The COVID-19 pandemic still working its way out will enter history as a major exogenous shock to the global economy. We won’t see a smooth return to the status quo that prevailed before 2020, if at all.
But, while we have some preliminary indications of which changes we’ve seen in the past year will or might stick, exactly how life will be, say, in 2025, when time has passed to sort this all out, is far from clear. This is true around the world but is especially salient in industrialized nations, where the fraction of the work force in jobs requiring on-site physical labor such as construction or manufacturing, is low.
In our own nation, we are in the midst of structural changes to our economy in retailing, especially in food. In many occupations, the economic advantages of doing significant amounts of work from home and carrying out virtual meetings have become apparent to employers as well as workers. The ease of consulting one’s doctor for health issues not requiring hands-on examination is a positive change from check-in lines and waiting rooms. Online shopping for items we used to buy at malls and ordering groceries for pick-up or delivery have advantages. An extended adjustment process stretches before us.
People are also reading…
In the shorter term, a much-publicized immediate problem is that the number of open jobs employers want to fill has grown faster than the number of applicants. This is especially true in the service sector and comes despite the mass layoffs and business shutdowns we saw a year ago.
As of April, total non-farm employment was 144.3 million, up more than 14 million from April 2020 — the bottom of a job market collapsed from COVID-19 and restrictions to contain it.
However, this was still 8 million employed workers below the 152.5 million in February 2020, when COVID first appeared in the U.S. in a nursing home near Seattle. This was a historic high. An alternative measure, all private-sector employees, shows a very similar pattern in decline and tepid recovery.
Yet as of March, the latest month for which job opening numbers are available, some 8 million jobs remain unfilled. Anecdotal reports of employers struggling to find workers without success are common.
Last month, 9.8 million people still met the official criteria to be counted as “unemployed,” more than 3 million above the low set in February of last year.
So why are people without jobs not beating down the doors of frustrated employers?
One obvious explanation is that federal spending in response to the COVID downturn makes it less costly to be without a job than in “normal” times. The $300 per week top-up began in the COVID-aid bill passed in the last months of the Trump administration and continued with additional spending after President Joe Biden took office, is an obvious issue.
Republican elected officials and conservative economists identify this as the key problem — an incentive not to work, if you will. Some states have moved to eliminate the bump-up or to require jobless-aid applicants to show evidence they are actually seeking work.
Many Democratic officials dismiss this theory out of hand. Liberal economists fault the millions of daycare slots that remain closed. Many schools remain in hybrid mode, with children still at home a good part of the time. What’s a working parent to do? It is hard enough to go to a virtual job if there are no good alternatives for child care, but to show up for work in a bistro or bakery counter? Impossible.
Moreover, vaccination campaigns initially focused on the vulnerable, especially the elderly or those with serious health problems, and those in the health care professions. They then worked down to younger, healthier people, first to those in in-person service jobs. In other words, the majority of the first people vaccinated this spring were those least likely to be in the work force even in normal times. The proportion of people of prime working age remaining unvaccinated is substantially higher than the population as a whole. And it is higher for lower-income and minority communities. Many unvaccinated people have legitimate concerns about exposure to infection, especially if they take a job involving contact with many different strangers.
As in many situations in the contemporary U.S. economy, there are sharp differences in both opportunities and dangers faced by people at different income levels. Hospitality and retail jobs are more likely to involve unmasked, close contact with the public than those where a worker spends time in a home office, a cubicle, however bleak, or at a machine in some factory. Such work involves little contact with the public and gives physical separation from a discrete group of colleagues seen on a daily basis about whose health one can know much more.
Our inane patchwork health care system also adds complications. The risk of 20- to 50-year-olds dying of COVID-19, if infected, is not high. But infection can involve much medical treatment and a long time in which one cannot work. People earning too much to qualify for Medicaid, but getting no significant health benefits at work, risk relatively much larger financial hits if they do get sick. Many of the service-sector jobs that remain open do not have paid sick leave.
An additional factor is that the overall total numbers for employment, unemployment and job openings do not distinguish between full- and part-time positions. The safe alternative of $300 per week does not depend on how many hours one was working prior to the pandemic nor on the number of hours one would get from an available job. Inevitably, this incentive is larger for those who, willingly or unwillingly, are apt to have low-paying 20-hour-a-week jobs rather than full-time ones.
The issue of the value of the flat-rate benefit relative to lost compensation exists regardless of the number of hours worked. For someone laid off from a full-time $100,000 per year job and offered that for a new one, losing $300 a week is minor. For someone with a half-time job busing tables or cleaning offices or hotel rooms, $300 is a lot.
A final factor to consider is the usual, pervasive one of “imperfect information.” We no longer are in a 1950s situation where Ford, GM or U.S. Steel might lay off 200,000 workers whom they would rehire when the economy improved. Lots of low-skill jobs disappeared when bars, restaurants and small tourist businesses folded.
People who worked for these may indeed find similar work, but it will have to be with a different employer. Both employers and job seekers face greater uncertainty about a new situation than in the more familiar situation of a recession where the distribution of job losses, and of re-hiring, is more evenly spread.
This labor market crunch is an immediate problem getting much attention. It will sort itself out in time. These essentially are what economists term “cyclical” issues. Yet COVID-19, as exogenous shocks do, also is fostering much deeper and longer-term “structural” economic changes, in this case in the way people view and value work. These merit further examination on their own.
St. Paul economist and writer Edward Lotterman can be reached at firstname.lastname@example.org.