SME's and young workers face significant COVID-19 lockdown challenges

Darryl Gobbett

Nearly a quarter of South Australia’s employment, or around 214,000 jobs, are in sectors such as hospitality, transport, and retail which are not suited to working from home and have been hard hit during the COVID-19 pandemic.

A new report by the International Monetary Fund has confirmed the challenges for small and medium enterprises (SMEs) of remote working, and maintaining viability, during the economic crisis caused by the pandemic. It finds that young, less educated and casual employees are the most vulnerable during times of international economic stress.

In the process, the report raises both short and long term policy and regulatory issues for governments to consider with the immediate future of the JobKeeper payment, which has supported the retention of employees, high amongst them.

As South Australia emerges from the COVID19 lockdown, policy makers should consider some of the issues raised in Who will Bear the Brunt of Lockdown Policies? Evidence from Tele-workability Measures across Countries, a Working Paper just released by the International Monetary Fund.

The authors map occupation-level measures of the feasibility of working at home for each worker. This is based on the workers' tasks in each occupation for each of the 35 countries studied, as the importance of each task in each occupation varies across countries, along with examining the demographics, educational attainment, employment status and earnings that may impact workers' capability to work from home.

They found that workers least likely to work remotely are concentrated in the sectors that have been hit hardest by the lockdowns globally, i.e. the Accommodation and Food Services, Transportation and Retail, and Wholesale trade sectors. These would also be the sectors hardest hit in South Australia while also being amongst this State's largest employment groupings.

In South Australia in the twelve months to February 2020, the share of the State's employment in Accommodation and Food Services was 7.2%; in Transportation, Postage and Warehousing 4.4%; and in Retail and Wholesale Trade 13.4% for a total share of 24% and 214,000 jobs. Forty-seven per cent of these jobs were part time and those part time jobs represented around a third of all part time jobs in SA.

In addition, the authors noted the workers most vulnerable to losing hours of work, earnings and jobs tend to be:

• Young;
• Without the equivalent of a US college education;
• In the less secure working arrangements, e.g. on temporary contracts or self-employed; and
• Employed in Small and Medium Enterprises.

The authors note that this methodology "also provides crucial insights into which occupations and jobs may be at risk of continued disruption in the post-COVID era due to potential changes in consumer preferences, containment measures and even repeat lockdowns."  

Of particular relevance to South Australia, and in light of the SACES survey of Late Payments to Small Business, workers in SMEs are seen as less likely to be in jobs amenable to remote working. In addition, SMEs also "tend to be liquidity constrained, have less of a capital cushion to continue paying furloughed employees and may be less likely to survive the lockdown period."

The Federal Government JobKeeper program has been important in keeping many young South Australians in work and engaged with their employers. Its size, structure and purpose now need to be re-examined to ensure it best suits the coming emergent economy, workforce and social needs.

South Australian policy makers are on the right track in opening up as quickly as possible the Accommodation and Food Services and Retail and Wholesale Trade sectors, including with the encouragement of intrastate tourism and tourists from interstate. Increased attention to and funding for tertiary education and vocational training will also help displaced workers longer term.

There needs to be more attention, however, to improving the various capabilities and strengths of South Australian SMEs. This is both for emergence from the lockdown and in preparation for likely future lockdowns.

Crucial elements in that would be reducing red tape and rationalising Federal, State and Local Government regulations and taxes; encouraging productivity growth and more flexible employment practices; and accelerating action to get large businesses to pay up on time.       

The Prime Minister has also flagged reforms to the Vocational Education and Training (VET) system which is a significant provider of skills and training for young workers and their SME employers.  Reforms need to be quickly put in place including efforts to accelerate enrolments from those receiving the JobKeeper support payment and JobSeekers and new entrants to the labour market. Productivity enhancing skills formation will be a critical step to the rejuvenation of the national and state economies along with the acceleration of infrastructure investment, all the more so in an environment of low interests rates and a slowdown in international migration.

SACES Visiting Fellow and Chair of the Independent Research Fund, Mr Darryl Gobbett

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