How COVID-19 has transformed the labor market

How COVID-19 has transformed the labor market

Although it may seem like a distant memory now, the COVID-19 pandemic first devastated the US economy. It has also exposed and exacerbated existing inequalities in society. The wealthy could escape to safer retreats – ranches in Montana or apocalyptic getaways in New Zealand. Stuck where they were, workers had fewer options and were dying at higher rates. But just as the pandemic has wiped out jobs, it has also changed labor markets in many ways.

“Plagues and Their Aftermath,” a book I wrote during the COVID-19 shutdown, examines past pandemics for clues about how the pandemic may affect the future of the economy, society, behavior and politics. The book eschews predictions – uncertainty may be the dominant feature of the post-pandemic landscape. Instead, the book identifies recurring themes.

One of them is labor relations, which seems awfully dry. But it’s not about human resources, it’s about human beings and how they react to life-changing upheavals. It is above all about attitudes. Large-scale epidemics of deadly diseases cause people to think about where they are now, what they are doing, how they want to spend the rest of their lives. Thousands of individual decisions can become a movement. A pandemic that occurred almost 700 years ago illustrates this point.

The Black Death, an outbreak of bubonic plague in the 14th century, wiped out nearly half of Europe’s population, causing a severe shortage of manpower. In England, he undermined an already eroded seigneurial system, which tied peasants to the land and its lord.

The peasants were not slaves, but they had to provide labor and were not free to leave the manor without the permission of the lord. With so few surviving farmers to farm the land, however, the peasants could negotiate for better terms or easily flee and find better situations elsewhere. As a result, their condition improved markedly.

Alarmed by the economic turn and the “impudence” of the commoners, the lords enlisted the English crown to impose wage controls, tighten requirements to supply the labor demanded by the lords, and even ban commoners from wearing clothes. above their social rank. Those who refused could be taken to jail and detained until they agreed.

The coercive measures sparked widespread discontent, which intensified with the new imposition of poll taxes that hit the poor hardest. Local resistance coalesced into the Peasants’ Revolt of 1381 – England’s first social revolution. Thousands of people marched on London and briefly took control of the city.

Although the death toll of later pandemics did not match the depopulation caused by the Black Death, the cholera epidemics that swept Europe in the 19th century and the influenza pandemic of 1918-19 had radicalizing effects. . Cholera riots were common. Class resentments grew. The 1918 flu was followed by an explosion of labor militancy. Coal miners, steelworkers, railroad workers, seamstresses and others in the United States demanded shorter hours, higher wages, safer working conditions and an end to child labor and the exploitation of workers.

Fast forward 100 years to the COVID-19 pandemic, which was followed by what has been called the “Great Resignation,” a term coined by Anthony Klotz, who is not an economist but a psychologist. . As COVID-19 numbers dwindled, American workers began quitting in record numbers. In 2021, more than 47 million workers left their jobs.

Initially, the figures reflected a backlog of deferred resignations during the shutdown, but the phenomenon continued. Labor shortages and a rapidly recovering economy have allowed most job changers to find new employment at higher wages with better benefits.

Generally, the lowest-paying and lowest-skilled jobs in the wholesale and retail trade and hospitality services sectors saw the most departures. But while wages were a big driver, there were other issues.

Working from home was a key factor in employee retention. Sectors of the economy that allowed working from home saw fewer quits, but 30% of those working from home said they would consider leaving if remote working was eliminated altogether.

A rapid post-pandemic recovery has pushed unemployment to 3.5%, a historic low as 10 million jobs go unfilled. Where have all the workers gone? An explanation remains elusive.

The death of 1.2 million people from the virus offers only part of the explanation. Although clearly a national tragedy, the death of 1.2 million Americans has nothing to do with the depopulation caused by the Black Death. It represents about a third of 1% of the US population, and many of those who died were elderly and not in the labor force. The “long COVID,” which may affect up to 16 million working-age Americans, could play a bigger role.

Many workers have been laid off during the pandemic; some of these retirees. Others were exhausted and withdrew from the labor market. Some have started their own business. Still others may be looking for jobs that they might be more passionate about. Whatever the reasons, a severe labor shortage persists. However, this could change due to efforts to reduce the current high rate of inflation, another legacy of the pandemic.

Government payments to help families during the pandemic and higher wages as the pandemic waned are now blamed for causing inflation to spike in the United States by increasing consumer demand. Disrupted supply chains and pent-up consumer demand have contributed to this. Others suggest unprecedented corporate profits could drive up costs. The war in Ukraine could also have something to do with it by disrupting the world’s energy and food supply.

Whatever the cause, unemployment is seen as the cure. Former Treasury Secretary Larry Summers says a 6% unemployment rate is “a necessary side effect of effective fiscal policy.” More optimistic, Janet Yellen, the current secretary of the Treasury, thinks that inflation can be contained without unemployment exceeding 5%. While Summers and Yellen differ on the stats, they agree on the cure.

Until the recent rebound, wages in the United States had stagnated for decades, with labor’s share of income steadily declining. Since the pandemic, workers have seen a real increase in their wages, but this will likely be temporary, eroded by inflation and suppressed by rising unemployment.

Meanwhile, employers are in a tough spot. They must offer decent wages and better conditions to attract needed workers while making a profit – or just to stay in business for small businesses. And if their success depends more on knowledge and talent than hard work, they could go beyond salary and benefits and find ways to engage and motivate their employees. New agile companies can do better than corporate dinosaurs.

The peasant uprising of 1381 was suppressed, but the rigid manorial system in England nevertheless gradually gave way to more flexible economic relations. Still unpredictably, the COVID-19 pandemic may have accelerated profound changes in the way work works today.

Brian Michael Jenkins is the author of “Plagues and Their Aftermath: How Societies Recover From Pandemics”. He is a senior adviser to the president of the RAND Corporation.

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