Impact of Covid-19 on consumers

THE relationship between a worker and consumer’s well-being is certainly strongly interconnected.

Unless the consumer has employment, he would not have the income to purchase necessities for himself and his family.

Thus a job loss 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% of the workforce.

Average salaries fell by 9% and median salaries fell by 15.6%. Thus more than half of salaried employees currently earn less than RM2,062 per month.

Furthermore, in a report by the International Labour Organisation, 35% of the self-employed claimed a drop of income by 90%.

A further 71% of self-employed have cash flows that could only last for one month.

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

According to the United Nations Children’s Emergency Fund (Unicef) and United Nations Population Fund (UNFPA) Report “Families on Edge: Impact of Covid 19 on low income urban families”:

● 25% of head of households are unemployed (compared with the national level of 5.3%);

● 31% of head of households faced cuts in working hours during the movement control order; and,

● Females faced greater challenge. 32% of female households are unemployed.

In another study by Unicef on unemployment among the urban poor it was found that unemployment had increased from 7% in September to 15% in December 2020, with one in three adults in these households without a job.

The report further showed that 63% 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 residents, increasing mental health issues and an unhealthy living environment, especially for children.

In a study by the Credit Counselling and Debt Management Agency, 41% of respondents reported that financial stress had affected their mental well-being.

Furthermore, 65% 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% from the micro small and medium enterprise sector (MSME) (which makes up 40% of the country’s GDP) would collapse by October 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% of the enterprises had no insurance while 70% had no safety nets to fall back on should they lose their jobs.

According to the Malaysian Institute of Economic Research, 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 of 2021) than before rose to 42% surpassing a 2020 report of 40%.

In addition, those who responded negatively – most of the responses totalling 43% – 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 5% of single mothers had enough savings to last for more than three months.

Furthermore, female-headed households that 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.

Children also faced challenges. According to the Unicef and UNFPA Report “Families on Edge: Impact of Covid-19 on low income urban families”:

● 52% of households consumed more eggs (cheapest form of protein); and

● 40% of households consumed more instant noodles (unhealthy diet)

Thus the negative impacts of the pandemic were particularly severe for single mothers and children.

Datuk Paul Selvaraj is Federation of Malaysian Consumers Associations (Fomca) Secretary-General. Comments: [email protected]