LETTER | Economic impact of Covid-19 on consumers severe

LETTER | The relationship between worker well-being and consumer well-being is certainly strongly interconnected. Unless the consumer has employment, he would not have the income to purchase the needs for himself and his family. Thus, a loss of job or loss of income would have a devastating impact on the welfare of consumers. The Covid-19 pandemic has indeed had a severe negative impact on workers and consumers in Malaysia.

Unemployment and underemployment have increased. Around 3.4 million people are unemployed or underemployed, which is 19.8 percent of the workforce.

Average salaries fell by nine percent and median salaries fell by 15.6 percent. Thus, more than half of salaried employees currently earn less than RM2,062 per month.

Further in a report by the International Labour Organisation (ILO), 35 percent of the self-employed claimed a drop of income by 90 percent. Further 71 percent of self-employed have cash flows that could only last for one month.

The economic impact on low-income urban families has been particularly harsh.

According to the United Nations Children’ Emergency Fund (Unicef) and United Nations Population Fund (UNFPA) report 'Families on edge: Impact of Covid-19 on low income urban families:

• 25 percent of head of households are unemployed (compared to the national level of 5.3 percent);
• 31 percent of head of households faced cuts in working hours during the movement control order ; and,
• Females faced a greater challenge - 32 percent of female households are unemployed.

In another study by UNICEF on unemployment among urban poor, it was found that unemployment had increased from seven percent in September to 15 percent in December 2020, with one in three adults in these households being without a job.

The report further showed that 63 perent of the households were experiencing difficulties in meeting their basic needs and purchasing daily essentials, despite government and zakat financial aid.

The survey also found increasing stress among the residents, increasing mental health issues and an unhealthy living environment, especially for children. In a study by the Credit Counselling and Debt Management Agency (AKPK), 41 percent of respondents reported that financial stress had affected their mental well-being.

Further, 65 percent reported that financial stress had led to poorer job performance.

According to a survey by the Entrepreneur Development and Cooperatives Ministry in July 2021, 49 percent of the micro small and medium enterprise sector (which makes up 40 percent of the country’s GDP) would collapse by October 2021 if they were not able to start business by then. According to the report, seven million Malaysians would lose their jobs if that happened. Assuming each worker has an average of two dependents, this would mean that another 14 million people would be affected by the situation.

The report also added that more than 90 percent of the enterprises had no insurance while 70 percent had no safety nets to fall back on should they lose their jobs.

According to the Malaysian Institute of Economic Research (MIER) in the survey on the Consumer Sentiment Index (CSI) in the fourth quarter of 2021, the CSI score persisted below the 100 point threshold level of confidence indicating that consumers are losing faith in the economy and their well-being going forward.

Respondents who reported being worse off (in the fourth quarter 2021) than before rose to 42 percent surpassing 2020 report of 40 percent. Furthermore, of those who responded negatively most of the responses totalling 43 percent were contributed by those in the low-income, urban and rural categories.

One particular group that has been severely impacted are single mothers. According to the Unicef report, only five percent of single mothers had enough savings to last for more than three months. Additionally, female-headed households who were able to make RM1,000 in 2019 saw their incomes drop to RM675 in 2020.

They are still struggling to survive and adapt financially. Based on interviews by Fomca and reports, they have been/were:

• Unable to pay their electricity and water bills;
• Unable to pay their rentals;
• Taking their children out of pre-school;
• Could not afford school fees; and
• Pawning whatever jewellery they had to meet critical expenses.

Challenges were also faced by children. According to the Unicef and UNFPA report, 52 percent of households consumed more eggs (cheapest form of protein); nd 40 percent of households consumed more instant noodles (unhealthy diet).

Thus, the negative impact of the pandemic was particularly severe for single mothers and children.

PAUL SELVA RAJ is the secretary-general of the Federation of Malaysian Consumers Associations (Fomca).

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.