“Danas Daily” Labour Day interview with Jovan Protic, ILO NC for Serbia
06 May 2020
1. The call for solidarity in the area of labour, made by international organizations and trade unions to the national governments could remain without response, similarly to the aftermath of the 2008 global financial crisis. At the same time, the international workers’ movement has been weakened, so does it appear that the implications upon labour will depend upon the “economic mercy” of the states?
We have to acknowledge that this crisis is very different from previous ones. It is not only a health crisis but also a social and economic crisis. Talking about the economic fallout, there is no playbook on how to handle such a huge challenge based on both supply and demand shocks. Business disruptions have lowered production, creating shocks to supply. And consumers’ and businesses’ reluctance to spend has lowered demand.
The expected drop in manufacturing might be comparable to the global financial crisis in 2008/09, but the decline in services appears larger this time — reflecting the large impact of social distancing.
What we see in many countries is more than a mercy approach. Despite the missing playbook, many governments try to go for substantial targeted policies to support the economy through the pandemic. The goal is very often to prevent a temporary crisis from permanently harming people and firms through job losses and bankruptcies. But, the consistency and quality of the responses vary from country to country. The success of keeping the impact on labour low will also greatly depend on the strength of national institutions and the commitment to evidence based policy making, the trust vested in them by the citizens and the rule of law. Another important factor is just and interest-based social dialogue which could transpose the calls for solidarity into action. This largely depends upon the trustworthiness of those who participate in it.
2. The economists have been warning that the profit maximization logic in the global competition and mainly neoliberal economies was on the brink of collapse even before the pandemic. Will all this which is now happening, contrary to globalization and neo-liberalism, lead to the opposite extreme, or will the world be compelled to learn new methods of doing business, production and interest-based connections (?) Is that going to speed up the changes in the area of labour and are the trade unions fit to confront with those challenges?
The globalization in the past few decades was undoubtedly lead by the profit maximization logic, but on the other hand it has helped raise incomes across the globe, rapidly develop economies and lift millions out of poverty. Factors that have contributed to it were international trade deals, rapidly developing economies and easier travel, which have all created a system that is much more dependent now on what is happening on the other side of the world than it ever was. That has come with a price - the increased risks of contagion, be it financial or medical, to the extent that those risks have become the underbelly of globalization. The pandemic has exposed those risks and made the people much more risk-averse - it has disrupted supply chains overnight and forced the companies and customers to look for alternatives locally. It will definitely make the businesses look more into their neighborhood rather than across the globe, and as much as it will probably slow down the global economic growth it might create new opportunities for emerging enterprises that might fill up the niches left by the disruption of global supply chains. To what extent the workers and new entrants to the labour market will benefit from those new opportunities will depend upon the ability of the national governments to recognize the opportunities, and upon the capacity of trade unions to reach out to smaller and new businesses. Thus, the crisis might turn into an important motivating factor for the trade unions to make an additional effort to approach and grasp for new membership in smaller and local businesses rather than focus on their “traditional clients”.
3. In Serbia there are not yet any data on how many workers have lost their jobs, permanently or temporarily, due to the pandemic. The unions claim that already at the end of March there were dozens of thousands of such workers and that the figures will double by the end of April. The Chamber of Commerce stated that in March 67,000 workers stayed at home and did not work and approximately 170 companies have practically halted their production. Do you have any data about the increase of unemployment or any estimates for the near future (?), can the employment after the crisis return quickly to the pre-crisis level?
In order to make quick progress on collecting these new data, the ILO and the European Bank for Reconstruction and Development (EBRD) joined forces two weeks ago. We established a joint task force to assess the impact of the crisis on the economies of the Western Balkans by examining the likely short- and medium-term effects on employment
So far we do not yet have precise figures for Serbia, but we expect to come up with the results of the task force by the beginning of June. We are aware that workers are being laid off temporarily, especially in tourism and services, but they do not yet show up in unemployment statistics. The development of unemployment will very much depend on how quickly companies resume work and how quickly the national economic picks up.
How quickly the employment in Serbia will return to pre-crisis level will primarily depend on the economic growth, but also on the ability of the policy-makers to come up with improved activation policies, as Serbia had substantive inactive labour force reserves prior to the pandemic. If the 3% economic decline in 2020 is indeed followed by a strong growth in 2021, as forecasted by the IMF, Serbia will have relatively good chances for employment recovery, but it will also depend a lot on the economic trends in Europe overall which are not nearly as optimistic. A lot of economic output and employment in Serbia is linked to European (and global) supply chains, so if some major industries in Europe – such as car industry – do not recover quickly, that will certainly affect the pace of recovery in Serbia, too.
