The impact of the COVID-19 pandemic has been devastating, particularly for impoverished countries with weak or non-existent health care and social protections and insufficient fiscal space to help struggling businesses.
The Ethiopian garment sector provides but one example of the challenges manufacturers and workers are facing during the COVID-19 crisis. Ethiopia has significantly decreased poverty, with the garment sector playing a key role in this success; nonetheless, 24 percent of people continued to live in poverty as of 2015/2016. As the pandemic spread, global fashion brands slashed orders, leading to widespread factory closures with devastating impacts for Ethiopian manufacturers. Finding from 20 semi-structured interviews ILO conducted with factory managers indicate that capacity utilization decreased an average of 30%; 45% reported cancelled or reduced orders due to COVID-19-related disruptions; and 30% reported that lack of access to raw materials has contributed to a production slowdown. For companies that are able to continue operations, drastically reduced capacity in bus services has made it more difficult for workers to get to the factories; and business costs have increased due to additional PPE equipment and hand sanitizer. One-fifth of the surveyed managers have already reduced the working hours for employees and half say employee layoffs are likely to follow. Locally owned firms have been hardest hit.
Researchers have conducted high-frequency phone surveys of women working in Ethiopian garment factories to document the impact of the pandemic on their lives. Preliminary findings indicate that 24 percent are on paid leave; 56 percent continue to work but only 42 percent of these women are able to work the same number of hours as before. Of those who are not currently working, almost none have found another form of employment despite actively looking; 81 percent of those not employed anymore would like to return to their jobs. Between 40 and 60 percent of respondents have worried about not having enough food in the last seven days, but the high cost of travel stops many workers from seeking work elsewhere.
Enterprises and workers around the world are facing similar challenges. The transport, hospitality and manufacturing sectors have been most heavily impacted by the disruptions in global supply chains, lock-down measures, sudden reductions in demand from customers and travel restrictions. Small and medium-sized enterprises – the engine of the global economy – are suffering immensely and many may not recover. The poorest and most fragile countries face the most dramatic risks, in part because they have least resilience because of the lack of social protection systems, access to finance or are working in the informal economy.
Many companies are struggling for survival and have started the process of restructuring their operations to keep afloat in this changed business environment. In March 2020, the International Organization of Employers (IOE) and the International Trade Union Confederation (ITUC) have called for urgent action by governments at national and international levels to ensure “business continuity, income security and solidarity”. It also highlighted “the important role that social dialogue and social partners play in the control of the virus at the workplace and beyond, but also to avoid massive job losses in the short and medium term. Joint responsibility is needed for dialogue to foster stability.” As follow-up, employers and workers in many social and economic sectors have developed their own joint statements and calls for action to protect workers and support enterprises, such as the COVID-19: Action in the Global Garment Industry.
Given the many structural changes that are taking place, the ILO has developed a guidance note for enterprises on restructuring for recovery and resilience as a component in the efforts of “Building Back Better” responses to the crisis. The recommendations are based on the provisions of international labour standards and the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration). A key focus is the role of social dialogue in identifying solutions that support both management and workers’ needs. The guidance note also suggests actions that employers’ and workers’ organizations can take to support enterprises and workers during restructuring as well as the critical role government has in stimulating the economy and employment, supporting enterprises, jobs and income and protecting workers in the workplace.
SME Spa Factory Bali provides an example of this guidance in action. In the video, Maria Satiaputri, the owner and CEO, discusses the role of dialogue with buyers and with workers on ways in which the company can adapt to the new challenges posed by COVID-19. Spa Factory Bali participates in the ILO SCORE Training, which supports SMEs to strengthen collaboration between management and workers to be more productive and resilient.
Additional guidance, tools and programmes to support businesses in their response to COVID-19 can be found on the Business and COVID-19 section of the ILO Helpdesk for Business.