.
There can be no room for confusion. The recovery must be measured based on these indicators: reduction of sick people; increase in the number and quality of employment; and a greener production system.
Everything else, such as debt, parity of currencies, stock markets, the public deficits and even percentage points of GDP, should be understood as secondary issues or mere instruments to achieve the desired recovery.
Otherwise, there may be a simulated retorn to normality, apparently recovering what has been lost when in fact we will go backwards because there will be more poverty, inequality, pollution, and a decreased ability to prevent and face new catastrophes.
In the case of Mexico, the foregoing translates into the need to design a recovery program that does not exist today. The announced vaccination campaign is not enough if hospital capacity and first-rate health care are not improved. A new economy must lead us to the production of cleaner energy and other measures that reduce pollution and inject vitality into new economic branches. You cannot trust the United States-Mexico-Canada Agreement (USMCA) and infrastructure works in progress as the only drivers to recover the jobs lost. A new legislation on unemployment insurance, outsourcing, digital platforms, and programs to support families, especially those who live in the informal economy, is necessary. A progressive salary policy, like the one that has been implemented, is not enough if regional, gender and age gaps are not reduced.
To elaborate on the issue of employment, fundamental for a true recovery, we have consulted the report that the ILO and ECLAC published at the end of last year. The paper recognizes that the pandemic will “lead to the worst GDP contraction in the region’s history (a projected downturn of 9.1% in 2020), which has already had and will continue to have profound labor and social consequences”.
According to this study, the existence of a large informal sector, without access to social security and therefore very vulnerable, has had and will have a strong regressive impact on the income and quality of life of millions of people. Formal jobs were also affected as many people were laid off; others kept their jobs, but suffered a significant decrease in their income, due to the reduction of hours worked or to the fact that they were sent home with unpaid vacations or leave with lower wages. The effect of these measures was more severe in our country due to the absence of unemployment insurance.
A remarkable phenomenon that this crisis produced was the enormous number of people who were left without work and stopped looking for it. Technically they ceased to be part of the EAP (Economically Active Population) and joined the Economically Inactive Population (PEI). Women were particularly harmed due to their stronger presence in the sectors most heavily affected by the health crisis (domestic service, restaurants and hotels, commercial activities) but, also, to the prevalence of a macho culture that confined them to take care of the sick, children without school, the elderly and household chores.
The crises caused also that wage employment contracted less than own-account work. The reason is that the latter involve, for many of the activities, face-to-face contact, especially in the informal sector. In Mexico salaried workers fell by almost 14% in the second quarter of 2020 but self – employed accounted for a 30.9% drop. This decline has been reversed, but at the cost of a greater exposure of the informal workers to contagion, which would partly explain the growth in the number of sick and dead persons.
On the other hand, the study emphasizes the devastating consequences among young people: job losses affected them more than other workers. This situation, says the report, has been a factor that has accentuated “fatigue and loneliness… So, “feelings of sadness, fear and distress are also more common among young men and women.” The paper warns that: “the more time spent out of school and out of work, the greater the risks of precarious work and exclusion from the labor market throughout one’s working life”
To avoid these tragedies, programs aimed at improving their training are required; and maintain and improve income transfer policies for young people who study, the workers adults, and households. Otherwise, it is highly likely that young people will be pressured to look for an income mainly in the informal activities. It would also restrict the possibilities of investing in improving their labor capacities.
The latest data, offered by the Mexican government, show the slowness of the recovery: in November 2020, the employed population was 52.93% (in relation to the total of working age population), a little lower than in October and, of course in March (55.76%). Furthermore, most of the people who returned to work did so in informal activities. With respect to formal jobs, the loss in eleven months, from January to November, was 369, 890 posts. Nearly 278 thousand more were missed in December, as the president of the republic told in his morning press conference.
With this scenario, the recovery does not look so close or certain. The ECLAC-ILO study underlines that: “The health crisis has highlighted the importance of a solid and efficient public sector with the capacity to react quickly to shocks with strong economic and social impacts.” The situation that we are observing at the beginning of the year requires that the institutions of the Mexican state redouble their efforts, do it as soon as possible and with a comprehensive project.
(Saul Escobar Toledo, Economist, Professor at Department of Contemporary Studies in National Institute oh Anthropology and History, México and President of the Board of the Institute of Workers Studies “Rafael Galvan”, a non-profit organization).
