Question

Brief summary about how covid-19 affect labor market and unemployment in Malaysia?

Answer 1

Not only Malaysia, it's almost the same scenario everywhere across the world. As the spread of virus increased rapidly in the month of April, governments asked manufacturing plants to shutdown operations, which essentially means that the firms lose revenue. What's the next step? The wages of the laborers are cut down, thus breaking the equilibrium of the labor market. And after a drought of revenue, the firms lay off workers who are no longer required due to the stranded operations. Thereby, unemployment increases very rapidly as we are not talking about a single firm but a myriad of them present in Malaysia. When a majority of these firms take up such decisions, the unemployment increases quite rapidly. Due to lesser job vacancies and more people on a lookout for jobs, the Beveridge curve shifts outwards indicating an inefficient economy.

With that being said, Government's are trying to support firms by fiscal packages, advising precautionary measures so that they can begin operations and increase the productivity of the economy. When the latter increases, the firm will need workers, hence hiring increases thereby gradually pulling the economy back into normalcy.

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