The Covid Economy

An increasing number of Covid-19 vaccines are making their way into arms. That’s led to a growing sense that the end of one of the world’s worst pandemics may be within sight. But when it finally does end, what will that mean? Could things return to the way they were before anyone ever heard of the coronavirus? Experts are beginning to examine what life post-Covid might look like. Many of them are pointing to changes in the U.S. economy that may far outlive the crisis we’re in right now.

Some of the changes could be painful. Others might benefit us in the long run.

“We can be pretty confident that the post-Covid economy will be different from the pre-Covid economy,” says David Wessel, an economist at the Brookings Institution, a think tank in Washington, D.C. “But it may surprise us.”

The pandemic has revolutionized the way Americans work. For decades, the accepted model for how white-collar workers did their jobs was that they gathered in offices, where they could go to meetings and the boss could keep an eye on them. The pandemic, economic experts say, has shattered that model.

According to a Pew Research Center poll of workers whose jobs can be done remotely, only 20 percent of them were working from home all or most of the time before the pandemic. By December 2020, 71 percent were working remotely. Twitter and Facebook are among the companies that now say they’ll let their employees work from home permanently.

“Whatever reluctance there was to embrace working from home before, a big chunk of people who are doing it now are going to continue doing it,” says Robert Reich, a former U.S. labor secretary who is now an economics professor at the University of California, Berkeley.

The pandemic has revolutionized the way Americans work. For decades, gathering in offices was the norm for how white-collar workers did their jobs. In these spaces, workers could go to meetings and their bosses could keep tabs on them. Economic experts say that the pandemic has shattered that model.

According to a Pew Research Center poll of workers whose jobs can be done remotely, only 20 percent of them were working from home all or most of the time before the pandemic. By December 2020, 71 percent were working remotely. Twitter and Facebook are among the companies that now say they’ll let their employees work from home permanently.

“Whatever reluctance there was to embrace working from home before, a big chunk of people who are doing it now are going to continue doing it,” says Robert Reich, a former U.S. labor secretary who is now an economics professor at the University of California, Berkeley.

That has huge economic implications for downtown districts where office buildings tend to be clustered and for commercial real estate. Companies will need less office space if a significant number of their employees are working from home. The coffee places where all those workers grabbed lattes, the delis where they got sandwiches, and the bars where they gathered after work will face new challenges if their regular customers are working from home instead.

There are other possible ripple effects. Wessel predicts that we’ll see a big decline in business travel. Having been forced to rely on Zoom for the past year, many companies have figured out that it’s unnecessary and inefficient to fly employees across the country to attend a three-hour meeting.

That may be a huge savings for many businesses, but it will be an enormous loss for others, including the airline industry, which depends on high-price business class tickets, and hotels, which depend on business travelers.

That has huge economic implications for downtown districts where there tend to be clusters of office buildings and for commercial real estate. Companies will need less office space if a large number of their employees are working from home. The coffee places where all those workers grabbed lattes, the delis where they got sandwiches, and the bars where they gathered after work will face new challenges if their regular customers are working from home instead.

There are other possible ripple effects. Wessel predicts that we’ll see a big decline in business travel. Many companies have been forced to rely on Zoom for the past year. As a result, they’ve figured out that it’s unnecessary and inefficient to fly employees across the country to attend a three-hour meeting.

That may be a huge savings for many businesses, but it will be an enormous loss for others. That includes the airline industry, which depends on high-price business class tickets, and hotels, which depend on business travelers.

Online shopping has seen incredible growth during the pandemic. Americans spent more than $861 billion buying things online in 2020, up a whopping 44 percent over the previous year, according to Digital Commerce 360. That’s the biggest annual jump in online shopping in at least two decades.

What’s happened is that a whole new group of consumers discovered that online shopping is convenient for things they used to think were easier to buy in person. According to a recent survey by TopData, 73 percent of people say they’re shopping more online than they did pre-Covid, and 88 percent say they’ll continue to do so when the pandemic is over.

