Impact of COVID-19 on the Republic of Moldova: how to improve the situation of employees during the crisis?

The Institute for European Policies and Reforms (IPRE), in partnership with Privesc.eu and with the support of the Hanns Seidel Foundation, organized on Thursday, April 9, 2020, the second online video conference, dedicated to the situation of employees in the Republic of Moldova during the COVID-19 crisis.

The debate was attended by representatives of civil society, financial and economic analysts, representatives of the confederation of employers and trade unions, as well as national authorities. In their interventions, the participants referred in particular to the response measures of the authorities of the Republic of Moldova for the group of employees in the real sector and the estimated impact of the COVID-19 pandemic on the unemployment rate. Furthermore, they pointed out which sectors might suffer and which policy interventions are required by the state.Please find bellow some interventions of the speakers.

Alexandru Ghețu, Head of Unit for policies in the field of labor relations and social partnership at the Ministry of Health, Labor and Social Protection: “The state of emergency established in Moldova is like a state of war, which can lead to the restriction of some employees’ rights. However, we have many companies working at the moment. These are pharmacies, food production companies, etc. But we also have strongly affected businesses, such as the HORECA sector. Let’s say that everyone who stays at home receives a salary, because the employer is limited in possibilities. If the Government will be able to cover 50-70% of these salaries, the employers will surely be satisfied and will be able to maintain a salary for all the employees. But unfortunately, the Government does not have such possibilities. In these circumstances, authorities cannot come up with strict measures imposed on employers. The government comes up with some recommendations in this regard. First, it wants to protect the life and health of employees and create opportunities for them to work remotely. Secondly, it was recommended to change the working regime with granting the employees a partial working schedule. We do not know how long this crisis will last. But if the crisis continues until May and June it will be serious. If it is until April, it will not be so tragic. After the end of the crisis period, I do not think that those who do not receive salaries from other areas, or those who receive lower salaries, will run to buy clothes or go on trips. People will go to buy food and pharmaceuticals. They will not go to restaurants and cafes, nor to tourist agencies. ”

Marcel Spătari, Economist, Director of Syndex Romania: “We anticipated some of the measures taken by the Government, namely that increasing the unemployment aid will indirectly increase the redundancies. So, one of the measures, unfortunately, is to stimulate layoffs, or this does not correspond to the interests of the employees. The measures taken by the Government are not necessarily bad, but they are insufficient. I want to come up with some contextual data about how we got into this crisis, which are very important to understand how we are going through this situation. First of all, the huge gray market and tax evasion in the Republic of Moldova, related to salaries in the hundreds of millions of lei was and is a problem. Secondly, it is the dependence on remittances from abroad, which will decrease. Foreign investments in labor-intensive sectors, which transformed Moldova into a subcontractor of industrialized countries, will still have an effect. Respectively, due to the fact that car factories are closed, the demand for these components will decrease and this will affect the companies here. At the same time, the presence of a financing system in which there is high liquidity, but which in the last period has been directed towards the increase of micro-financing, should be limited to the maximum or even forbidden. Also, a very major dysfunction is a statistical system not adapted for the management of the labor force. In the Republic of Moldova, there is no such system as in the EU, where the state authorities can see how many employees are, under what conditions, at what salary level are the employees. From here comes the difficulty of making any kind of calculations, and the authorities have acknowledged that they are not ready to provide the exact number of unemployed. In this regard, I wonder, if the Ministry of Labor cannot have such an estimate, how could the Ministry of Finance have an estimate of the budgetary impact and unemployment aid? “.

Sergiu Sainciuc, Vice-President, National Confederation of Trade Unions: “Those measures that have been taken by the authorities have resulted from the financial possibilities of the state. I believe that calculations for the assessment of unemployment can be made because we know the areas that are affected and which have stopped their activity. It is also good to know the size of the unemployment benefit for people who are eligible, who do not have a job. At the same time, the technical unemployment has a very clear notion because it can be declared and arise for different structural economic reasons. It must be seen in this case which decision is better. Either we grant subsidies to companies or we grant unemployment aid. In this context, the measures that were approved, regarding the granting of aid due to Coronavirus, were for people without income and who are entitled to unemployment aid. With regard to the subsidization of employers, this can be done for the economic agents who have the financial possibility to pay that technical unemployment. We, the employees, depend a lot on the employers and we have to support these employers, so that they stay in the labor market and functioning to take care of the employees”.

