A dramatic rise in unemployment
Debate continues between rapid impoverishment and exposure to a virus that can kill thousands of lives
Monday, April 27, 2020 – 1:42 PM
Air traffic reduced globally, and Jaime Temprano suffered the consequences. The demand for airplane parts he helped produce at a factory in Santa Isabel fell and many workers were laid off, including him.
The same thing happened to his partner, Mariana Hernández, who worked at a firm that provides businesses with a credit or debit card payment system. Just two months ago, this scenario was unthinkable. Now they live off their savings and unemployment insurance is not coming.
“It’s scary because we live in uncertainty. I like to see things beyond the present. As a couple, we have some goals, but with all this…” said Hernández, 25, a resident of Guaynabo.
“The most complicated thing is that we don´t know when this will end,” added Temprano, 27.
And there are many like them. As a result of the lockdown, the unemployment rate in Puerto Rico probably rose from about 9 percent to 23 percent, according to separate estimates by the firm Estudios Técnicos and economist José Alameda, a professor at the University of Puerto Rico’s Mayagüez Campus.
The expectation is that this indicator, which shows the number of unemployed people on the island, will rise even more and may reach about 37 percent by May when projections by the Health Department expect the peak of infections by the new strain of the coronavirus SARS-CoV-2, an infection that has caused more than 190,000 deaths around the world.
“If 80 percent of high-risk employees are included in unemployment statistics, the unemployment rate would gradually rise from 8.8 percent in February 2020 to 37.1 percent in May 2020,” says the analysis by Estudios Técnicos.
“This is a catastrophe. This is like a wartime economy,” illustrated Alameda.
These calculations were mainly based on previous unemployment surveys and the number of unemployment insurance claims reported by the Department of Labor and Human Resources (DTRH, Spanish acronym).
The firm Estudios Técnicos estimates that some 369,700 jobs are at risk due to the economic disruption caused by this highly contagious and lethal virus.
All this has an impact on the levels of poverty in Puerto Rico, which are usually high. The Census Bureau estimated in 2018 that 43 percent of the island’s population lived below poverty levels. That percentage represents 1,363,666 people. Alameda estimated that, as a result of the lockout and the quarantine to fight COVID-19, some 68,700 individuals have gone into poverty. The number is increasing as more people lose their jobs.
This decline in economic activity joins the economic depression the island has been experiencing since 2006, including Hurricanes Irma and María and the January earthquakes last January.
“Puerto Rico has been going into poverty for a long time. We just have to understand that, in real terms, salaries reduced by about 20 percent over the past 20 years,” said economist José Joaquín Villamil, of the firm Estudios Técnicos.
The bailout Congress approved can partly mitigate this economic cataclysm. This aid package includes $1,200 for individuals and adds $600 to weekly unemployment insurance benefits. In some cases, especially those with wages close to the federal minimum wage, these new unemployment benefits to address the COVID-19 emergency exceed the income they generate from their jobs.
There have been so many insurance claims that DTRH had to triple its capacity to process applications. The first checks will allegedly start arriving this week. The program lasts four months. After that, benefits will return to pre-pandemic levels.
However, when this will happen, whether the economy will have returned to normal, the spread controlled, or if there will be a new wave of infections, or new incentives approved to mitigate the impact of the economic crisis that comes with the pandemic still remains unknown.
“The problem with COVID is that we don’t know when it will end. That’s a very big difference and with many implications when compared to Hurricane María. The hurricane happened one day and, therefore, many companies did not go weeks without operating … With COVID it can be a months-long process and that exacerbates the problem with companies that do not have capital and, therefore, the capacity to endure,” said Villamil.
“There’s not a single perspective for the future. This has a tremendous psychological burden on the population,” said Linda Colón, a sociologist and expert on poverty.
Colón explained that, although the fight against the pandemic is affecting people from all social classes, those with less economic resources are the ones most exposed, among whom there must already be many going hungry. This is especially the case among families that depend on school meals programs. While this is happening, the rich are concerned about their businesses, and those in the middle class, about keeping their income or jobs as best they can, she explained.
“Poverty is going to get worse. Those who had children who ate breakfast and lunch at school no longer have that option. And the money from the PAN (Nutrition Assistance Program) is not enough,” said Colón.
“Everyone here is getting poorer. Everything is going down, for those who have a good income, their lifestyle doesn’t change much, but those who have less suffer much more,” said Alameda.
Villamil argued that in this type of scenario, larger companies with more automated processes tend to maintain operations. In contrast, small, labor-intensive businesses or industries tend to be the least likely to survive emergencies. These dynamics will lead to deepen differences in purchasing power between the rich and poor classes.
This complicated economic situation, however, does not mean that the economy should be reopened immediately since uncontrolled flexibilization would mean an increase in contagion. In the end, the choices are between two of the worst evils that can be faced: poverty and exposing people to a disease that easily gets out of control and can kill tens of thousands as happened in New York City.
The worst-case scenario for Puerto Rico, according to initial government estimates, is that some 20,000 would die from COVID-19. The cholera epidemic in the mid-19th century killed 25,000, which was about 5 percent of the population back then.
“I think testing should be resolved. That’s absolutely necessary. If we don’t know how many people are infected or where they are, then we don’t have the information to make decisions,” Colón said.
Around the planet, different cities and countries have begun to discuss or channel initiatives to end the lockout, reactivate the economy, and a slow return to normal life. In some cases, authorities opted to reopen recreational areas or to allow trade with distancing measures, among many gradual actions.
Some models suggest a process of intensifying or easing social distancing according to the level of contagion detected in society. Others propose a complete reopening by July.
For leaders of the scientific community, making decisions about reopening the economy requires a lot of testing in order to have enough information.
Puerto Rico is one of the jurisdictions with less testing per capita and at least part of the process to purchase COVID-19 rapid testing kits or the antibodies it produces has been plagued by irregularities.