4. As a lot of people in Serbia have fixed-term contracts, or are employed through private employment agencies, or are engaged as seasonal workers, or work in the informal economy, we assume that they are the hardest hit because they have practically lost their income, and will get nothing from the state because the state measures do not recognize them. How can this part of the labour force be assisted to survive the period of the crisis?
For informal economy workers, reduced hours due to the pandemic means indeed a loss of income with no possibility of receiving unemployment benefits. This is not a specificity of Serbia - informal micro and small enterprises constitute 80 per cent of enterprises worldwide and are generally out of reach of public policies. Part-time workers, many of who are women, temporary workers, or workers under short-term contracts and in the digital gig economy are not eligible for unemployment benefit or income support in most of the countries.
Many of them face the same “work or lose your income” dilemma as informal economy workers. To pay their food and other basic expenses they often continue to work until forced to stop by measures to limit contagion by the virus. This compounds the economic insecurity they already face.
The only immediate measure of the Government in this case is income support which could be extended through non-contributory social security schemes or existing cash transfer programs. Support could also be offered temporarily to informal enterprises, but it would require conditionality that they register and formalize after the end of the pandemic. In adopting short-term responses to the crisis, urgent attention should be devoted to protecting low-income households, rather than giving away 100 EUR to each adult citizen of Serbia regardless of the level of income.
5. Legislative changes last year in Serbia, especially in the area of labour force leasing (Private employment agencies law), have apparently come at the right moment for future employers through those agencies. Experiences from other countries show that the liberalization of engagement of such agencies drastically reduce and limit the workers’ rights, their incomes are lower and they are turned into precarious workers. Our trade unions did not manage to convince the Government to give up on this Law or to improve it in the making. Is this law going to be their major problem during and after the pandemic?
Serbia has ratified the ILO Convention 181 on Private employment agencies in 2013, which invites the ILO member countries to regulate the work of those agencies by their national legislation. Trade unions in Serbia have long opposed the adoption of any legislation that would regulate the work of those agencies, believing that their work would cease if it doesn’t get regulated, which was a profound mistake. Banning the work of those agencies is not an option, so regulating their work – even if not to the level required by the trade unions, is better than leaving them the room to interpret themselves the broader conditions for their work.
What is really important is a substantial economic recovery and the build-up of the rule of law that would create more and better employment overall, thus creating better job opportunities to the workers as an alternative to low-paid work through the agencies. To what extent this Law be a problem to the trade unions depends upon their ability to recognize these developments that can truly benefit the workers overall and whether or not they will be willing to support the elimination of socio-economic inefficiencies that hinder the economic growth.
6. The ILO estimated that the measures and limitations imposed due the pandemic could leave between 13 and 35 million people around the world without employment. The ILO estimates that “work in poverty” until the end of the year will affect between 8 and 35 million workers, who will retain their jobs but with minimal salaries. At the same time some 200 million people will lose their income due to reduction of salaries. How can one make progress in such world which will certainly not be able to recover for years? Are the public works part of the solution to this problem, and/or some modern Marshall Plans?
The initial global projection of the ILO from March was that up to 25 Mio people could lose employment because of the economic crisis caused by the pandemic, which is around 13% increase of global pre-pandemic unemployment of around 190 million workers. In the meantime we see a high risk that the end of the year figure of additional unemployed will be even higher than the initial projection.
For comparison, the 2008-9 financial crisis increased unemployment by 22 Mio globally, so the virus could have a more damaging impact on employment than the financial crisis. We need to understand that the COVID-19 pandemic is a unique economic challenge different from other crisis. Shocks reverberate through both supply (disrupted supply chains, containment measures, and lockdown of non-essential economic activities) and demand (lower consumption of goods and services due to declining household incomes, restriction of movements, and uncertainty) which makes the economic and social crisis very severe.
We need an entire package of measures starting with protecting workers in the workplace reducing the risk of exposure to the virus, to policies to protect jobs and income like short time work schemes, insurance-based unemployment benefits or other income support schemes for those who are not covered like informal workers. Enterprises, especially small and medium sized companies, will need temporary liquidity assistance in form of preferential loans or grants.
The ILO has come out with a compendium of the policy responses designed by its 187 member states in order to facilitate exchange and learning, which can be reached through our website.
We are in constant contact with the Ministry of Labour, Employment, Veteran and Social Policy of Serbia and with the social partners and one of our first post-pandemic activities in this country will be the assistance to the drafting of the new National Employment Strategy 2021-2025, which will certainly take into account the new realities and help Serbia adapt and accelerate the growth of its employment rate.