The year 2020 left its mark in history. Governments forced businesses to close down and restricted travel, people were required to wear masks, and everyone had to self-isolate. With more than 700 million confirmed cases of COVID-19 worldwide, the virus has significantly affected the world and has contributed to the growing poverty rates in many countries, including Austria. According to Statistics Austria, more than 17.5% of the country’s citizens faced the risk of experiencing poverty in 2022. The following are some reasons why the impact of COVID-19 on poverty in Austria is so significant.
Increase in Automation
Due to COVID-19 and the inability of many people to work in person, many employers turned to automation or the use of robots and machines to do the work of employees.
According to an OECD report, the emergence of COVID-19 “accelerated automation, putting additional pressures on places with relatively high shares of jobs at risk”
The jobs at risk of automation are “predominantly in the private sector and in larger, single-site workplaces.” Additionally, 15.5% of workers on a temporary contract have a high risk of automation compared to just 13.5% without a contract.
The increased automation has significantly affected many people’s lives and has caused thousands of Austrians to become unemployed and eventually impoverished. According to a 2022 World Bank report, the unemployment rate was 4.7%.
During the second half of 2020, Austria’s economy struggled with inflation, as commodities such as food alongside industrial services recorded price hikes.
These hikes occurred due to “significant supply chain bottlenecks” resulting from increased demand when the government lifted COVID-19 restrictions. Additionally, the Russia-Ukraine war put extra pressure on Austria’s economy by increasing energy prices.
According to the World Bank, COVID-19 caused inflation to increase by more than 7%, going from 1.2% to 8.5% in 2022, the highest it had ever been. So, at the same time that Austrians were getting laid off or had to close their businesses, the cost of everyday necessities was increasing, pushing more people toward poverty. Alongside other factors, this issue of inflation represented the impact of COVID-19 on poverty in Austria.
According to KPMG, which supplies tax assistance to many organizations, the Austrian government made €100 million worth of loans available to hotels that lost 15% in sales.
Additionally, on March 13th, the Austrian government implemented a €38 billion fund for “COVID-19 crisis management.” This fund went solely toward stimulating the Austrian economy. Some efforts of the fund include helping businesses affected by COVID-19 by giving them subsidies for fixed costs and providing them with €4 billion worth of aid. In addition, restaurants benefitted from “value-added tax relief.”
As a result of government aid and subsidies, the economy improved remarkably. Fewer businesses had to shut down, and as a result, the unemployment rate decreased from 5.4% in 2020 to 4.7% in 2022. Additionally, The GDP growth skyrocketed from -6.5% in 2020 to 4.6% in 2021.
Finally, as a result of the government providing aid to hotels in Austria, the tourism industry continued to stay afloat in 2020. According to World Data.info, “Austria recorded a total of 15 million tourists in 2020, ranking 18th in the world.” Furthermore, the industry generated at least $15 billion, which might have been impossible without the government’s help in keeping hotels open.
Despite the significant impact of COVID-19 on poverty in Austria, there are reasons for hope. Government initiatives and financial aid programs have provided support to businesses and individuals, leading to a decrease in unemployment rates and an improved economy. The tourism industry also received assistance, allowing it to continue operating and generating revenue. These positive developments highlight the efforts of the country to recover from the challenges posed by the pandemic and alleviate the effects of poverty.
– Hope Yonehara
Photo: Max Pixel