This is just accelerating a well-established trend. Many malls and mom-and-pop stores were already struggling before the pandemic, as customers embraced the ease of online shopping.

Some analysts see a silver lining for brick-and-mortar stores: After so many months of being cooped up in our houses, Americans may be overjoyed to peruse books in person or try on jeans before buying them. But the immediate future looks tough. More than 12,000 stores closed in 2020, according to Business Insider. Those empty storefronts will have a big impact for years.

“Once you shutter these places, it takes a long time for them to come back,” says Jeffrey Wenger, an economist at RAND, a public policy think tank. “It will change how your city or town feels.”

Online shopping has seen incredible growth during the pandemic. Americans spent more than $861 billion buying things online in 2020, up a whopping 44 percent over the previous year, according to Digital Commerce 360. That’s the biggest annual jump in online shopping in at least two decades.

What’s happened is that a whole new group of consumers discovered that online shopping is convenient for things they used to think were easier to buy in person. According to a recent survey by TopData, 73 percent of people say they’re shopping more online than they did pre-Covid. Another 88 percent say they’ll continue to do so when the pandemic is over.

This is just driving a well-established trend. Many malls and mom-and-pop stores were already struggling before the pandemic. Given the ease of online shopping, these businesses found attracting customers more difficult.

Some analysts see a silver lining for brick-and-mortar stores. After so many months of being cooped up in our houses, Americans may be overjoyed to browse books in person or try on jeans before buying them. But the immediate future looks tough. More than 12,000 stores closed in 2020, according to Business Insider. Those empty storefronts will have a big impact for years.

“Once you shutter these places, it takes a long time for them to come back,” says Jeffrey Wenger, an economist at RAND, a public policy think tank. “It will change how your city or town feels.”

While many white-collar workers have been able to work from the safety of their homes during the pandemic, that wasn’t possible for the huge chunk of workers who deliver our packages, bag our groceries, clean our hospitals, drive our buses, pick up our trash, and do hundreds of other essential jobs that keep our society functioning.

“There’s been an outpouring of appreciation and support for essential workers,” says Molly Kinder, who studies low-wage workers at the Brookings Institution. “I think the word essential is such a positive one. It denotes that these workers have value, that we cannot exist without them.”

This newfound appreciation is starting to translate into increased support for raising the minimum wage. The federal minimum wage of $7.25 an hour hasn’t increased since 2009, and there’s been a big push in the past year to raise it gradually to $15 an hour by 2025. Surveys show that more Americans—about 7 out of 10—now support raising the minimum wage than before the pandemic.

Many white-collar workers have been able to work from the safety of their homes during the pandemic. But that wasn’t possible for the huge chunk of workers who do the essential jobs that keep our society functioning. That includes those who deliver our packages, bag our groceries, clean our hospitals, drive our buses, and pick up our trash.

“There’s been an outpouring of appreciation and support for essential workers,” says Molly Kinder, who studies low-wage workers at the Brookings Institution. “I think the word essential is such a positive one. It denotes that these workers have value, that we cannot exist without them.”

This newfound appreciation is starting to lead to increased support for raising the minimum wage. The federal minimum wage of $7.25 an hour hasn’t increased since 2009. There’s been a big push in the past year to raise it gradually to $15 an hour by 2025. Surveys show that more Americans—about 7 out of 10—now support raising the minimum wage than before the pandemic.

President Biden says he favors raising the minimum wage to $15 an hour. But many small businesses say they can’t afford to pay their employees that much without cutting jobs, and many Republican lawmakers have opposed a mandatory increase.   

There’s also been renewed interest in unionizing. Workplaces such as meatpacking plants have been Covid superspreaders, and more workers are realizing that unions would enable them to band together to demand better protections. Amazon, for example, is facing the most serious unionization effort in its history from warehouse workers in Alabama. (Amazon has argued that unions won’t benefit their employees.)

Americans’ growing support for low-wage workers has to do with our increased awareness of who these people are, Kinder says, and what their lives are like.

“A lot of them are people who are trying to raise a family,” she says.

