Will Covid-19 have long-term impacts on the German labor market?


Term Paper, 2020

11 Pages, Grade: 1,7


Excerpt

Contents

List of abbreviations

List of figures

1. Introduction

2. What is Covid-19?
2.1 Global classification as pandemic
2.2 Containment measures in Germany

3. Impacts on the German labor market

4. German gross domestic product trend

5. Summary and conclusion

6. Bibliography

List of abbreviations

Covid-19 Corona Virus Disease 2019

GDP Gross Domestic Product

SARS Severe Acute Respiratory Syndrome

WHO World Health Organization

List of figures

Figure 1 Forecast development of GDP in 2020 and 2021

1. Introduction

A year ago, nobody would have thought that we were in such an economic and private situation. Due to the Coronavirus the public life is largely paralyzed, production lines have come to a standstill and air traffic is restricted. At the beginning of the crisis, it was still assumed that the consequences would only affect China and the trade associated with it. But it quickly became clear, however, that the crisis affects the entire global community and that there is no economic counterweight to the countries affected.1 Unlike previous financial crises, the Corona crisis is spreading both- on supply and demand. Production processes are affected because employees are sick and absent. Suppliers can no longer deliver due to transport restrictions. As a result of closures in the service sector, there is neither sales nor income. In addition, the entire consumption worldwide collapsed, since the closures of retail or catering businesses simply eliminate the opportunities for this. This is an exceptional situation for any country, and we must try to deal with it properly. What are the economic consequences of such a lockdown and to what extent is it acceptable? How long will these impacts be felt and how quickly can a society recover from it?

In this essay I discuss and analyze the effects of the Corona Virus Disease 2019 on the German labor market based on a literature review. Due to the currency of this topic, there is still limited scientific literature and publishes studies. Therefore, I work only with a few selected sources.

2. What is Covid-19?

Corona viruses were first discovered in the 1960s. Many colds are caused by these viruses. Today's Coronavirus new, because a new strain of the virus has formed. It is a variant of SARS (Severe Acute Respiratory Syndrome) and is called SARS-CoV-2. Infections caused by the Coronavirus are called Covid-19. It is suspected, that the virus originates from bats and that the first humans became infected at the Huanan Seafood Market in Wuhan. The Coronavirus can be transmitted from person to person mainly by droplet infection via mucous membranes of mouth and nose as well as contact trough hands.2

2.1 Global classification as pandemic

The situation regarding to Covid-19 became increasingly critical. On 12 March 2020 there were already more than 20.000 confirmed cases of Corona in the European area, of which 1.000 were deadly.3 As the number of cases outside of China has been rising rapidly in the last two weeks, Covid-19 has been officially declared as a pandemic by Dr. Tedros Adhanom Ghebreyesus, director general of the World Health Organization. The WHO emphasize the importance of taking preventive measures to slow down the pandemic and support the health care system to avoid overburdening it. 4

2.2 Containm ent m easures in Germ any

On 16 March uniform guidelines for the containment of the corona pandemic in Germany were publishes. However, each federal state has the option to introduce its own individual measures. In Baden-Württemberg, for example, universities and day-care centers for children were closed, events with over 100 participants were prohibited.5 As the virus spread wider and more rapidly, this led to further and drastic restrictions only a few days later. Restaurants were completely closed, educational institutions of all kinds, as well as fitness studios, cinemas and retail trade were forbidden. In addition, a travel ban was imposed in foreign risk areas, so that tourism in various countries collapsed. Staying in public places is only permitted alone or with another person not living in the same household.6 Shortly afterwards, one of the largest car manufactures, Daimler AG, stopped a large part of the production for at least two weeks throughout Europe.

