Latest / Stephanomics / What’s Really Causing the Labor Shortage

Transcript

What’s Really Causing the Labor Shortage · Stephanomics

0:00
Speaker 1: I was talking to one agriculture company about whether it
0:02
Speaker 1: would help to get prisoners to collect the harvest, and
0:06
Speaker 1: they said there are a number of problems, including that
0:08
Speaker 1: they might not be very good at it. They might,
0:11
Speaker 1: you know, you need particular set of skills, especially if
0:14
Speaker 1: you're picking soft fruits, for example, and also sometimes the
0:17
Speaker 1: prisoners run away, which is another problem. Hello, and welcome
0:26
Speaker 1: to Stephanomics, the podcast that brings the global economy to you.
0:29
Speaker 1: I'm Stephanie Flanders, and this week we're investigating why employers
0:34
Speaker 1: on different sides of the Atlantic are considering extreme solutions
0:37
Speaker 1: to their labor shortages. But an economy with millions of
0:40
Speaker 1: jobs they can see can still somehow be one in
0:43
Speaker 1: which unemployed people struggle to find work. It's all the
0:48
Speaker 1: flip side, the human side of the supply chain snarl
0:51
Speaker 1: ups we come across so often these days, the post
0:54
Speaker 1: COVID economy with demands still gaining pace and inflation and
0:58
Speaker 1: wages heading up, but at least four million fewer people
1:02
Speaker 1: in work today in the US than before the pandemic.
1:06
Speaker 1: Later on, I'll ask Jason Furman, previously President Obama's top
1:10
Speaker 1: economic advisor, to help me solve the riddle of the
1:13
Speaker 1: missing American worker. I'm also here why agricultural companies in
1:18
Speaker 1: Russia are weighing the pros and cons of using prisoners
1:21
Speaker 1: to bring in the crops. But first we asked US
1:24
Speaker 1: economy reporter Jill Sharp to give us a taste of
1:27
Speaker 1: the US jobs market at ground level. Well, I think
1:40
Speaker 1: that right now everybody is hiring, but they're only hiring
1:43
Speaker 1: for lopaying job. They're hiring for positions as only one
1:49
Speaker 1: day a week, two days a week, and people cannot
1:52
Speaker 1: make it off of that. That's Precious Briggs, a thirty
1:55
Speaker 1: two year old whose stream of working as a Las
1:57
Speaker 1: Vegas cocktail server came to a sudden halt last April
2:01
Speaker 1: after COVID nineteen shut down America's gambling paradise. After restrictions lifted,
2:06
Speaker 1: she expected her former employer to hire her back, but
2:09
Speaker 1: the call never came. Today, Precious is among over four
2:13
Speaker 1: million Americans who are unemployed were missing from the labor
2:17
Speaker 1: market compared to pre pandemic levels. Like many others, she's
2:21
Speaker 1: used up her unemployment and pandemic benefits from the government,
2:24
Speaker 1: and she's getting by on rental assistance, Medicaid, and support
2:28
Speaker 1: from her family. She's hopeful that she'll land a full
2:31
Speaker 1: time job as Vegas continues to reopen. I definitely want
2:35
Speaker 1: to be in the casino. I love the people and
2:37
Speaker 1: I love the atmosphere there, So that's definitely something that
2:40
Speaker 1: I love, and that's that. It was a dream of
2:42
Speaker 1: mine to leave Little Louisiana, my little town, and come
2:46
Speaker 1: here in Tacktail emborsing here. When the pandemic arrived in
2:52
Speaker 1: the US last year, millions of American workers abruptly lost
2:56
Speaker 1: their jobs. Now, as the economy recovers, a puzzle has
3:01
Speaker 1: emerged in the labor market. The country at over ten
3:04
Speaker 1: million job openings at the end of August, according to
3:07
Speaker 1: federal government data, and that number might have increased over
3:10
Speaker 1: the last two months. The job posting website indeed estimates
3:15
Speaker 1: there may now be as many as eleven million unfilled openings.
