Twenty-year-old William Lovely used to work at Jason’s Deli in Virginia Beach, delivering catering orders to surrounding businesses. Now, thanks to the coronavirus, he’s struggling to pay his bills.
Laid off in March, he’s gone from regular hours and pay to gigging for UberEats or Instacart, earning up to $100 on some days but often coming home with almost nothing. While the restaurant is trying to slowly reopen, Lovely reckons the best he can hope for is a part-time position, requiring him to keep his second job if he’s going to meet his expenses.
“My job stopped, but the bills don’t,” he said.
Lovely’s experience goes to the heart of the dilemma facing the
The hope is the
The risk though is that the pandemic is inflicting a “reallocation shock” in which firms and even entire sectors suffer lasting damage. Lost jobs don’t come back and unemployment stays elevated. That would force workers to retrain or relocate, both of which are hard, and governments to do more than just try to spend their way out of trouble.
It was a theme hit upon last week by Federal Reserve Chairman
There will be “well into the millions of people who don’t get to go back to their old job,” said Powell, who will testify to Congress on the economic outlook this week. “In fact, there may not be a job in that industry for them for some time.”
Unfortunately, new research by
Jobs in the hospitality industry -- like Lovely’s -- are among the most at risk, alongside retail, leisure, education and health. In many cases, the pandemic will increase the challenge for bricks and mortar companies facing off against e-commerce platforms such as Amazon.com. Inc, accelerating the pre-crisis trend.
Financial markets are already pricing in the risk, according to the Bloomberg economists.
Other studies carry similar warnings. Research published in May by the Becker Friedman Institute at the University of Chicago estimated 42% of recent layoffs in the U.S. will be permanent.
“There’s a massive reallocation shock,” said
The phenomenon puts governments under pressure to craft policies which help viable firms to survive and workers navigate to different jobs, but which ideally don’t prop up companies that are no longer sustainable and just drain resources.
The Peterson Institute for International Economics said in a study last week that the unique shock of the virus means governments may need to do more to preserve businesses and protect workers than they would in a normal recession.
They recommend wage subsidies to create incentives to resume production, and continued credit guarantees for new loans.
Different reasons for job losses call for different, and sometime conflicting, policy responses, although a caveat is that the end of the lockdown could trigger another reallocation shock if consumer tastes recover quickly enough to prompt firms to rehire.
A major worry though is that as temporary job losses become permanent, skills are lost and higher unemployment becomes entrenched -- a concept economists refer to as hysteresis.
Amid that backdrop, labor market experts says measures shouldn’t stop at improving safety nets, but must also ensure people have the right skills. The Organization for Economic Cooperation and Development last week called for public
Part of that is about getting workers ready for the next phase of the technology revolution and any upheaval that comes with it.
That process could now
The potential for structural shifts has also given rise to ideas that might have once seemed non-starters -- from job guarantees to universal income.
In the U.S., an employer-of-last-resort idea won support among some Democrats earlier in the primary election cycle. Economists who’ve worked on versions of the plan, including Darrick Hamilton at the University of Ohio, sought to revive it during the coronavirus slump, citing the example of federal employment programs during the New Deal in the 1930s.
“The pandemic has exposed the fault lines that already existed for working people and the economy,” said
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