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Should Firms Reduce Labour Cost During Covid-19?

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COVID-19 has disrupted the global economy and employers may soon face the need to reduce labour cost amid financial fears. 

However, many countries have put employee wage support in place to protect millions of jobs and to shore up the economy against the coronavirus impact.

1. UK
The government has unveiled a package of financial measures including £330bn in loans, £20bn in other aid, a business rates holiday and grants for retailers and pubs. Help for airlines are also being considered.
 
According the BBC, Chancellor Rishi Sunak told a press conference that if this package was not enough, he would go further. From the hospitality industry to the airline sector, companies have warned that their long term survival is under threat.
 
Mr. Sunak said any business who needed access to cash to pay their rent, their salaries, suppliers or purchase stock would be able to access a government-backed loans or credits on attractive terms.
 
2. Vietnam
The Government has offered a credit package worth VNĐ285 trillion for businesses due to difficulties caused by Covid-19. The State has also extended payment deadlines for taxes and fees to support businesses, including value added tax, income tax, corporate tax and land rent.
 
The finance ministry said the total amount of the five-month extension is estimated to be about VNĐ30.1 trillion (US$1.3 billion). Those assistance measures are expected to help businesses and ensure social security during the Covid-19 pandemic. However, they have not yet come into effect.
 
3. Singapore
Singapore has announced a $ 4 billion USD support package in the coming months for workers and businesses. Specifically, the employment support program will help businesses have money to keep workers.
 
To help businesses that are short of cash, Singapore announced a reduction in corporate income tax in 2020 and a series of other corporate tax measures over a one-year period.
 
4. Japan
According to Channel News Asia, the Japanese government is considering offering cash to support households with a stimulus package of more than 30,000 billion yen (over US $ 276 billion). Japanese Economy Minister Yasutoshi Nishimura said the stimulus package will definitely be planned by the Government in April.
 
5. Indonesia
On March 13, Indonesia also announced an $8 billion USD economic stimulus package. In February, they have already launched a 725 million USD bailout package. In the latest stimulus package of Indonesia, there are 324 million USD to support low-income households.
 
6. Spain
Spanish Prime Minister Pedro Sanchez announced on the March 17th a $220 billion USD bailout package (equivalent to 1/5 of GDP). The Spanish government pledges that all individual business owners who have lost their houses due to the COVID-19 outbreak will receive special help.
 
In addition, the bailout package also includes a policy of postponing mortgage payments, ensuring adequate supply of electricity, water, Internet for disadvantaged households, etc.
 
7. US
According to Axios, the White House is asking the US Congress to approve a budget of up to $1000 billion USD for the economic stimulus package to support the domestic business community and help people overcome the difficult period of the pandemic.
 
8. Canada
In Canada, an economic bailout has partial emergency care for workers who do not qualify for unemployment insurance but being infected by COVID-19. The economic bailout is also for medical isolation or self-isolation at home. This payment will be made fortnightly and continuously for 14 weeks at a value equal to the unemployment benefit.
 
Ottawa also spends up to CAD 3.8 billion (US $ 2.64 billion) on small business payments in the form of temporary wage support for three months to retain the company's regular wage earners. The package is equivalent to 10% of the salary these businesses pay their employees. This benefit amount is maximum CAD 1,375 (USD 957) per employee and maximum CAD 25,000 (USD 17,401) for the business owner.
 

Regarding E-commerce, the market share is expected to increase due to convenience and less direct interaction with purchases. 

 
Online-to-offline (OTO) shopping model and e-commerce shopping are meeting the needs of Vietnamese consumers during this time. Online shopping platforms and delivery services are expected to grow strongly both in number of buyers and revenue. This is thanks to:
(1) New buyers who have never online shopping before are dramatically increasing.
(2) An increase of consuming levels from people who have been shopping online.
 
According to Sky News, advertising mogul Sir Martin Sorrell has suggested the coronavirus outbreak will "accelerate digital revolution", forcing consumers and businesses to move forward as "things get tough".