Jobs and Small Businesses in the New Normal

July 22, 2020

By Emmanuel A. San Andres and Andre Wirjo

As Covid-19 cases continue to mount in many economies, even months into the pandemic, lockdowns across the Asia-Pacific are being retained, revisited, or even reinstated. Any return to normalcy in terms of economic activity and movement will likely be pushed back.

Our lives will continue to be ruled by digital screens for the foreseeable future as we use them to obtain goods and services for both work and leisure. And as the pandemic pushes more consumers online, many businesses are adapting by accelerating the adoption of e-commerce.

(Photo: Conor Ashleigh / The Asia Foundation)

Businesses that haven’t started doing this, should. Ideally they should also be getting some help from governments, which have had to assume much control over economic life over the course of the crisis. One sector that policymakers should be looking out for is micro, small, and medium enterprises (MSMEs), which are particularly vulnerable to the economic impacts of social distancing and generally have fewer assets or cash reserves than their larger counterparts to tide them over.

Economic relief for MSMEs was a critical component of policy interventions in the Asia-Pacific even before Covid-19. Elevating smaller enterprises is an exercise in inclusivity—98 percent of all enterprises in economies that form the 21-member Asia-Pacific Economic Cooperation forum (APEC) are micro, small, or medium. Collectively, MSMEs account for the employment of over 60 percent of all workers in the APEC region.

Ninety-eight percent of all enterprises in economies that form the 21-member Asia-Pacific Economic Cooperation forum (APEC) are micro, small, or medium. Collectively, MSMEs account for the employment of over 60 percent of all workers in the APEC region.

The spread of the coronavirus has now raised the stakes. The APEC Policy Support Unit estimates that even if the global economy were to start recovering right now, the second half of 2020 would still witness a 3.7 percent decline in growth in the APEC region, leading to some of the highest numbers of unemployed in decades, a projected 81 million people.

Aid for MSMEs is now a matter of survival for many of these vital enterprises. Even as early as March and April, Asia-Pacific governments were announcing interventions in this regard, including a range of fiscal and monetary policies and initiatives promoting digital adoption.

Adopting new technologies will benefit businesses in a number of ways. Digital platforms will help them manage transactions from safe distances, facilitate access to financial services, and aid engagement with both new and existing customers. Automating processes by means of AI or other digital applications will help struggling firms lower their costs, cushioning the impact of the downturn. If transactions are conducted through digital platforms, there will be less need for human-to-human interaction, which will make it easier to conduct business while adhering to advisories from health authorities to limit contact.

But adapting to the digital economy comes with its own challenges. These have not gone away just because digitalization has become one of our only options. Cybersecurity, digital fraud, and data privacy are even bigger issues now that nearly every meeting and transaction is conducted in an online space. Online misinformation continues to run rampant, and now has the potential to spread health hoaxes that could have immediate and deadly consequences if not managed.

The public and private sectors will have to work together to ensure that, even as businesses are given the tools to survive Covid-19, workers will likewise be guaranteed decent work, social protections, and the opportunity to upgrade their skills to adapt to a more digitized world.

In many developing economies, internet infrastructure is lacking. This means fewer businesses, especially smaller ones, have access to technology that could help them compete with bigger companies that have large war chests and international reach.

Furthermore, many of the benefits afforded to businesses by digital technologies may come at a steep price for workers.

As long as the virus still rages, most employees will need to stay home. This will encourage firms to increase their reliance on automation to the point of no return. When tasks are automated and the need for human interaction declines, so will demand for certain jobs. If this continues after lockdowns are lifted, furloughed workers may emerge from home quarantine to find that they have fewer options.

Women in particular will be disproportionately affected by this, as they are often tapped to perform customer-facing services. Women who have jobs that allow them to work from home will still be at a disadvantage compared to male counterparts, as household responsibilities and childcare will disproportionately fall on them. This will stifle their productivity and may encourage firms to lean further towards automating jobs that employ a high proportion of women.

The Covid-19 pandemic has shown the world that digital technology is key to keeping economies running during a health crisis. Proactive support for digitalization is necessary. But as employers weigh a multitude of factors in making the critical decision to automate, policymakers need to address the impact of these decisions on the jobs, incomes, and welfare of workers.

(Photo: Conor Ashleigh / The Asia Foundation)

The public and private sectors will have to work together to ensure that, even as businesses are given the tools to survive Covid-19, workers will likewise be guaranteed decent work, social protections, and the opportunity to upgrade their skills to adapt to a more digitized world. Digitalization, ultimately, should not be about technology, but about improving people’s lives and livelihoods.

In support of a broader dialogue on Covid-19 response and recovery, The Asia Foundation is partnering with APEC to improve understanding of the impact of technology on jobs and small businesses in the Asia-Pacific.

It will not be easy to strike a balance between encouraging businesses to go digital and managing the possible effects on jobs in the midst of a global health crisis. Regional cooperation has a role to play in providing a forum for policymakers to share information and coordinate policy. By pooling experience and know-how from across APEC economies, an admittedly dire situation can surely be overcome.

This article is part of The Future of Work, a special series from InAsia focusing on jobs, digitalization, and automation in Asia. This online conversation includes insights and research from policymakers, corporations, and Asia Foundation experts on issues shaping the livelihoods of millions of workers across the region.

Emmanuel A. San Andres and Andre Wirjo are analysts in the APEC Policy Support Unit. They can be reached at [email protected] and [email protected], respectively. The views and opinions expressed here are those of the authors, not those of The Asia Foundation.

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