What Happens if Jobs Never Come Back?

Long before the Covid-19-induced crash, workers were facing entrenched financial pressures. Years of poor policy design, offshoring, technological advances, stagnant minimum wages and declining unions have extracted a big toll.

Inflation-adjusted wage growth of typical workers since the early 1970s has been virtually flat at 0.2% per year. The value created by workers continued to move up to businesses and investors. While employees, who primarily rely on wage income and not investments, saw ballooning health care, schooling and housing costs that far outpaced inflation and wages.

Remember, it was only 2008 when we experienced an “unprecedented” worldwide economic collapse. Trillions of dollars of value vanished in thin air, while millions of people lost their savings, homes and 401K retirement nest eggs.

The subsequent rebound brought stock market highs and full, but uneven employment. Real wage growth barely budged. Then came Covid-19.

What full employment really means

An unemployment rate of just under 5% is considered full employment. This rate means that people who want a job will likely have one or will get one soon. But that rate doesn’t really exist.

The U.S. Bureau of Labor Statistics does not count those who stopped looking over the past four weeks. This leaves a big gap for the real number of unemployed, underemployed and barely attached to the workforce. True unemployment numbers are always higher by at least a few percentage points.

In the case of Covid-19, the number was significantly higher due to furloughs and others not being counted in official unemployment numbers. Many of these workers will be let go as the anemic economy limps on.

Why this economic crash is different

Notwithstanding the enormous human toll of Covid-19, the impact on the labor force and society will far outlast it. One side-effect the pandemic is job automation will continue to gain momentum at a difficult time for us to absorb it.

Employers will turn to robotic and AI (artificial intelligence) automation to augment, and many times replace, current and future employees. It not only saves labor costs, it also helps future-proof businesses from the workforce disruptions like we’re experiencing now.

In January 2019, the Brookings Institute released a study citing that 36 percent of U.S. employment (52 million jobs) is at risk for high exposure to automation 2030. Another 57 million are at medium risk. That is a significant percentage of the 164.6 million in the U.S. workforce we have today.

We are unprepared for the coming wave of automation

Covid-19 has exposed many weaknesses in our government’s ability to handle crisis, even when that risk was in plain sight. The pandemic has exposed how little investment we’ve made in the health and wellbeing of workers over the decades—all in the shadow of massive wealth and stock market gains.

This transition will be hard on the labor force and the country. The massive technical and social shift that may rival the economic upheaval the country experienced by the advent of the Industrial Age if not handled well. One thing for sure, it will change our country, society and how we view work forever.