Business Design

While all focus is directed towards flattening the COVID-19 curve, a global unemployment pandemic is taking shape in the shadow of the deadly virus. The unemployment curve has been exponentially growing much faster than the viral spread. And if business leaders turn a blind eye, we could be facing a Global Economic Depression.

For the past two months, humanity has faced its toughest enemy in a hundred years—a deadly virus that confined half of the world population to their homes and halted most human activities. As of April 25, 2020, over 2.8 million people have been diagnosed with COVID-19, and approximately 200,000 have lost their lives to the virus. More than 3.9 billion people, or half the world population, are under government-induced lockdowns to slow the spread of the virus and give healthcare systems a chance to cope and respond to the pandemic. For up-to-date figures, check the WHO.

A Looming Threat of Global Depression

Data from around the world shows that the pandemic is not just the worst healthcare threat humanity has faced in a century; COVID-19 could also be one of the cruelest destroyers of jobs in human history. Fear and lockdowns have dramatically slowed the economy. To protect their cash flow and bottom line, many businesses have laid off employees as the global crisis continues. CNN reported that a record-breaking 26 million Americans have filed for unemployment benefits in the past five weeks.

People worldwide are suffering similar consequences due to the global pandemic. The UN Labour body expects approximately 200 million jobs to be wiped out globally in the second quarter of 2020. If the virus continues to spread, the International Monetary Fund predicts that the cumulative loss to global GDP over 2020 and 2021 could reach 9 trillion dollars. This mass unemployment will lead to economic stagnation and could escalate the financial injury from a short-term recession to a global depression.

An Unequal Opportunity Virus

To put things in perspective, economists project that job losses due to COVID-19 could reach over 47 million in the US alone—a third of the U.S. working population. This figure dwarfs the 8.7 million jobs lost during the 2008-2009 Great Recession and exceeds the Great Depression of the 1930s by over 8%. While COVID-19 is an equal opportunity virus in terms of transmission, its economic consequences are not! In efforts to reduce labor costs, human resources departments strive to retain skillful talents—the revenue generators, those who are hard to find and usually earn in the top 20 percent—while letting go of low-wage earners who perform clerical and supporting tasks. To make the numbers work, companies often have to let go of, on average, four low-wage earners to retain one skilled, high-earning talent.

The Grief of Losing a Loved One

As layoffs occur, it is critical to ensure fairness and equity. Corporate decision-makers must understand that job loss disproportionately affects those without a financial cushion. For those who live paycheck to paycheck, the grief of losing their jobs equates to the grief of losing a loved one, especially amid economic stagnation and the uncertainty surrounding the pandemic, psychologists note. If employees believe the layoff decision could have been avoided, they may feel betrayed by their employer. This emotional experience could also cause survivor’s guilt among the retained workforce, potentially leading to a lapse in performance, motivation, and morale.

In recent weeks, many cases of public shaming have emerged on social media, targeting renowned business people who announced the layoff of hundreds of employees. Thousands of social media users are compiling lists of businesses they intend to boycott, even after the pandemic ends. Although business reputation should not be the top driver for decision-making during this pandemic, it is essential to understand that today’s actions will shape companies’ images and reputations in the eyes of customers and job candidates in the near future.

We are All in this Together

The collective nature of this pandemic is forging a sense of solidarity—a feeling that we are all in this together. People are staying home and risking their livelihood to flatten the curve and protect the more vulnerable, not out of fear of catching the virus, but out of a sense of social responsibility and care for humanity. The public expects businesses to respond in a similar manner.

Businesses must make some sacrifices and take risks to protect the most vulnerable in their workforce. Leaders cannot, and should not, make decisions solely to protect the bottom line, but to also protect the people behind the line. The unemployment curve is rising much faster than the virus curve. All indicators point toward a global unemployment pandemic. If companies do not take the necessary measures to flatten that curve, we could face a global depression in the coming months, and most businesses will not survive that storm.

