Economic Impact of COVID-19

This seminar, entitled, Economic Impact of COVID-19, was presented at the WCRI 37th Annual Issues and Research Conference which took place on March 23 and 24, 2021. See https://www.wcrinet.org/.

The moderator, John Ruser, PhD is the CEO of WCRI.

The presenter, Katharine Abraham, PhD, is an economist who is the director of the Maryland Center for Economics and Policy, and a professor of survey methodology and economics at the University of Maryland. She is a former commissioner of the U.S. Bureau of Labor Statistics and a former member of the President’s Council of Economic Advisers.

How this pandemic has differed from other recessions

According to Dr. Abraham, the economic slowdown that results from a recession is usually a gradual process in which economic activity begins to slow and increased unemployment follows. But in the COVID-19 pandemic, which began in March and April 2020, the economy experienced a quick downturn like nothing before. During the Great Recession of 2007-2008, the downturn in spending occurred primarily in the market for durable goods. The Covid-19 pandemic impacted personal services. The downturn in the economy caused by COVID-19 had a disproportionately negative impact on lower paid employees, particularly those working in restaurants and cosmetology. Notably, the pandemic hasn’t had a significant effect on high paid workers. While some experienced temporary loss of income, in most instances, the pre-pandemic income flow has recovered. That has not been the case for those in many lower paid jobs just haven’t come back.

How spending has changed

The pandemic has not resulted in diminished spending patterns for many lower income people because they have been assisted with unemployment benefits. On the other hand, higher paid employees have experienced larger reductions in spending due, at least in part, to the fact that many personal services that they were accustomed to purchasing prior to the pandemic are no longer available.

Trends in unemployment

Many people were placed on temporary layoff at the start of the pandemic, and some of them were called back over time. However, for a significant number of employees, the anticipated temporary layoff has proved to be a permanent one. As of February 2021, the percentage of the unemployed who have been out of work for 6 months or more has risen to 40%. This is a very serious concern because it is well established that once people have been off work for an extended period of time, their chances of finding a suitable job and returning to work diminish. It is also well established that long term unemployment has an adverse effect on both mental and physical health, that can last a decade.

Impact on female employees

Female employees have been disproportionately impacted by the pandemic. Many have been required to stay at home to provide care for children who otherwise would have been in school. Others have worked part-time, when under normal circumstances, they would have engaged in full-time work. Still other women have left the labor market entirely. These formerly-employed women are not currently included in the unemployment statistics at all.

Nonetheless, Dr. Abraham was optimistic about the return of women to the job market. While it is true that long-term unemployment can reduce the chances of being called for a job interview, some employers may be sympathetic to women who have been forced to stay at home through no fault of their own.

Long term implications of increased educational deficits caused by online learning

According to Dr. Abraham, test scores suggest that students have not learned as much during the past pandemic year, and that they have fallen behind by a number of months. Nonetheless, there are ways in which schools can make this up this deficit. School districts are considering supplemental learning, including extra classes and summer studies to close the gap.

The effect of the pandemic on the K-12 group is a cause for concern, but Dr. Abraham is even more worried about those who stopped their education because of the pandemic, either dropping out of high school or college. The number of people transitioning from high school to college has decreased and this is particularly the case at community colleges where there is a higher proportion of low income and minority students. Also, access to technology is associated with higher income and race/ethnicity. Addressing these deficits will require sizable investments in the form of federal and state aid.

The future of remote work

The consensus of opinion among Dr. Abraham and her colleagues is that in certain areas, remote work will become the norm. Some advantages of remote work are the elimination of the commute to and from work, and the facilitation of personal needs such as the ability to be at home when the plumber comes.

Nonetheless, there are also other negative factors. An important part of any organization’s productivity is interaction between members of the staff, who can collaborate. With more people working from home, the ability to interact and collaborate is sometimes lost. Dr. Abraham predicts that the most likely picture of the future will involve a significant number of workers working from home part of the time and an equally significant number spending part of the workweek in the traditional workplace. While some tech companies have indicated they will be moving more and more toward remote work, it should be noted that at the same time, many are leasing additional office space in the center cities.

The future of universities

Dr. Abraham believes there will be additional blending of online and in person learning in the future. She suggested that working professionals often prefer pre-recorded lectures because that format can be better accommodated within their schedules. Additionally, there is no reason why students should have to sit together in a big room to hear a single person deliver a lecture.

Synopsis (or takeaway)

• The pandemic has significantly differed from other recessions.
• Spending has changed based on available goods and services
• Women have been disproportionately affected by the pandemic.
• The pandemic has caused educational deficits that have long term implications.
• Remote work will persist after the pandemic ends but will not become exclusive.

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