President Biden says he favors raising the minimum wage to $15 an hour. But many small businesses say they can’t afford to pay their employees that much without cutting jobs. Many Republican lawmakers have opposed a mandatory increase as well.

There’s also been renewed interest in unionizing. Workplaces such as meatpacking plants have been Covid superspreaders. More workers are realizing that unions would enable them to band together to demand better protections. For example, Amazon is facing the most serious unionization effort in its history from warehouse workers in Alabama. Amazon has argued that unions won’t benefit their employees.

Americans’ growing support for low-wage workers has to do with our increased awareness of who these people are and what their lives are like, Kinder says.

“A lot of them are people who are trying to raise a family,” she says.

Traditionally, cities—and the metropolitan areas around them—have been the main engines of our national economy. That’s where most of the jobs have existed, so that’s where most of us had to live.

The pandemic has upended that calculus. Not only has Covid raised some people’s anxiety about living in densely packed cities, but the growing acceptance of remote work means that many white-collar workers have new options.

“There have always been places that were desirable to live but from which you could not earn a living,” says Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania. “But now those are places where you can earn a living.”

This creates opportunities for the nation’s rural areas, which have traditionally been economically left behind. Since the start of the pandemic, there’s been a jump in home sales in rural communities and an increase in the number of kids enrolled in rural school districts, according to Matt Dunne of the Center on Rural Innovation.

While this may open the door for new growth in rural America, economists insist that we shouldn’t count cities out. Cities may look different in the future, but Richard Florida, a professor of urban studies at the University of Toronto, predicts that fear will subside and cities will come roaring back.

“The clustering of ideas and talent” in cities, Florida says, “is a way more powerful force than any infectious disease.”

Traditionally, cities and the metropolitan areas around them have been the main engines of our national economy. That’s where most of the jobs have existed, so that’s where most of us had to live.

The pandemic has upended that reasoning. Covid has raised some people’s anxiety about living in densely packed cities. Beyond that, the growing acceptance of remote work means that many white-collar workers have new options.

“There have always been places that were desirable to live but from which you could not earn a living,” says Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania. “But now those are places where you can earn a living.”

This creates opportunities for the nation’s rural areas. These regions have traditionally been economically left behind. Since the start of the pandemic, there’s been a jump in home sales in rural communities and an increase in the number of kids enrolled in rural school districts, according to Matt Dunne of the Center on Rural Innovation.

This may open the door for new growth in rural America. But economists still insist that we shouldn’t count cities out. Cities may look different in the future, but Richard Florida, a professor of urban studies at the University of Toronto, predicts that fear will subside and cities will come roaring back.

“The clustering of ideas and talent” in cities, Florida says, “is a way more powerful force than any infectious disease.”

For the past few decades, the U.S. economy has become more and more globalized, meaning that fewer products are made in the U.S. because it’s cheaper to make them elsewhere and import them.

Even products that are still manufactured here depend heavily on materials and components from other countries.

There have been benefits to this: All those cheap products available at superstores and clothing retailers wouldn’t be possible without workers in foreign countries who are paid a lot less than Americans. But the pandemic has also revealed the dangers of this approach.

The early days of the pandemic were marked by shortages of many critical products. It turned out that most of the protective gear that health-care workers use to keep themselves safe is made in China, so finding adequate supplies of medical-grade masks, gowns, and gloves was suddenly impossible.

“There’s been a recognition that if you rely too much on supply chains that are long and go to China, we may find ourselves in a bad place if we need something in a hurry,” Wessel explains.

Experts believe this will encourage the U.S. government to subsidize more goods made in America.

“We weren’t manufacturing the things we needed to keep ourselves safe,” says Jamieson of the Annenberg Center. “We’re going to be producing more things in the United States. There’s going to be a push to produce things that are essential here.”

For the past few decades, the U.S. economy has become more and more globalized. That means that fewer products are made in the U.S. because it’s cheaper to make them elsewhere and import them.

Even products that are still produced here depend heavily on materials and parts from other countries.

