US Workforce Bounces Back from Covid Pandemic

The Covid pandemic affected the US labor market, but not in the way you might have thought. The Covid pandemic caused a deep economic recession that had an immediate negative impact on labor. People lost their jobs, others were forced to work from home, and some had to work under unsafe conditions. As the pandemic evolved, however, society adapted in unexpected ways that over time brought positive changes for labor that many experts think will last into the future.

The Covid pandemic emerged in the US in early 2020, bringing severe negative impacts on labor. Government mandated closure of most businesses meant that millions lost their jobs, almost overnight. Others were forced to try working remotely from home, yet people didn’t know how to do this or were not equipped to do so. Some businesses, such as grocery stores and food producers, and some public services, such as medical clinics and transportation, needed to remain open, and this required parts of the labor market to work in person under dangerous conditions. As part of a transition to online shopping and work, a lot of big tech companies such as Google, Amazon, and Zoom grew rapidly while smaller businesses that could not compete online were forced out of business. This caused more wage cuts, closures and unemployed workers. As the pandemic set in, and no immediate end was in sight, ever more workers sought to adapt to a labor market that encouraged work from home, but this created technological and practical challenges, from limitations on wifi and computer know-how to a lack of child care and privacy. People found it difficult to be productive with so many distractions surrounding them. This further increased pressure for employers to reduce the costs of labor. According to Christopher Gorog, a small business owner and investor based in Northern California,“This created a situation where employers had an incentive to no longer hold on to their workers. I had to let some people go, and I cut everybody's salaries, myself included, by 25%”(Christopher Gorog).

As the pandemic set in, however, these conditions began to change. Businesses adapted to a decentralized workforce based outside the office, and on-line workers became more productive from home. In addition, parts of the labor market began looking at their work decisions in new ways. Gary Paoli, owner and director of a local consulting company, said “Before the pandemic I would not have encouraged so many people on our team to work from home, not even for a week. Now, I do not mind too much where people work, even for long periods of time, provided their work environment enables them to be happy and productive. Covid has changed my views on this as an employer” (Gary Paoli). Christopher Gorog, whose main business was design and manufacture of t-shirts found opportunities in the pandemic that helped his business and the public by using his t-shirt material to produce low-cost, effective masks. This helped to make up for lost revenues, which enabled him to keep more people on payroll.

As the pandemic became established and the economy adapted, there were early signs that labor might benefit in unexpected ways. One central part of this was the federal government’s Payroll Protection Plan, or PPP, which gave small businesses forgivable loans to keep employees on their payroll. According to Gorog, “The whole goal of PPP was to help small businesses keep their workforce, and to a large degree it was pretty successful. The PPP was well designed, and though it was abused by some people, it’s probably true that tens of millions of jobs were saved by the PPP” (Christopher Gorog). The PPP was temporary, but it was important because it enabled many people to plan ahead for their next job, in case their current job supported by PPP would end. During this time, parts of the labor market learned new skills, others started online businesses and still others found new jobs in sectors of the economy that were not affected by the pandemic. A further benefit of the pandemic for labor is that wages began to rise. Workers in low wage parts of the economy such as fast food and unskilled services demanded higher wages in order to come back to work. As the economy re-opened, demand for labor became much higher than supply, and this forced employers to pay higher wages. Labor experts believe this trend will continue and wages will rise, especially for employees who work in-person and continue to face health risks created by the pandemic.

This article shows that while the US labor market was severely impacted with an economic recession when Covid hit, the economy and labor adapted. Then workers benefited from the PPP which helped small businesses keep their work force and saved jobs. Then they really benefited from wage inflation.