The long-term economic impacts of COVID-19 will be enormous, but most of the discussion that I’m reading focuses on the more immediate priorities. This makes sense because of the urgency of skyrocketing unemployment, overwhelmed hospitals, and the tolls in life and health. Even as we deal with the immediate issues, we should also start to conceptualize how this pandemic will shape society in the future.
Technologies that enable companies and organizations to operate virtually are, of course, going to enjoy a huge boost. While many businesses already rely on virtual teams, the value of this capability is vastly more evident in the current environment. What’s more, greater familiarity with these technological platforms will also encourage companies to allow people to work remotely. It is entirely possible that more organizations will actively encourage people to work from home. While traditional managers prefer to have people congregate in an office setting, COVID-19 highlights the benefits of virtual teams.
While many studies have documented the financial fragility of a large proportion of American households, COVID-19 highlights the situation. Many households do not have resources to deal with a surprise expense of a few hundred dollars, much less to cope with being unemployed. Increasing numbers of freelance and gig workers, who typically have no employer-provided safety net, rely entirely on the number of hours they work each week. High levels of household debt, which have now exceeded the previous peak in 2008, also increase financial fragility. Larger fixed monthly costs from debt repayment make it much harder to economize in hard times. Financial fragility is less obvious when unemployment rates are low and interest rates make it easy for people to borrow. The society-wide shock of COVID-19 will reveal the perilous financial situation of many families.
The COVID-19 pandemic also highlights that the functioning of wealthy countries depends on continuous and ceaseless consumption of a vast array of goods and services. To put this differently, it appears that the U.S. economy depends on consumerism to function effectively. In response to COVID-19, Americans have massively reduced their discretionary spending and, apparently, the economic implications are dire. People are still eating, consuming media, and heating their homes, but they are not eating out, not taking vacations, and are otherwise cutting out non-critical spending. The news media suggests that these cutbacks in consumption could bring the U.S. economy to its knees. Might there be a form of an economy that does not depend on such a high degree of consumerism?
Another likely outcome from COVID-19 is that companies will accelerate the adoption of automation. For businesses facing a situation in which people cannot work in close proximity, if at all, more automation may be the difference between failure and survival. And, of course, increased automation displaces human workers, with all of the attendant implications.
Finally, it is clear that wealthier people are far better off in coping with COVID-19 than poorer people. Many well-paying professional jobs can be performed from home, while low-wage jobs are more likely to require physical interaction with others. The service jobs lost during COVID-19 are mostly on the low end of the wage scale. COVID-19 is highlighting socioeconomic inequality and will also tend to exacerbate the divide between the wealthy and everyone else.