Coronavirus feared taking greater toll on jobs than Lehman shock

The economic fallout from the new coronavirus in Japan has triggered a sharp increase in nonpermanent workers seeking advice after losing their jobs, with some economists predicting unemployment could rise by over a million within a year, worse than the impact from the 2008-2009 global financial crisis.

“Your job ends in three days’ time,” a woman employed on a temporary contract for the front desk of a Tokyo hotel was told by her boss in early April.

When she started her three-month contract in February, she had been told by her boss that the position was long term, and had planned to renew it from May.

But after the hotel’s occupancy rates dropped due to the spread of the virus, she was told by the agency that supplied her to the hotel the contract would terminate on expiry, with no chance of renewal.

The next day, the hotel laid her off before it suspended operations and before her contract expired.

“I want them to pay me until the end of this month at least,” she said. The agency, however, is only willing to pay until her last working day, she said.


 

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On April 7, over 30 organizations, including the Japanese Trade Union Confederation and the Labour Lawyers Association of Japan, held a video conference to discuss the worsening economic situation.

“In early March we had a lot of enquiries about suspending business operations, but since late March it has centered on dismissals,” said one participant, while another said the situation in the labor market is “a battlefield.”

Regional labor unions also reported firms had begun shortening the contracts of temporary employees, in preparation of laying them off.

At the forefront of participants’ minds was the aftermath of the collapse of Lehman Brothers Holdings Inc. in 2008. The ensuing global economic downturn forced Japanese labor unions and nonprofit organizations to jointly set up a temporary shelter at a park in central Tokyo for temporary workers who had lost their jobs and homes.

“Unlike the Lehman shock, where temporary workers in the manufacturing industry were the hardest hit, this one is causing problems for people with all kinds of employment statuses,” said Ichiro Natsume, a lawyer from the LLAJ who instigated the video conference.

Economists are also keeping an eye on the pandemic’s impact on the workforce.

Taro Saito, executive research fellow at the NLI Research Institute, said that at more than 100 trillion yen ($1 trillion), the government’s economic stimulus is insufficient, predicting Japan’s unemployment rate could rise to 3.9 percent from February’s 2.4 percent, with the fallout from the pandemic yet to appear in official data.

He also estimates the number of unemployed will hit 2.72 million in the fourth quarter of 2020, up from 1.56 million in the same period last year.

The pace of increase will be faster than during the Lehman shock, which saw 940,000 people lose their jobs during the one-year period through the third quarter of 2009, he added.

But Shuichiro Sekine, secretary general of Haken Union, an organization which supports nonpermanent employees, said companies may gradually cut payrolls instead of laying off people in one hit. Such an approach could make it difficult to quantify the scale of nationwide unemployment.

“We are still in the early stages of the coronavirus impact. There is a high possibility it will ripple out to all industries and become even more serious than the Lehman shock,” he said.

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