Written by Andrew Miller
August 28, 2020
We saw the first confirmed cases of COVID-19 in the US back in late January and lockdowns became widespread by the end of March. There was a general hope back then that if we all behaved properly and beat the virus into submission, that life would return to semi-normal by the end of the Summer. Clearly, that didn’t happen, and there is a growing belief it won’t happen until a vaccine is approved and widely administered.
What we hoped would be a brutal, but short hit to the economy is turning into a much longer economic event that will have significant and permanent impacts on American workers. Let’s explore where the American job stands today six months into the COVID-19 pandemic and where this all could ultimately be headed.
Where We Stand Today
Many large employers who were in weak positions before the COVID-19 pandemic have declared bankruptcy or are close to doing so. While the retail and hospitality industries have been hardest hit, other industries have suffered as well. A short list of some of the best-known companies includes:
Even if these companies survive, they will likely be smaller entities with fewer locations. It’s not just the big names. “One-third of bars and lounges have permanently closed nationwide, up from about one-quarter in late June, according to the small business data analysis firm Womply. So have one-fifth of restaurants and 12% of retailers.” All this means one thing – the disappearance of lots of jobs.
The story for workers who have managed to hold onto jobs is not rosy either. “The number of Americans who have endured wage cuts or reductions in work hours isn’t definitive. But federal data, combined with economic research, puts the figure at around 11 million. In July, more than 7 million Americans reported that they were working part time because their hours had been cut — far more than the 2.8 million who said so in February — the government said. And from March through June, businesses reduced the pay of an additional 6.8 million workers.”
It is true that employment has started to revive as the Spring lockdowns have ended. More than 7 million jobs were added back to the economy in May and June after 20.8 million jobs were lost in April. But the number of new jobs added dropped sharply to 1.8 million in July. “Data in recent weeks has shown the economy stalling out in July as the number of COVID-19 cases rose across the country. ADP’s private payroll data for July showed that just 167,000 private sector jobs were created last month, far short of expectations.” Clearly, it’s going to be a long time before the US gets back a majority of the lost jobs, and many jobs many never return.
Changes in the Work Paradigm
It is becoming clear with each passing day that any hope of a full economic recovery depends on the widespread administration of an effective COVID-19 vaccine, which will take at least until 2021. But will a vaccine be enough to bring back 10 million jobs? The pandemic has forced many employers to reassess how work gets done and reevaluate the need for employees. Employers have always sought technology to increase operational efficiency, but there are signs that the pandemic is accelerating the use of technology at the expense of the worker.
You don’t need to be a compensation professional to see these trends. Anyone who has recently called the cable company for technical support knows that they now put you through a 10-minute automated “self-help” routine before they will let you talk to a human. More locally, my bank branch has been closed for months with a sign on the front door that has a phone number to call if you need access to your safe deposit box. Meanwhile, many of my neighborhood restaurants have stopped taking cash for takeout, thereby eliminating the need for cashiers. Some sushi restaurants are even using robots to roll sushi. It’s unclear if these trends will reverse when a vaccine is found.
While the retail economy has been hit especially hard, the white-collar workforce is also undergoing fundamental shifts. Most of my friends and relatives who have office jobs have been working remotely for months, many of them glad to be free of hellish commutes and cubicle life. While the new remote reality has made some activities like employee onboarding more difficult, employers have realized that sending people home doesn’t necessarily result in a catastrophic drop in productivity. Based on these experiences, how many office workers will be rushing back to 40 hours/week in a cubicle when the pandemic ends? How eager will employers be to pay for large swaths of downtown office space in the future? Moreover, as the need for downtown office space decreases, so does the need for restaurants, bars, and related support businesses, leading to even more permanent job loss.
Long-Term Thoughts on the Future
While some jobs will always need to be performed by humans, many other jobs will continue to be automated away. In the long term, there simply may not be enough jobs to go around as the nation’s population is forced to depend on fewer and fewer people that can find jobs. There is already evidence for this in the Labor Force Participation Rate (the percentage of the population that is either working or actively looking for work.) The Labor Force Participation Rate has declined from a high of 67% in 2001 to a low of 60.8% in May, only recovering to 61.4% in July after being over 63% for most of 2019. A smaller percentage of people working also means a smaller percentage of people paying into Social Security, which is now expected to run dry in just 14 years. If the Labor Force Participation Rate continues to drop significantly, there will likely be further paradigm shifts in how work gets done and how wealth gets redistributed.
What might these paradigm shifts look like? Well if Andrew Yang had managed to secure the presidency, he was hoping to allocate every single American adult a freedom dividend of $1,000 a month. Another radical possibility would be the official adoption of a four-day work week with mandatory overtime pay over 32 hours. Of course, employers would balk at such a change, but it would be the fastest way to increase employment. Most employers would rather pay overtime than incur the additional costs of hiring new employees, of which the biggest cost is providing ongoing health insurance. Universal healthcare would remove that burden from employers, which might make the four-day work week more palatable, but that is a subject for another blog. Will any of this happen in our lifetimes? Your guess is as good as mine.
Short -Term Thoughts for the Compensation Professional
COVID-19 has altered the duties of many jobs and created some new ones. Employees in apparel companies like Brooks Brothers and New Balance are now producing surgical masks and gowns, while Tesla, Ford, and General Motors have retooled their factories to produce ventilators from car parts after idling their automotive plants due to plummeting consumer demand. Many other jobs have revised work procedures to ensure health and safety. Meanwhile, new jobs like “Temperature Screener” and “Contact Tracer” are becoming more ubiquitous every day. Salary.com recently added Temperature Screener to our CompAnalyst database, and will be adding Contact Tracer in September.
Experienced compensation professionals know that having accurate, current job descriptions is a pre-requisite for effective recruiting and compensation management. If the pandemic has changed the way work gets done in your organization, now would be a good time to review and revise your organization’s job descriptions. Salary.com’s Job Architect may prove useful if your organization’s job descriptions need a lot of work. Given the current economic challenges, it is more important than ever that organizations manage their human capital decisions carefully, and the strategic use of HR technology can help compensation professionals perform their role as guardians of their organizations human and financial assets.
Download our white paper to further understand how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.