Vladislav Caminschi, Director, National Confederation of Employers: “Employers use those tools that are most convenient to them and they try to apply those measures, which will allow them to reach the end of this situation with minimal losses. However, they are different. We have a category of food businesses, whose incomes are growing and there are opportunities to increase wages. But, there are companies that cannot carry out any activity, such as those in the services sector. However, many employers apply technical unemployment for the simple reason that it is cheaper. In this situation there are two extremes. On the one hand, it is one of retaining the employee and paying him full salary, and on the other hand, dismissing the employees. This choice is made by each employer depending on their situation. Statistically speaking, small and medium-sized enterprises, which have few employees or low profitability, prefer to lay off their staff. This is unfortunately the reality. Medium-sized enterprises, which have higher incomes, can keep their staff for a longer period. I want to mention that unemployment and social assistance, as it is, is far too appealing for some citizens not to participate in the job market and I think it is necessary to think about this system and to review it”.

Dumitru Vicol, Strategist, American Bank, London, UK: “It is only now that the IMF has declared that we are in the greatest recession since 1933. This means that the behavior of the participants in the economy was already much worrying than that of the authorities. It seems to me that this was the reason why the authorities, especially from the developed European countries, first of all, understood that it would be a short-term crisis and deserves to keep the whole economy intact because it will be a very fast recovery. This also makes sense in the context in which we see that, following the example of the crisis of 2008, the return after the crisis, after extending the world into unemployment, is very and very troublesome. Respectively, the governments were cutting edge and said they would cover all costs. If we talk about developed countries, they have the opportunity to keep jobs, but if we talk about countries like Ukraine, Romania and Moldova, they are not satisfied with the economy they have. Currently, our Government has to think about what it will do after the crisis, because all the current unemployed will have to be employed. We will get to the situation where the state will become more important than the private sector. After the pandemic, the consumption will decrease very much, and in this sense the state will become the one that consumes a lot”.

For more details you can watch the video of the event here.

The event was organized within the project “EU DEBATES CAFÉ: Advancing knowledge and expertise on EU institutions and policies in the Republic of Moldova”, implemented by IPRE in cooperation with Hanns Seidel Foundation in the Republic of Moldova and with the financial support of the Federal Ministry for Economic Cooperation and Development .

The Institute for European Policies and Reforms (IPRE), in partnership with Privesc.eu and with the support of the Hanns Seidel Foundation, organized on Thursday, April 9, 2020, the second online video conference, dedicated to the situation of employees in the Republic of Moldova during the COVID-19 crisis.

The debate was attended by representatives of civil society, financial and economic analysts, representatives of the confederation of employers and trade unions, as well as national authorities. In their interventions, the participants referred in particular to the response measures of the authorities of the Republic of Moldova for the group of employees in the real sector and the estimated impact of the COVID-19 pandemic on the unemployment rate. Furthermore, they pointed out which sectors might suffer and which policy interventions are required by the state.Please find bellow some interventions of the speakers.

Alexandru Ghețu, Head of Unit for policies in the field of labor relations and social partnership at the Ministry of Health, Labor and Social Protection: “The state of emergency established in Moldova is like a state of war, which can lead to the restriction of some employees’ rights. However, we have many companies working at the moment. These are pharmacies, food production companies, etc. But we also have strongly affected businesses, such as the HORECA sector. Let’s say that everyone who stays at home receives a salary, because the employer is limited in possibilities. If the Government will be able to cover 50-70% of these salaries, the employers will surely be satisfied and will be able to maintain a salary for all the employees. But unfortunately, the Government does not have such possibilities. In these circumstances, authorities cannot come up with strict measures imposed on employers. The government comes up with some recommendations in this regard. First, it wants to protect the life and health of employees and create opportunities for them to work remotely. Secondly, it was recommended to change the working regime with granting the employees a partial working schedule. We do not know how long this crisis will last. But if the crisis continues until May and June it will be serious. If it is until April, it will not be so tragic. After the end of the crisis period, I do not think that those who do not receive salaries from other areas, or those who receive lower salaries, will run to buy clothes or go on trips. People will go to buy food and pharmaceuticals. They will not go to restaurants and cafes, nor to tourist agencies. ”

