- Restoring Public Health and Preserving Economic Livelihoods Must Go Together
As policymakers continue to respond to the coronavirus pandemic, it is more important than ever to weigh the consequences of their public health decisions on jobs and livelihoods. The adage that “the treatment is worse than the disease” comes to mind when considering the lockdown’s effect on the economy. Take, for example, the findings of a recent working paper by the World Bank, entitled “Survival of Firms during Economic Crisis.” It estimates that “in a hypothetical scenario fashioned after the current pandemic period―where firms have no revenues due to a lockdown or collapsed demand,” an average retail firm may have retained only as many earnings and other sources of financing to last as little as eight weeks. Manufacturing firms are typically better positioned, with resources sufficient to last between 19 and 38 weeks. Analyzing about 7,000 firms in selected countries across the globe, the World Bank’s research points out, In the current pandemic, governments rightly focus on dealing with the health aspects first, and only then on the recovery of the economy once the immediate danger of the pandemic is over. In the meantime, businesses are rapidly running out of cash. In the United States, half of small firms―those with fewer than 500 employees―have cash reserves for less than a month, and another quarter of businesses may run out of cash in two months. For service industries, the period to illiquidity is even shorter.