How Governments Around The World Are Reacting To The Economic Shutdown

Apr 16, 2020
Originally published on April 16, 2020 8:40 pm
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AILSA CHANG, HOST:

Each week new unemployment numbers add to the breathtaking total. Today we learned that more than 5 million Americans filed for unemployment benefits last week. The total over the past four weeks has climbed to more than 22 million. That's more than 10% of the workforce in just over a month.

ARI SHAPIRO, HOST:

In other parts of the program, we look at what that means here in the U.S. Now we're going to see what we can learn from other parts of the world, where the same pattern is playing out. Governments are responding in different ways to the spike in unemployment. To explain, we are joined by three of our correspondents - Carrie Kahn in Mexico, Lauren Frayer, who covers India, and Rob Schmitz in Germany. Good to have all three of you here.

ROB SCHMITZ, BYLINE: Hello.

LAUREN FRAYER, BYLINE: Thanks for having us.

CARRIE KAHN, BYLINE: Hi.

SHAPIRO: Rob, let's start with you. Germany is like the U.S. - an advanced economy. But it doesn't have the same level of unemployment that the U.S. has right now. Why not?

SCHMITZ: That's because 95% of Germany is still employed, and that's thanks to a government program called Kurzarbeit. It literally means short-term work. And if a company has lost revenue and needs to cut staff, it applies for this program. And the German government steps in and subsidizes the company so that those workers are not laid off, and they continue to get paid at least 60% of their salaries. And the important thing is they keep their jobs until the crisis is over.

SHAPIRO: Even if they're not actively working in those jobs, they're getting a paycheck that comes in part from the government. Is that how it works?

SCHMITZ: That's right. And as of today, a record 725,000 German companies have applied for Kurzarbeit.

SHAPIRO: That's companies, not workers.

SCHMITZ: Those are - that's companies, yeah. So the workers are in the millions. And I spoke to Anke Hassel at the Hertie School in Berlin about Kurzarbeit, and she calls this program a win-win-win. It's a win for employers, employees and especially for the government because it costs the same as unemployment benefits.

ANKE HASSEL: From the government's perspective, it's a very good scheme because they pay the same amount of money but they keep unemployment levels down. And that is what they want. They want to keep people in their jobs in order to avoid economic insecurity but also economic hardship.

SCHMITZ: And, Ari, Kurzarbeit has become so popular that the European Union is now promoting the program for other EU member states like Italy, who are in a lot of need right now.

SHAPIRO: Interesting. Lauren, let's turn to you. Of course, India has an enormous population - 1.3 billion people. The virus has not stung there quite with the intensity that it has in other countries partly because all of India is shut down. What effect has that had on jobs and industry there?

FRAYER: So on one hand, it's really difficult to know because more than 80% of Indians work in the informal economy, so they're not even represented in unemployment figures ever. On the other hand, look at the streets of India right now. Most of that informal workforce is out of work. We've got tens of millions of migrant workers stranded when their factories closed, when public transit was halted. And they're lining the streets now, many of them trying to walk hundreds of miles home to their villages. Lots of them gave up and are now sleeping on trash-strewn, soiled riverbanks in Delhi.

I saw a heartbreaking video of - a milk truck had gone by. It leaked milk into a street. A pack of dogs were lapping it up, and so was a poor man trying to scoop up handfuls of milk. We have hundreds of millions of people who literally will not eat if they miss one day of work.

SHAPIRO: Wow. Carrie, how similar is Mexico, where also many people work in informal jobs and there is widespread poverty?

KAHN: Yeah. A large portion of the Mexican economy - about a third - are in the informal economy, about 31 million workers. And just in Mexico City here alone, we're talking about 1.3 million people selling tacos and tortas on the corner, shoe shiners, entertainers - you know, everything. They're just selling gum and candy, whatever they can. Through the first week in April, job figures officially were a loss about 350,000 workers. But that doesn't account for all these informal workers who are out of a job.

I interviewed this one couple for a story I did who sell breakfast sandwiches and coffee on this median in this busy intersection, or it was a busy intersection nearby here. And they just said if they don't work, they won't eat. And they were gone all last week, but today they were back out selling. And I asked them what happened, and the woman just said, we have to work. We're hungry.

SHAPIRO: And what's the Mexican government doing to try to help these people?

KAHN: So far, not a lot. The president here has asked employers to just join in solidarity and not lay off workers and keep paying them. He says such big business bailouts just have an unhappy history of benefiting only the wealthy and the crooked in Mexico, so he's not offering tax cuts or deferments for business leader. He says he needs that money to pay for expanding social programs to the poor and offering loans to small business, and he's not budging. He's a populist who put the poor first. But he's also a fiscal conservative and very frugal and says he will not allow the country to incur more debt to get out of this crisis.

SHAPIRO: To go back to you in Germany, Rob, that government is famously frugal. Is that helping...

SCHMITZ: Yeah.

SHAPIRO: ...Germany right now?

SCHMITZ: Very much. Germany, you know, is so frugal that it famously tries to avoid deficits at all costs. And that behavior is finally paying off. Germany's tapping its budget surplus to help keep people employed, and it's spending nearly a trillion dollars to do that. That's half what the U.S. is spending, and Germany has less than a quarter of the U.S. population. So this is an historic aid package, and much of it is going into the Kurzarbeit program that I mentioned. The rest is going to unemployment, housing benefits, instant loans for small- and medium-sized employers.

SHAPIRO: And, Lauren, is the government of India doing anything to try to avoid layoffs and help prop up businesses?

FRAYER: So when Prime Minister Narendra Modi extended India's lockdown earlier this week, he made a speech in which he asked employers, similar to Mexico's leader, not to fire their workers. But Modi did not announce any aid to help them do that. Last month, when this all began, India did announce a stimulus package of $22 billion. So just to compare that with what Rob just explained, Germany is offering a trillion dollars for a population of how many, Rob?

SCHMITZ: Eighty-three million.

FRAYER: So 83 million. India has been able to manage $22 billion for a population of 1.3 billion people. It's one of the smallest stimulus packages in the world. It amounts to less than 1% of Indian GDP. However, a possible lifeline for some of those migrant workers I mentioned - the government says factories, agriculture and construction may restart next week, and so some of those jobs may be coming back soon.

SHAPIRO: Finally, Lauren, you said India may be talking about opening up soon. How long do each of these three countries feel like they can absorb this economic hit, and when do they think they'll be able to reopen parts of the country?

FRAYER: I mean, the poor in India can't absorb the pain for another day, really. The Indian government has outlined red, orange and green zones, which could provide sort of a roadmap for reopening things. Mumbai, where I live, is a red zone. It has a high concentration of COVID-19 cases. But there are lots of rural areas that are green, and that means they could reopen first in May.

SCHMITZ: And here in Germany, Ari, the individual states of Germany have been pushing the federal government to open as - you know, fairly quickly. But Chancellor Merkel just basically said that Germany will, on Monday, open smaller shops, zoos, barbershops. But restaurants, bars and all sporting events are going to remain closed for some time.

KAHN: And in Mexico today, actually, the person on the pandemic care said they were looking to extend the stay-at-home and containment orders until June 1. He did say some areas, like in India, could relax earlier, but he said that high transmission areas like the Mexico City metropolitan area, where 22 million people live, would probably have to continue social distancing and other restrictions well into June.

SHAPIRO: That's NPR's Carrie Kahn in Mexico, Rob Schmitz from Germany and Lauren Frayer, who covers India. Thanks to all three of you.

FRAYER: You're welcome.

KAHN: Thank you.

SCHMITZ: Thank you.

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