There have been benefits to this: All those cheap products available at superstores and clothing retailers wouldn’t be possible without workers in foreign countries who are paid a lot less than Americans. But the pandemic has also revealed the dangers of this approach.

The early days of the pandemic were marked by shortages of many critical products. It turned out that most of the protective gear that health-care workers use to keep themselves safe is made in China. As a result, finding adequate supplies of medical-grade masks, gowns, and gloves was suddenly impossible.

“There’s been a recognition that if you rely too much on supply chains that are long and go to China, we may find ourselves in a bad place if we need something in a hurry,” Wessel explains.

Experts believe this will encourage the U.S. government to subsidize more goods made in America.

“We weren’t manufacturing the things we needed to keep ourselves safe,” says Jamieson of the Annenberg Center. “We’re going to be producing more things in the United States. There’s going to be a push to produce things that are essential here.”

There’s a saying in Washington that big crises create big opportunities. Many public policy experts are now hoping that the public health and economic disaster of the past year prompts a new openness to consider reforms.

“I think economic shocks often lead to rethinking the status quo,” Wenger says. “You clearly saw that during the Great Depression. Once the pandemic exposed the fragility of the system, then all the systems become open for debate.”

That’s essentially what happened in the 1930s with Franklin D. Roosevelt’s New Deal in response to the Great Depression. With 25 percent of the country unemployed and lines of desperate people waiting for food handouts, Americans were willing to try a radical new approach. The New Deal created, among other things, the country’s first unemployment insurance system, protections for workers, and a major public-works program to give jobs to out-of-work Americans.

There’s a saying in Washington that big crises create big opportunities. Many public policy experts are now hoping that the public health and economic disaster of the past year prompts a new openness to consider reforms.

“I think economic shocks often lead to rethinking the status quo,” Wenger says. “You clearly saw that during the Great Depression. Once the pandemic exposed the fragility of the system, then all the systems become open for debate.”

That’s essentially what happened in the 1930s with Franklin D. Roosevelt’s New Deal in response to the Great Depression. At the time, 25 percent of the country was unemployed. There were long lines of desperate people waiting for food handouts. That increased the willingness of Americans to try a radical new approach. The New Deal created, among other things, the country’s first unemployment insurance system, protections for workers, and a major public-works program to give jobs to out-of-work Americans.

Might the country be poised for a similar policy rethink now?

“We’ve gone through a trauma as a society,” says Reich, the former labor secretary. “When you do that, everyone is much more willing to consider reforms.”

But, he cautions, we’re not likely to see the kind of massive structural reforms that took place during the Depression. “Unlike 1933, we still have a very divided country,” Reich explains. “With FDR, the whole country was behind him on doing something quite dramatic. We don’t have any political consensus behind what needs to be done now.”

Americans are sharply divided, for example, on whether the government should provide health care to all Americans, as many nations do, and to what extent the government should offer economic assistance to the people in society who need it most. These kinds of disagreements could
limit the extent of any changes.

But there’s little doubt that the pandemic will at least get people talking seriously about them.

“This is a chance for the country to have a bigger discussion about what its future is going to look like in 50 years,” says Jamieson. “In some ways, it’s really exciting.”

Might the country be ready for a similar policy rethink now?

“We’ve gone through a trauma as a society,” says Reich, the former labor secretary. “When you do that, everyone is much more willing to consider reforms.”

But, he cautions, we’re not likely to see the kind of massive structural reforms that took place during the Depression. “Unlike 1933, we still have a very divided country,” Reich explains. “With FDR, the whole country was behind him on doing something quite dramatic. We don’t have any political consensus behind what needs to be done now.”

Americans are sharply divided on issues. That’s caused many questions about our nation’s future to remain unresolved. For example, should the government provide health care to all Americans, as many nations do? And to what extent should the government offer economic assistance to the people in society who need it most? Disagreements over these pressing issues could limit the extent of any changes.

But there’s little doubt that the pandemic will at least get people talking seriously about them.

“This is a chance for the country to have a bigger discussion about what its future is going to look like in 50 years,” says Jamieson. “In some ways, it’s really exciting.”