A gradual return of the economy to regular activity in a way that will keep the risk of Covid-19 infection to a minimum will be good for growth but will not bring relief from unemployment, especially for low-paid workers. This emerges from a study by a team comprising representatives of the Ministry of Finance, the Bank of Israel, the National Economic Council, the Ministry of Economy and Labor, and the Ministry of Health. The Ministry of Finance says that it accepts the study's conclusions.
Under the plan recommended by the team, the Israeli economy will return to routine in four stages, each lasting two weeks. The transition from one stage to the next will be examined according to health criteria.
In the first two weeks after the end of the Passover holiday (April 19-May 3) the proportion of employees allowed at places of work will rise to 50%, and stores and open shopping centers will reopen in a limited way. Kindergartens and special education centers will resume activity. People will be allowed to leave their homes for other purposes besides buying food.
In the second stage (May 3-17), primary school pupils in grades 1 to 3 will go back to school, and shopping malls and markets will reopen, subject to restrictions. In the third stage, starting May 17, places of leisure and entertainment that are not densely crowded (fitness clubs, nature reserves, libraries, museums, and also rented vacation cottages, but not sports stadia, theaters and cinemas) will reopen. In the fourth stage, from May 31 onwards, all closed businesses will reopen.
One activity that does not appear in the list at all is overseas flights.
It is important to note that no decision has yet been made about restarting the economy. It is believed that the government is waiting to see the daily rate of new Covid-19 infections fall below 100.
Over 400,000 seen remaining unemployed
The team attaches to its report a warning that "the damage to the incomes of hundreds of thousands of low-income households with small financial reserves is liable to impair the public's readiness to observe the restrictions required to deal with the pandemic, especially in the light of the perception that the risks of the disease are not evenly distributed over all levels of society." Because of these findings, the team implores the government to consider the reopening of stores and shopping malls.
The team's report begins with a description of the depth of the expected damage to the economy from the coronavirus crisis. A survey carried out by the Central Bureau of Statistics on March 31 found that 41% of businesses had experienced a decline of more than 50% in revenue since the crisis broke out, the main damage being to small and medium-size businesses. Some 50% of businesses said they would close if the existing situation continued for another month.
The team estimates that more than 400,000 of the people currently on unemployment benefit will remain unemployed even after the lockdown ends, and that if it is relaxed quickly. "The longer the shutdown continues and the wider it becomes, the greater will be the long-term damage to the Israeli economy, and the slower will be the recovery after the restrictions are lifted. The reason for this is the risk that companies harmed by the restrictions will collapse financially, or will decide to cease activity, and in such a situation the acceleration of economic activity will be retarded because of the need to recreate employer-employee relations, to establish contractual engagements, and to buy and commission plant and equipment. Alongside all this, it will be necessary to deal with dishonored financial commitments," the reports states.
Summing up, the team writes, "The economy needs to be restored to activity gradually, in accordance with a timeline that will be produced in detail immediately after the Passover holiday, in order to avoid economic collapse and irreparable damage."
To balance economic and health needs, the team recommends controlled resumption of the basic infrastructure needed for people to return to work: frameworks for young children of working parents, and public transport. "These need to be the leading elements in the exit from the lockdown," the report finds.
Tourism and leisure won't recover any time soon
The team maps out the various kinds of workplaces in Israel and rates them according to three criteria. The health criterion examines how safe each industry is from the point of view of the chances of the coronavirus spreading, and how easy it is to monitor and control in the event of a renewed outbreak. The second criterion is economic: the contribution to GDP of the workers in the industry, on the assumption that a limited number of employees will be able to return to the workplace. The third criterion is employment: the resilience of the businesses in the industry and the degree of risk to the business, and the risk to those employed in it of dropping out of the workforce because of an extended shutdown, with an emphasis on the weaker sections of the labor market.
The most hopeful finding in this ranking is that the industries that make the highest contributions to GDP are also the safest as far as the health criterion is concerned. These are the various branches of the technology industry, and also more traditional sectors, and financial and business services such as lawyers, accountants and tax consultants. "Analysis of the actual effects of the shutdown in these sectors shows that even partial relaxation of the restrictions on them will facilitate significant expansion of GDP, because these sectors have succeeded in expanding work from home and shift-work at the workplace."
The most discouraging finding is that the danger of infection is high in sectors that are particularly important to employment, particularly at low wages. The tourism and leisure industries "are not expected to recover in the near future, both because of low demand and because of the high potential for spreading the disease that exists in them." In the case of retail trade, the team is of the view that consideration should be given to resumption of activity, despite the health risk, because of the impact on consumption and because some 350,000 people are employed in the sector in Israel, many of them on low wages.
Published by Globes, Israel business news - en.globes.co.il - on April 12, 2020
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