Economic recovery will still depend on workers

With restrictions on social mobility being lifted, China should avoid the systemic risks that some major economies have encountered in this process.

The factor that is likely to have the greatest impact on the economy is likely to be a decline in the labor force participation rate. One reason for this is that the speed of labor returning to the market is slow relative to the increase in labor demand, resulting in a shortage of manpower. The COVID-19 pandemic has seriously affected the manufacturing industries with long supply chains and assembly-line operations. The United States, for example, currently has a labor shortage of 11 million people.

China's manufacturing labor is mostly migrant workers. If the pandemic continues for months, which is highly likely, the process of returning to work of some migrant workers may be slowed down to a certain extent. Or, after the recovery of the hard-hit service industry from the influences of the pandemic, there will be a change in the employment structure of the country. More labor will flow to the service industries, where the wages are higher, resulting in a shortage of manufacturing labor.

Besides, the shortage of truck drivers in the logistics industry is as high as 10 million. If a certain number of drivers have to stop work due to infections every day for a period of time in the future, it will continuously cause a decline in the efficiency of the logistics industry, and affect the efficiency of the entire supply chain and the operation of the manufacturing industry. In countries such as the US and the United Kingdom, reduced logistics efficiency and a shortage of lorry drivers are among the factors driving inflation.

Therefore, it is necessary for Chinese factories to prepare for possible labor losses after the expected mass migration of workers to their hometowns for Spring Festival, which falls on Jan 21 next year. For example, incentives should be offered to workers who promise to return on time, and workers should be guaranteed paid holidays or other benefits if they become infected. Factories with heavy orders can offer bonuses to encourage employees to stay on the job during the Lunar New Year holiday to avoid labor losses and shortages as much as possible.

The income of truck drivers and other practitioners in the logistics industry needs to be increased and their welfare improved, so as to avoid supply chain disruptions.

Maintaining the normal economic cycle of consumption, production and distribution is the biggest challenge and task for restarting the economy in the post-pandemic era.