On Thursday, November 12, the Fed Chairman Jerome Powell spoke to a panel at the European Central Bank’s Forum on Central Banking. The topics focused on the COVID-19 pandemic and how the world economy can start moving toward recovery. Mr. Powell spoke in length on how the recent pandemic has accelerated certain trends in the economy. Technology, telework, and automation have all exploded since COVID-19 first took hold over seven months ago. The Fed chairman warned that while America is recovering, it is recovering to a completely different economy. This article will focus on the factors that are causing such a rapid change in the US economy. We will delve into what the future holds as the American people adjust to the new normal.
The Rise of Telework
One of the biggest changes we are seeing in the US economy is the rise of telework. Before the pandemic, more than 26 million Americans worked at least part-time from home. The U.S. Bureau of Labor Statistics found that from 2005 to 2015, the number of Americans participating in telework increased by over 115%. While these numbers seem like a lot, it only represents around 16% of America's total workforce. Many employers, before the pandemic, discouraged telework. According to Isabel Sawhill, a Senior Fellow at Brookings University, many employers did not want to put in the effort required to implement telework strategies. Isabel Sawhill says, “This inertia probably reflects sticky work cultures as well as a lack of interest from employers in investing in the technology and management practices necessary to operate a tele-workforce.”
However, once states started to issue stay at home orders, companies needed to scramble to implement practices suitable for telework. Now, companies are finding that telework may not need to be a temporary solution. Recently, Susan Athey, a respected economist, spoke to the Washington Post on Telework's lasting trend. Susan Athey had this to say, “People will change their habits, and some of these habits will stick. There’s a lot of things where people are just slowly shifting, and this will accelerate that.” It is now estimated that by the end of 2020, more than half of working Americans will at least work part-time from home.
Telework provides many benefits for employees. According to a survey conducted by CoSo Cloud, 77% of those polled found that they were more productive when working from home. Also, over half of those polled loved the fact they could design their own schedules to better fit their personal lives. However, loneliness seems to remain a huge issue with telework. According to the social networking company Buffer, more than 20% of those surveyed would not choose to participate in telework due to loneliness.
Telework is reshaping how the American workforce operates. Before the pandemic, many Americans chose to live in large cities to be closer to potential jobs. However, now that telework is the new normal, Americans choose to leave the city and move to the suburbs where the cost of living is much cheaper. This drastic move in the workforce is causing a massive upheaval in commercial real estate. Office buildings all over the country remain empty as more employers are deciding to make telework permanent.
The Rise of Automation
Automation is not a new phenomenon in the American workforce. Machines have been used in America since the Industrial Revolution. However, over the past several decades, with the rise of personal computing power, the American economy sees the potential that automation has to offer.
At the beginning of the pandemic, many people had to stop working to help prevent the spread of COVID-19. Companies, not wanting to lose out on profits, turned to technology to fill in the gap. These companies have now discovered that not only is using technology cheaper than hiring employees, but it delivers the same productivity. Elisabeth Reynolds, the executive director of MIT’s Task Force on the Work of the Future, believes that many of the jobs lost during the pandemic are not coming back. Here is what she had to say on the matter, “It is fair to assume that some firms have learned how to maintain their productivity with fewer workers, and they will not unlearn what they have learned.”
Some of the most hard-hit sectors include logistics, factory work, maintenance, and medical. In 2018 just over 100,000 robots were used to replace jobs in these various fields. The Financial Times believes that the number of robots replacing jobs will increase to over 500,000 by the end of 2023.
Robots are not the only thing disrupting the American workforce. The way Americans interact with technology is also changing. According to a Mckinsey global survey, digital interaction with customers is growing at a rate 25 times faster than before the pandemic began. People choose to do shopping, schedule appointments, and perform other tasks from the comfort of their home. This acceleration of digital interaction runs the risk of jeopardizing millions of jobs. Retail workers, receptionists, and other customer-facing jobs are evaporating at a record pace. Companies point to lower costs and ease of use for the reasoning behind choosing digital interaction over physical interaction.
The Future of The US Economy
Advances in technology are often good for the growth and overall health of an economy. However, Jerome Powell fears that the growing pains will cause severe disruption for working Americans. Mr. Powell suggests that even after the pandemic is over, there will still be workers who will need assistance. He stressed that retail and restaurant workers might never recover completely. Mr. Powell stated, “Even after the unemployment rate goes down and there's a vaccine, there's going to be a probably substantial group of workers who are going to need support as they're finding their way in the post-pandemic economy, because it's going to be different in some fundamental ways.” Jerome Powell urged Congress to pass more stimulus for the American people at the end of his remarks.
Bibliography
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Guyot, Katherine, and Isabel V Sawhill. “Telecommuting Will Likely Continue Long after the Pandemic.” Brookings, Brookings, 6 Apr. 2020, www.brookings.edu/blog/up-front/2020/04/06/telecommuting-will-likely-continue-long-after-the-pandemic/.
Marinova, Iva. “2020's Remote Work Statistics (Productivity, Income, Trends).” Review42, 24 Sept. 2020, review42.com/remote-work-statistics/.
Romei, Valentina. “Pandemic Boosts Automation and Robotics.” Financial Times, Financial Times, 20 Oct. 2020, www.ft.com/content/358f6454-e9fd-47f3-a4b7-5f844668817f.
Tappe, Anneken. “The Economy as We Knew It Might Be over, Fed Chairman Says.” CNN, Cable News Network, 12 Nov. 2020, www.cnn.com/2020/11/12/economy/economy-after-covid-powell/index.html.