Marcel Spătari, Economist, Director of Syndex Romania: “We anticipated some of the measures taken by the Government, namely that increasing the unemployment aid will indirectly increase the redundancies. So, one of the measures, unfortunately, is to stimulate layoffs, or this does not correspond to the interests of the employees. The measures taken by the Government are not necessarily bad, but they are insufficient. I want to come up with some contextual data about how we got into this crisis, which are very important to understand how we are going through this situation. First of all, the huge gray market and tax evasion in the Republic of Moldova, related to salaries in the hundreds of millions of lei was and is a problem. Secondly, it is the dependence on remittances from abroad, which will decrease. Foreign investments in labor-intensive sectors, which transformed Moldova into a subcontractor of industrialized countries, will still have an effect. Respectively, due to the fact that car factories are closed, the demand for these components will decrease and this will affect the companies here. At the same time, the presence of a financing system in which there is high liquidity, but which in the last period has been directed towards the increase of micro-financing, should be limited to the maximum or even forbidden. Also, a very major dysfunction is a statistical system not adapted for the management of the labor force. In the Republic of Moldova, there is no such system as in the EU, where the state authorities can see how many employees are, under what conditions, at what salary level are the employees. From here comes the difficulty of making any kind of calculations, and the authorities have acknowledged that they are not ready to provide the exact number of unemployed. In this regard, I wonder, if the Ministry of Labor cannot have such an estimate, how could the Ministry of Finance have an estimate of the budgetary impact and unemployment aid? “.

Sergiu Sainciuc, Vice-President, National Confederation of Trade Unions: “Those measures that have been taken by the authorities have resulted from the financial possibilities of the state. I believe that calculations for the assessment of unemployment can be made because we know the areas that are affected and which have stopped their activity. It is also good to know the size of the unemployment benefit for people who are eligible, who do not have a job. At the same time, the technical unemployment has a very clear notion because it can be declared and arise for different structural economic reasons. It must be seen in this case which decision is better. Either we grant subsidies to companies or we grant unemployment aid. In this context, the measures that were approved, regarding the granting of aid due to Coronavirus, were for people without income and who are entitled to unemployment aid. With regard to the subsidization of employers, this can be done for the economic agents who have the financial possibility to pay that technical unemployment. We, the employees, depend a lot on the employers and we have to support these employers, so that they stay in the labor market and functioning to take care of the employees”.

Vladislav Caminschi, Director, National Confederation of Employers: “Employers use those tools that are most convenient to them and they try to apply those measures, which will allow them to reach the end of this situation with minimal losses. However, they are different. We have a category of food businesses, whose incomes are growing and there are opportunities to increase wages. But, there are companies that cannot carry out any activity, such as those in the services sector. However, many employers apply technical unemployment for the simple reason that it is cheaper. In this situation there are two extremes. On the one hand, it is one of retaining the employee and paying him full salary, and on the other hand, dismissing the employees. This choice is made by each employer depending on their situation. Statistically speaking, small and medium-sized enterprises, which have few employees or low profitability, prefer to lay off their staff. This is unfortunately the reality. Medium-sized enterprises, which have higher incomes, can keep their staff for a longer period. I want to mention that unemployment and social assistance, as it is, is far too appealing for some citizens not to participate in the job market and I think it is necessary to think about this system and to review it”.

Dumitru Vicol, Strategist, American Bank, London, UK: “It is only now that the IMF has declared that we are in the greatest recession since 1933. This means that the behavior of the participants in the economy was already much worrying than that of the authorities. It seems to me that this was the reason why the authorities, especially from the developed European countries, first of all, understood that it would be a short-term crisis and deserves to keep the whole economy intact because it will be a very fast recovery. This also makes sense in the context in which we see that, following the example of the crisis of 2008, the return after the crisis, after extending the world into unemployment, is very and very troublesome. Respectively, the governments were cutting edge and said they would cover all costs. If we talk about developed countries, they have the opportunity to keep jobs, but if we talk about countries like Ukraine, Romania and Moldova, they are not satisfied with the economy they have. Currently, our Government has to think about what it will do after the crisis, because all the current unemployed will have to be employed. We will get to the situation where the state will become more important than the private sector. After the pandemic, the consumption will decrease very much, and in this sense the state will become the one that consumes a lot”.

For more details you can watch the video of the event here.

The event was organized within the project “EU DEBATES CAFÉ: Advancing knowledge and expertise on EU institutions and policies in the Republic of Moldova”, implemented by IPRE in cooperation with Hanns Seidel Foundation in the Republic of Moldova and with the financial support of the Federal Ministry for Economic Cooperation and Development .