Written by: Irina Chen
A global epidemic named coronavirus (also known as COVID-19), first appeared in China in early January. As of March 27th, the virus has infected approximately 590,000 and killed at least 27,000 people worldwide. Schools and businesses have been forced to shut down. The global economy has become unimaginably fragile in recent months. In this article, two aspects, economics and education, are discussed concerning the impact of COVID-19 to humankind.
Economics:
To understand the impact of COVID-19 on economics, it is essential to look at the micro and macro view. In terms of the micro view, both individuals and companies are facing a financial crisis. According to CNN business news, jobs in the US that are related to transportation and travel, as well as leisure and hospitality, are at high risk due to the virus, which might cause 5 million workers to get laid off or furloughed [1]. Airline companies are among those who have suffered the most because of this disease. For example, Cathay Pacific, based in Hong Kong, has cut capacity by 65% in March and April and anticipates more cuts in May. Korean Air has lopped 80% of its schedule. At this moment, most airlines are desperately trying to preserve cash; besides cutting flights, many are asking or forcing employers to take unpaid leave. The revenues in European and American carriers’ share prices have declined faster even than the globe’s COVID-struck stockmarkets (see chart 1)[2].
Chart 1
Now let’s talk about the macro view, such as the impact on the national interest rate and unemployment. On March 16th, the US government cut its interest rates to zero, alongside the third-time trading curb this week. Similarly, the Bank of Canada has announced a surprise half-percentage-point rate cut, lowering the central bank’s key rate to 0.75 per cent.
How do low-interest rates affect daily life? First of all, banks will also decrease the annual percentage yield on checking and savings accounts in line with the government’s move. This means a decreased interest rate will accrue from the money that has saved in the bank. Secondly, low rates incentivize house buyers choosing to buy or refinance their mortgages.
There is no doubt that the global unemployment rate is also linked to the outbreak. Does it imply a recession is upcoming? Uncertain. Goldman Sachs reckons global GDP will shrink at an annualized rate of 2.5% in the first quarter (see Chart 2). With luck, the slump will end once the virus stops spreading [3].
Chart 2
Education:
China is the first country to implement online learning which started on February 10th. As COVID-19 spreads out fiercely to other continents, schools begin to shut down and switch to online virtual classrooms gradually. So far, over millions of students remain out of school, and almost all countries have school closures.
However, switching from in-class to online is not an easy task. A study in 2009 modelling the effects of closing all schools and formal day-care centres in America for a month put the cost at 0.1 – 0.3% of GDP [4]. Graduate and research funding are expected to remain the same or even decrease in the next year. This is because government funding is the largest source of revenue for universities and degree-granting colleges, and the government needs to put a large number of subsidies (US: $500 billion; Canada: $27 billion) toward local businesses and families during the current situation.
Other than financial conditions, there are a few other additional issues. For example, schools may no longer provide a nutritious meal for poor children; if schools are closed for a month, between 6% and 19% of key health-care workers would have to stay at home to take care of their kids [5]. The US and Canada are fortunate because employers allow employees to work from home or take paid sick day leave; however, in some Asian countries such as Japan, working at home is not allowed, nor is there paid sick day leave.
Accessing the Internet may be easy for the most developed countries but not for developing countries. The global Internet access rate is only 59%, which means 4 out of 10 people cannot access virtual study [6]. More importantly, not all families can afford the cost of using the Internet (see Figure 1). For example, the median individual income of China in 2019 is 26535 Yuan [7], which roughly equals to 5000 dollars. It is expensive to pay 10 dollars for each 1GB when this online mode has lasted over three months in China. Similar to the US and Canada, despite relatively higher median income, the cost of Internet is among the highest in the world. According to a news website, the COVID-19 pandemic could last into next year [8], which means the cost of the Internet will become a burden to median and low-income families without the subsidies from the government.
Figure 1
Conclusion:
There is no doubt that this is a battle between the virus and the whole world. As more and more countries are getting involved, it is important to try our best to help each other and to cooperate together to find the optimal solutions. Remember that dawn always comes after the darkness.
References:
[1] Chris Isidore (2020, March 16). More than half of American jobs are at risk because of coronavirus. Retrieved from https://www.cnn.com/2020/03/16/economy/job-losses-coronavirus/index.html
[2] The Economist Group Limited (2020, March 15). Coronavirus is grounding the world’s airlines. Retrieved from https://www.economist.com/business/2020/03/15/coronavirus-is-grounding-the-worlds-airlines
[3] The Economist Group Limited (2020, March 5). A recession is unlikely but not impossible. Retrieved from https://www.economist.com/finance-and-economics/2020/03/05/a-recession-is-unlikely-but-not-impossible
[4] [5] The Economist Group Limited. (2020, March 19). How covid-19 interrupting children’s education. Retrieved from https://www.economist.com/international/2020/03/19/how-covid-19-is-interrupting-childrens-education
[6] Statista. (2020). Global internet penetration rate as of January 2020, by region. Retrieved from https://www.statista.com/statistics/269329/penetration-rate-of-the-internet-by-region/
[7] National Bureau of Statistics (2020, January 17). Individual income and consumption distribution condition. Retrieved from http://www.stats.gov.cn/tjsj/zxfb/202001/t20200117_1723396.html
[8] Statnews (2020, March 9). Coronavirus spread could last into next year, but impact could be blunted, CDC official says. Retrieved from https://www.statnews.com/2020/03/09/coronavirus-spread-could-last-into-next-year-but-impact-could-be-blunted-cdc-official-says/