Flattening the Unemployment Curve

Every business has a responsibility to flatten the unemployment curve. While minimizing costs is understandable, every business leader must ask: is reducing the workforce the only way to achieve cost reduction? The consequences of this decision on employees, business reputation, the local community, and the global economy are more serious than ever before. Executives should harness the collective creativity of people in their organization to find alternative ways to reduce costs. Each organization is unique, and cost optimization solutions should be tailored accordingly. For some, it might be the marketing budget, for others, operations, warehousing, or distribution. Perhaps old contracts need renegotiation with suppliers or other service providers. No matter where sacrifices are made, the best ideas will emerge from collective efforts that involve as many stakeholders and employees as possible.

The Search for Alternatives

If you exhaust all efforts, and trimming Human Resources becomes necessary, here are some ideas you might consider to lessen the financial and emotional burden on employees.

• Reduce pay rates, benefits, or work hours instead of letting people go.
• Encourage staff to take annual leave during the business’s most challenging times.
• Schedule unpaid employee furloughs (leave without pay), while continuing employee benefits.
• Plan furlough rotations. For example, instead of a three-month leave without pay, give staff a one-week-on, one-week-off schedule for six months. The cost would be the same, but it could lessen the financial burden on employees and sustain their morale.
• Encourage top management and high-earning employees to yield a higher percentage of their salary to ease the impact on low-earning staff. Creating a marginal reduction rate can help reduce costs further while retaining employees and lessening their burden.

Staff need to feel that they still matter to the company and haven’t been abandoned. By including everyone in the decision-making process, business leaders can cultivate empathy throughout their organizations and encourage broader acceptance of cost-saving measures. It is crucial for employees to feel that the human cost-reduction process was fair and equitable.

Prepare your Employees for the New Job Market

If you must let people go, approach the decision with empathy. Ensure that those laid off have a soft landing and are well-equipped to navigate the unemployment curve.

• Find volunteers within the organization who can offer career coaching, resume writing, and interview preparation workshops.
• Provide internal training in different areas of business management or other areas of expertise you can offer.
• Open up your business network: introduce your laid-off employees to people in your network who might be in a position to hire them.
• Send off laid-off employees with strong recommendation letters, highlighting skills relevant to the new job market.

Employees laid off during the COVID-19 crisis will enter a drastically different job market with different skill expectations. Any resources or endorsements that enhance their competitiveness in the new job market will be greatly appreciated both within the organization and by the public.

A Sense of Solidarity and Collective Consciousness

With all the pain and uncertainty that COVID-19 has brought to our world, it has also restored our faith in humanity. People worldwide are showing empathy and compassion towards their fellow humans. Millions of people are volunteering on the frontline of the response to keep others safe during this time of crisis. Factories have halted their operations to produce disinfectants and face masks. Others have pivoted their production facilities to produce ventilators and breathing devices to save the lives of coronavirus patients with serious lung infections. Thousands of businesses are donating resources, equipment, apparel, food, and money to support the healthcare system in the fight against the virus. Many governments have regained the long-lost trust and support of their citizens as countries around the world are on the brink of public health disaster and economic recession.

Flattening the Curve with Empathy and Compassion

For the first time in centuries, humanity feels connected. The collective nature of this pandemic is forging a sense of solidarity—a feeling that we are all in this together. Businesses should join in with empathy and compassion. If the unemployment pandemic continues, we will soon face a global economic depression that most businesses will not outlive. A steep unemployment curve will overburden the economy and drain government resources through unemployment benefits and bailout programs. A flatter curve means more disposable income in circulation, which benefits businesses and reduces demand for bailout programs. It also gives those affected a better chance to find new jobs, receive government aid, or find other support in their communities. A flatter curve gives the economy time to breathe and regenerate, which is crucial for the survival of any business.

Flattening the unemployment curve should now be on every company’s priority list. This is a fight for survival in a turbulent and uncertain global economy. But regardless of the circumstances at any organization, one thing is clear: leaders must manage employees in a way that upholds their dignity and builds their confidence to weather the storm.