COVID-19 has resulted in increased unemployment rates throughout the world. Countries and cities alike have utilized various mechanisms to combat unemployment and mitigate economic damage.
Municipal governments have utilized local funding and expertise to develop policies that complement their national programs. The tools municipalities are using to aid SMEs and the newly unemployed due to the pandemic include unemployment insurance, wage subsidization, training, increased access to loans, and grants. Furthermore, many local governments have allowed citizens to postpone various payments, including city taxes and rent, often reducing interest rates of delayed payments.
This review focuses on the main measures countries and municipalities are implementing in response to the pandemic. The wide range of tools outlined in this review can be used by local authorities to assist businesses and residents recover from the damaging economic effects of the virus. Data presented are updated for July 2020.
Protection for tenants that cannot pay rent
Among its fiscal responses, the UK government subsidizes wages and provides businesses with increased access to credit. Specifically, The Coronavirus Business Interruption Loan Scheme (CBILS) offers small businesses the opportunity to apply for up to 5 million pounds and 300 million pound for larger businesses in loans that are issued by banks and backed by government guarantees. The UK has also allocated resources for employee training to enhance reinsertion into the job market, and instituted a furlough to reduce layoffs.
In order to facilitate economic recovery, the municipality of London is providing 100% free fundraising services to small businesses by offering a free crowdsourcing platform and network, and by launching a pledging campaign encouraging citizens to pledge to pay for goods and services in advance to help ease cash flow problems.
Furthermore, the city’s mayor has temporarily prevented landlords from evicting their tenants in the current climate by closing the courts for several months, and he has directed struggling individuals to the UK’s Universal Credit program, which offers benefits to low income and unemployed citizens.
Subsidize a furlough to prevent layoffs
The City of Stockholm, with over 962,000 residents, has largely remained operative throughout the pandemic. While social distancing is encouraged, Stockholm schools and preschools, as well as businesses such as restaurants, have remained open since the virus first reached Sweden. Due to COVID, Sweden’s unemployment rate has risen to 9%. The Swedish government has offered wage subsidies and loans, and has expanded its unemployment benefit programs.
With its short-time work allowance program, Swedish businesses hurt by COVID can apply for subsidies that will cover over 90% of their employee’s pre-COVID wages, while they reduce their worker’s hours. This is known in Israel as a ‘flexible leave without pay’(חל”ת גמיש). Applications for this allowance will be open until January 3rd, 2021. In efforts to further help its small business owners, Stockholm has enabled businesses to postpone payment of municipal regulation fees and water and waste collection fees. The municipality has also enabled all hospitality and restaurant businesses that operate within the city to apply to postpone lease payments and rent payments, which will be granted based on the city’s assessment of individual applications.
Income support for self-employed, entrepreneurs and freelancers
Amsterdam, Netherland’s capital and home to over 821,000 residents, is offering income support for Dutch citizens living in Amsterdam who are established as self-employed, entrepreneurs, or freelancers, as part of a program known as BBZ Tozo. The income support is in the form of a loan that will be repaid at an interest rate that is 2%, lower than regular rates. Furthermore, the city is allowing businesses to apply to defer municipal taxes for up to three months, with a decreased interest rate on the amount due from 4% to .01%. The City of Amsterdam is also allowing businesses to apply for terrace expansions, so that cafes, restaurants, and bars will be able to increase the capacity of their services.
A stimulus program for Small and Medium-sized Enterprises (SMEs)
Dublin (city population of over 1,173,000) gradually reopened as work across all economic sectors resumed throughout Ireland on May 18th. Key fiscal policy measures include up to 70% subsidies of employees’ wages, enhanced illness benefits, and COVID unemployment benefits. Restart grants are being provided to small businesses, and increased access to loans will be available to SMEs at below market interest rates as well. The Revenue Commission has deferred taxes, suspended interest on late payments, and suspended enforcement of debt.
A prudent response led to a low unemployment rate
Berlin’s (city population of 3,769,000) COVID-related policy measures include tax breaks for businesses, quicker and larger bank guarantees, and compensation for loss of earnings. Furthermore, in order to assist SMEs, Germany’s capital has provided businesses with short-term liquidity support and with grants funded by the Berlin Senate. The senate also subsidizes its city’s residents for losses due to self-quarantine and by so reduces the risk of people violating quarantine restrictions. Germany is regarded as one of the European countries that most prudently responded to the pandemic. The country’s death toll of 9,205 and current unemployment rate of 4.4% is significantly lower than the rates of neighboring countries. The German government has provided its citizens with one of the largest stimulus programs in Europe, with a budget of €286 billion to shore up labor markets. The fund was divided between programs that stabilize businesses, and programs that provide aid to unemployment individuals.
Extending tax deadlines for the elderly and citizens with disabilities
Ottawa, Canada, is home to over 934,000 people. As of July 2020, the capital city has an unemployment rate of 9.5%, compared to a national rate of 12.3%.
Residents of Ottawa have access to Canada’s Emergency Response Benefit Program which includes direct wage subsidies for individuals and businesses that meet certain requirements as well as interest free loans.
As part of the country’s Emergency Response Benefit Program, the Canadian government is providing $2,000 every 4 weeks for workers who have stopped working due to COVID, for up to 24 weeks. Certain employers have also been offered up to 75% wage subsidies, in efforts to enable employers to reduce payroll deductions for up to three months.
To supplement these national policies, the municipality has instituted a Property Tax Hardship Deferral Program extending tax deadlines, and a Water Utility Deferral Program deferring water payments for low-income seniors and citizens with disabilities. The city also offers to assist eligible property owners in Ottawa, and a Corporate Real Estate Act has allowed rental adjustments for certain businesses renting space within a facility that belongs to the City. The City has organized a task force dedicated to continuously developing measures that will support local businesses throughout the pandemic
An online trading platform, access to information and assistance in exercising rights
Jerusalem, with a population of 936,000, was severely hit by the pandemic due to a low level of adherence to health and safety guidelines. As a result, many neighborhoods were coded “Red” under the Ministry of Health “Traffic Light” program and were put under a partial lockdown.
As a result of the high infection rate and in accordance with government guidelines, business activity decreased.
To assist SMEs, the government has approved a discount of up to 95% on business property tax payments, subject to the approval of the National SME Authority of the Ministry of Economy. Israel has implemented additional policy measures such as providing grants for self-employed individuals, expanding eligibility for unemployment benefits, and lengthening the entitlement period for unemployment benefits. In an effort to help mortgage payers, Israel’s central bank announced that it is allowing a postponement of mortgage payments until the end of 2020.
At the municipal level, Jerusalem has created an e-commerce platform – J-Mall, in collaboration with Bank Hapoalim, for shopping from local businesses. The municipality has also gathered information on its website to help educate its residents and business owners on how they can best exercise their rights amidst the crisis. It also operates 14 centers for that same purpose.
Israel’s government and Jerusalem’s Municipality have allocated many resources to support residents and business owners financially and to encourage business activity despite the covid-19 related restrictions on the economy. However, as the morbidity is at a high level, it will continue to be difficult to maintain normal business activity.