Coronavirus is a turning point event that will change the trajectory of governments, economies, businesses, and even individuals. The crisis has already transformed into an economic and labor market shock, and businesses across nearly every industry are confronting a stark reality: the global economy is slipping into a recession. Yet the economic toll of any coming recession hits different countries in disparate, uneven ways. Luckily, Egypt seems a bit protected due to its relative disintegration from the global economy and is less likely to see a negative GDP growth since its GDP grew 5.6% at the end of the last fiscal year. Other countries are definitely bracing, for example, the Eurozone countries, as its GDP grew 0.1% at the end of 2019, so any shock could push it toward a negative growth. As warning signs surface that “social distancing” may need to go on for almost 12 months, it’s un-doubtable that the coronavirus outbreak will have far-reaching impacts on the Egyptian labor market
The COVID19- outbreak is speeding up digitization efforts, which were already underway. Both private and public companies are now left with no choice but to step up their digital game and invest more in upgrading their network infrastructure, especially with remote work becoming the new normal. Companies that have so far relied on outdated solutions are now being forced to experience the efficiency of digital tools, from teleconferencing tools to cloud solutions to data mining techniques. This coming wave of digital disruption would certainly affect all employees, but it is not conspicuous that the unskilled labor will be hit the hardest
Job Losses are materialising at Speed:
Coronavirus pandemic could actually eradicate as many as 25 million jobs worldwide, in contrary with 22m job losses during global financial crisis, which unfolded over a much longer period. Businesses that are witnessing huge losses due to the coronavirus outbreak are forced into weighing some stark options: Less working hours and pay cuts, Furloughs or Layoffs. Workers are now thrown into a surreal limbo; Jobless, but maybe temporarily. Yet, many of the affected workers are at the bottom of the wage spectrum, leaving them with no income at all. If history is any guide, as people continue to lose their income, and their purchasing power, the odds of a recession will increase.
Employers are in charge:
During economic downturns, the shock to labor demand is likely to turn the labor market into an employer market, resulting in employers having the upper hand, raising the required qualifications and slashing wages. This would, in most cases, push individuals towards self-employment, often in the informal economy. But given the current situation, self-employment might not serve to cushion the impact of employer market due to current restrictions on the movement of people and goods.
Reversing the Brain Drain:
Our team believes that in addition to the recession that will hit the rest of the world with no mercy, the psychological impact on the Egyptians who used to work and live abroad will be high as the crisis elevates the awareness of threats in the world and brings families closer. We believe we will see a reversed shift in brain drain as those expats seek returning back to their home country. Such flow of mainly high-potential and high-performing talents is good news for the Egyptian economy and it couldn’t be coming at a better timing.
Layoffs Aren't the Only Option!
In this unprecedented global situation, companies aren’t left with many options on how to deal with this bump in economic activity, even though many would relay to the option of layoffs. A cost-cutting reflex is understandable, but there are other cost-saving measures that companies can take to keep workers on the payroll, which still consider the social impact as well as the economic one, for example:
- Cutting training costs and reducing vacation days.
- Delay hiring and promotion.
- Reduce working hours or offer more days off or part time availability.
- Cutting training cost and encourage self-learning and online courses.
- Halting bonuses and overtime pay.
