COVID-19 Pandemic and its Impact on Labor Force: A New Model Based on Social Stress Theory and Prospect Theory

Abstract

Human beings across the globe irrespective of caste and creed, culture, economic and geographic distances, are facing a very strange time, struggling and fighting against a pandemic COVID-19. On analyzing the literature, it is understood that most of the research scholars have confined their study to the clinical and therapeutic aspects of COVID-19 and there are a lesser number of studies related to the impact of COVID-19 on economic, psychological, social and behavioral perspective. This study is carried out to propose a new theory that can integrate the social and financial stress of the labor force during the pandemic situation. For this purpose, we have taken lessons from the social stress theory and prospect theory. The research extensively covers 420 samples duly collected from the labor force working across Kerala State, India. In this study, we have identified three major social stress constructs viz., Governance, Personal and Societal among the labor force through the Common Factor Analysis (CFA) method. We have also observed three major stressors using Cohen’s effect size; they are difficulty in diagnosing the disease, worry of the disease that it will get affected to the dear ones, and the fear of using public utilities. The general presumption of our theoretical model was identified stress constructs can create social stress among labor force, which was reconfirmed through the Covariance Based Structural Equation Modeling Approach (CB-SEM). The risk and benefit of the pandemic situation were further examined mathematically. It is interestingly observed that during COVID-19 pandemic the labor force across Kerala will value health and wellness as the most important gain than financial benefits.

Keywords: COVID-19, Social Stress Theory, Prospect Theory, Behavioural Finance, CB-SEM

JEL Classification: C12, G4, I12, J08