Both retention and reallocation employment policies can help mitigate the severe socio-economic impact of the Covid-19 pandemic on workers. Also, the persistence and asymmetry of the pandemic shock are crucial for the choice between retention and reallocation, according to the International Monetary Fund (IMF) World Economic Outlook for April 2021.
The report, released this week, stated that job retention policies such as wage subsidies and short-term work schemes are effective in lowering separations, while worker reallocation policies such as hiring incentives, job search-and-matching assistance as well as retraining programs boost job finding and on-the-job occupational switches by those still employed.
At the beginning of this year, the labour ministry stated that more than 12 000 workers were retrenched in 2020 due to the struggling domestic economy that contracted by about 8% and that was exacerbated by the pandemic.
Commenting on measures in place to boost the labour market, Bro-Mathew Shinguadja, executive director in the labour ministry, said the impact has been felt by all sectors of the economy. He noted that the difference was that sectors that responded quickly had forward-looking approaches or plans and for them the impact has been less severe.
He further explained that reallocation and retention depend on many factors such as workforce profile, ability to adapt to new working methods, clientele mentality and readiness to move into the fourth industrial revolution.
Shinguadja noted that Namibia has some of the necessary attributes already and some level of capacity like in mining, and in-services sectors.
“Traditional sectors like farming and construction may be struggling when it comes to reallocation of their workforce. However, as economies are recovering and moving, new adjustments are to be felt in the right directions,” he said.
The IMF pointed out that lower-skilled employees have tended to benefit more from job retention policies, while worker reallocation policies have bolstered prospects for women and youth.
“For a transitory and asymmetric shock, such as a lockdown or sharp rise in social distancing affecting sectors differently, job retention policies are extremely powerful in reducing unemployment and providing near-term income insurance. For a permanent shock, such as a shift in demand across sectors or a drop in productivity in some sectors, worker reallocation policies that foster job creation perform better in the long-term and hasten adjustment toward the new equilibrium,” reads the report.
Where the shock is a mix of transitory and permanent components, a policy package that favours job retention while social distancing is pervasive, and then reallocation once it lifts, better mitigates unemployment dynamics.
The recent findings suggest that uncertainties about the pandemic and its path mean the phase-out of such measures is more complicated in practice and require careful monitoring of the pandemic including the rollout of vaccines and judgment of the economy’s ability to weather a reduction in support.