3. Impacts on the German labor market

The corona crisis is currently affecting the entire German economy. Due to the restrictions to contain the virus, mentioned in the previous chapter, the economic development in Germany will collapse massively. It is therefore important to know, how long the restrictions will apply and how they can be dealt with. It is expected, that the restrictions on public life will not return to complete normality until after about ten months, i.e. in the first quarter of 2021. It is even estimated that the economic situation in Germany will return to normal after twelve and a half months.7 According to an ifo study, in which just over 300 managers were asked about their assessment, it was stated that approx. 85 % expect to be confronted with very strong losses in sales development. The figure was particularly high in the industry and service sectors.8 Indeed, firms from trade and service which were surveyed by the ifo institute in April 2020, expect a turnover loss of about 20 % for the second quarter of 2020.9 Most affected are tour operators, hotels, catering trade and the automotive industry. Uncertainty about the future state of the economy is putting the brakes on companies and households for long-term decisions regarding on investments durable consumer goods or long-term private investments like cars or real estate. The ifo institute's survey can be used to determine the uncertainty in companies. In this survey, companies submit a quarterly sales forecast for the upcoming quarter and their sales expectations in the worst- or best-case scenario. The gap between the rates of change and the worst- or best- case represents the insecurity of the companies for the upcoming quarter. In 2019 this value was relatively constant and around 10 %. In April 2020, this figure shot up to 24 %. Sales expectations range over a very broad spectrum from - 75 % to -2 %, depending on the sector.10 These figures also influence the reduction in employment. According to a survey conducted by the ifo institute also in April 2020, the above-mentioned industries have decided to cut jobs.11

4. German gross domestic product trend

Despite the attempt to provide support in form of liquidity and income protection in order to protect avoid insolvency, Germany is facing the most acute recession in its history.12 Already in the first quarter, the GDP fell by 2,2, % compared to the previous quarter. The German government expects the GDP to decline by 6,3 % for the year 2020. Due to the reduction in social contacts, the collapse in demand from abroad and the interruption of supply chains, private consumption is expected to fall by 7,4 % year-on-year. Exports are estimated to fall by approx. 11,6 % compared to last year, peaking in April because of the production stop in the automotive industry.13 Now that the restrictions are gradually being eased in May, the economy can breathe a sigh of relief again, but this will have small impact in the second quarter. In order to avoid job losses as far as possible, the number of short-time work increased enormously in March and April, and since there are currently no reliable statements on the extent of the loosening, there is still uncertainty about the development and the timing. Nevertheless, the situation is expected to recover further in the second half of the year, as measures to contain the virus constantly being developed to bring health protection and economic activities more into balance.14 Thus, the German government expects the GDP to increase by 5,2 % next year and only at the beginning of 2022 the GDP will return to its level at the beginning of the crisis at the end of 2019.15

In an evaluation on the economic effects of Corona, the German Council of Economic Experts has predicted the development of the GDP in various scenarios in 2020 and 2021 which was publishes on Statista.

[...]


1 Cf. i.a. Bardt, H., Beznoska, M., Demary, M., Forecast, 2020, p. 5

2 Cf. Trilla, A., Coronavirus, 2020, p. 3

3 Cf. N.N., http://www.euro.who.int/de, Pandemic, 2020, n. p.

4 Cf. N.N., http://www.euro.who.int/de, Pandemic, 2020, n. p.

5 Cf. N.N., https://stm.baden-wuerttemberg.de, Containment, 2020, n. p

6 Cf. N.N., https://stm.baden-wuerttemberg.de, Containment, 2020, n. p.

7 Cf. i.a. Demmelhuber, K., Leiss, F., Link, S., Impact, 2020, p. 1

8 Cf. i.a. Demmelhuber, K., Leiss, F., Link, S., Impact, 2020, p. 2

9 Cf. i.a. Bachmann, R., Carstesen, K., Insecurity, 2020, p. 1

10 Cf. i.a. Demmelhuber, K., Leiss, F., Link, S., Impact, 2020, p. 1

11 Cf. i.a. Demmelhuber, K., Leiss, F., Link, S., Impact, 2020, p. 2

12 Cf. N.N., www.bmwi.de, GDP, 2020, n. p.

13 Cf. N.N., www.bmwi.de, GDP, 2020, n. p.

14 Cf. N.N., www.bmwi.de, GDP, 2020, n. p.

15 Cf. N.N., www.bmwi.de, GDP, 2020, n. p.

Excerpt out of 11 pages

Details

Title
Will Covid-19 have long-term impacts on the German labor market?
College
University of Applied Sciences Stuttgart
Grade
1,7
Author
Year
2020
Pages
11
Catalog Number
V902731
ISBN (eBook)
9783346187895
Language
English
Tags
Covid-19, Corona
Quote paper
Cindy Russmann (Author), 2020, Will Covid-19 have long-term impacts on the German labor market?, Munich, GRIN Verlag, https://www.grin.com/document/902731

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