On the Need for Thorough Restructuring after COVID

December 1, 2020; New York Times and the Brookings Institution

A year ago, back before the disruption of COVID-19, the Century Foundation completed its look at the impact of a decade of recovery from the low point of the Great Recession. They concluded that despite historically low unemployment and high stock prices, the US economy still wasn’t working for many households. “Middle and low-income workers and their families in the United States have not reaped their share of the benefits of the apparent recovery,” Century said. “Only wealthier households and larger corporations that have gained noticeably since the recession ended a decade ago.”

The lack of an effective national strategy to manage the pandemic has resulted in the US becoming world leaders in lost lives and lost jobs, with most of the damage of both falling on the bottom rungs of the income and wealth ladder. According to the Brookings Institution, “No other high-income country has experienced such deep job losses. The shock has exposed and widened rifts in our two-tiered labor market—between workers with stable jobs and the newly unemployed, between those who can work from home and those who can’t, and between high-income workers and those struggling to make ends meet.” Peter Beard, senior vice president for regional work force development at the Greater Houston Partnership, an economic development group, tells the New York Times, “The damage to the economy, and particularly to workers, will probably be longer lasting than we think it is going to be.”

COVID-19 has taught employers that many of their workers can do their jobs as effectively from home as they did from their offices. That means they may never have to return to their former places of work. With the allure of travel dimmed well past the end of the health emergency, that leaves many in lower-wage positions in the lurch. The Times predicts, “If white-collar America doesn’t return to the office, service workers will be left with nobody to serve.”

The worry is particularly acute in cities, which for decades have sustained tens of millions of jobs for workers without a college education. Now remote work is adding to other pressures that have stunted opportunities. The collapse of retailers like J.C. Penney and Neiman Marcus has wiped out many low-wage jobs. The implosion of tourism in cities like New York and San Francisco will end many more.

There will be new jobs, but they will be quite different from the service jobs that are evaporating, requiring more education and training. According to Brookings economists Marcela Escobari, Ian Seyal, and Carlos Daboin, “The pandemic is rapidly shifting consumer preferences and company behaviors, with demand for digital services surging. But few unemployed workers have the time or resources to reskill and find new work on their own. If these shifts continue, many low-wage workers may see less demand for their labor in the long run—meaning lower wages and decreasing job quality for those who can find work, and long-term unemployment for those who can’t.”

Escobari elaborated on this warning in comments to the Times: “Workers in the occupations most heavily hit since the spring will have a difficult time reinventing themselves. Taxi drivers, dancers and front-desk clerks have poor track records moving to jobs as, say, registered nurses, pipe layers, or instrumentation technicians.”

Some states have recognized the need to increase investment in programs supporting reeducating displaced workers for new careers. In response, they’ve begun to use funding received under the CARES Act to support retraining and placement services. These resources are limited, however. Rhode Island Governor Gina Raimondo acknowledges how large and complex the challenge is. She tells the Times, recognizes this challenge is large and overly complex. She told the NY Times, “This stuff is easy to say and really hard to do. We’re talking about transitioning a whole economy, and transitions are hard.”

One of the reasons it’s hard is because our prior efforts to assist workers like those most displaced at this moment have not been effective. Returning to the Brookings analysis:

Job transitions data suggest that today’s hardest-hit occupations—from waiters and bartenders to teachers and personal care aides—have not historically offered pathways into occupations that have added jobs in recent months. Likewise, today’s high-demand occupations like software engineering have not typically absorbed workers from the occupations currently under pressure. This mismatch suggests that many of today’s unemployed workers may find it harder than in the past to find new jobs and advance through the labor market.

What’s needed here is massive investment in build capacity to support displaced workers across this chasm of change—and at a scale rarely seen before. Amit Sevak, the president of Revature, a company that transitions workers into new tech-oriented jobs, likens the necessary response to the nation’s efforts in the 1930s. “We need a New Deal for skills,” Sevak says. “President Roosevelt deployed the massive number of workers unemployed in the Great Depression on projects that created many of the dams and roads and bridges we have. We need something like that.”

In a recent interview with the video channel of The Hill, as noted by Common Dreams, economist Thomas Piketty expands on this, seeing an opportunity here “to finally make a serious attempt to address income disparities” and develop “a better income support mechanism, safety net, and better access to education.”

“There’s nothing natural in the way the economy is organized,” Piketty observes. “I think it’s important to send a message to working America and to low-wage America that you can have economic justice together with economic prosperity…we’re talking about a higher minimum wage, more investment in public universities, more progressive taxation at the top.”

Congress is still debating a new round of stimulus to help mitigate the economic fallout from the pandemic. Missing is a recognition of the true depth of COVID’s impact. An effective vaccine may reduce health risks, but it will not reverse the structural changes it will leave behind. Without a response at the level of the New Deal or the Marshall Plan, our sector will be left to manage pain and suffering it will never be able to ease.—Martin Levine