Labour Productivity gets affected during Epidemics, Emerging Economies Suffer the Most: World Bank

Published: July 20, 2020

A recent study by the World Bank has stated that the previous epidemics in the world have affected labour productivity severely. This time also, the overall labour productivity is going to be hurt big time due to the impact of COVID 19.

There were five epidemics during the period 2000-2018: SARS (2002-03), Swine Flu (2009), MERS (2012), Ebola (2014-15) and Zika (2015-16). The four major epidemics, excluding the one with Swine Flu, have coincided with the global financial crisis and all of them have decreased the overall labour productivity initially by 1% and by 4% cumulatively after three years.

According to the report, the severe epidemics adversely affect labour productivity, primarily through investment, which declined by 9% after three years due to the increased uncertainty at the global level. There has also been a broad-based slowdown in productivity during the 2007-2009 global financial crises coinciding with the spread of an epidemic. This time, the uncertainty over the COVID 19 pandemic will worsen the situation by hindering foreign direct investment and overall trade.

This report by the World Bank covers 35 advanced countries and 129 emerging economies to get a broad view. It has found that factors contributing to economic productivity such as working-age population growth, educational attainment, growth of global value chains, go for a toss during the epidemics as has also been observed during the financial crises of 2008. In the emerging markets, the productivity levels remain less than 20% of the normal average in the advanced economies and only 2% in the lower-income countries. It lends credence to the theory that the less developing countries are affected more due to the epidemic.

Since the emerging economies are already facing hurdles to close the gap on their advanced counterparts, the COVID 19 pandemic will see that they will find it more difficult to come to terms with these advanced countries in the years to come owing to the current slowdown in global manufacturing, trade growth slowdown, erosion of human capital and a weak outlook for commodity prices.

However, it is also expected that the pandemic will see the adoption of new technologies by the business community and this will affect the businesses positively in the years to come. It will ensure more innovations as well.

World Bank

It is an international financial institution that provides loans and grants to the governments of the developing and low-income group countries in order to eradicate hunger, poverty, etc. It has two components – the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Established in 1944, the organization is mainly focused on the reduction of poverty from the world. WB is headquartered in Washington DC, USA.

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