3:19
Speaker 1: But while hiring is picked up just recently with over
3:22
Speaker 1: five hundred thousand jobs added in October, millions remain unemployed
3:26
Speaker 1: or have left the labor market since the pandemics started.
3:30
Speaker 1: Economists and policymakers are all wondering where they've gone. Here's
3:34
Speaker 1: Julia Pollock, chief economist at the online Jobs marketplace zip recruiter,
3:40
Speaker 1: the labor markets, the matching market where you have to
3:43
Speaker 1: choose something and be chosen by it, and where all
3:46
Speaker 1: the jobs are very very differential, the works are very
3:48
Speaker 1: very different and so having you know the same number
3:51
Speaker 1: of job openings and of unemployed or underemployed workers does
3:56
Speaker 1: not imply that there will be a very simple direct match.
4:01
Speaker 1: For example, while job postings and warehousing and transportation and
4:05
Speaker 1: e commerce related companies have exploded, there's been a decline
4:09
Speaker 1: in brick and mortar retail postings during the pandemic. Workers
4:13
Speaker 1: can't swap out their old job for new one quickly.
4:16
Speaker 1: It takes time for people to build up the networks
4:19
Speaker 1: down the skills that allow them to move from one
4:21
Speaker 1: intitut chunnel. In interviews, out of work Americans described myriad
4:26
Speaker 1: challenges preventing them from seeking or winning full time jobs
4:30
Speaker 1: like precious. Some say employers are offering fewer hours and
4:34
Speaker 1: lower wages. Others are caring for children or elderly family members,
4:39
Speaker 1: limiting their ability to work. Many are scared of contracting
4:42
Speaker 1: the coronavirus, and some have rethought their careers and opted
4:46
Speaker 1: out of traditional employment. Altogether, they're getting by through patchwork
4:50
Speaker 1: of help, state jobless benefits, federal and local safety net programs,
4:55
Speaker 1: help from family and friends. A lucky few, like Josh
5:02
Speaker 1: Organ of Omaha, Nebraska, of ditch their workaday lives for
5:05
Speaker 1: riches in cryptocurrency. So it was really hard sitting in
5:09
Speaker 1: my office making a few dollars a day or whatever
5:13
Speaker 1: it was, and then you know, taking a trade on break,
5:18
Speaker 1: on my lunch break and making you know, my whole
5:20
Speaker 1: day's age in five minutes. During the pandemic, the thirty
5:24
Speaker 1: one year old who used to trade crypto on the side,
5:26
Speaker 1: began to feel increasingly frustrated with his day job. He's
5:30
Speaker 1: trained as a pediatric nurse and was managing a hospital
5:33
Speaker 1: dialysis unit. Last summer, he hired a financial advisor after
5:37
Speaker 1: his wife insisted quit his job and jumped full time
5:41
Speaker 1: into the fast paced world of crypto. I do remember
5:45
Speaker 1: quitting my job and then the next week I made
5:49
Speaker 1: like eighty thou dollars on a trade, like in just
5:51
Speaker 1: in the first week, And I was like, okay, cool,
5:53
Speaker 1: I just made my whole yearly salary at my job
5:57
Speaker 1: in a week after quitting crypto. And that was right
5:59
Speaker 1: back when the market really started to boom right. Since then,
6:03
Speaker 1: he's made more than seven figures and the family has
6:06
Speaker 1: been able to purchase a vacation home. He loves the
6:09
Speaker 1: flexibility of choosing his own hours and being able to
6:11
Speaker 1: care for his newborn. He also has more time for
6:14
Speaker 1: exercise and meditation, which he says he ignored for the
6:17
Speaker 1: better part of the last decade. Now I'm like starting
6:20
Speaker 1: to take care of myself a little bit more too,
6:22
Speaker 1: and like trying to be more healthy, um so that
6:25
Speaker 1: way I can obviously live longer, just for my family
6:27
Speaker 1: and my son. To be sure, many aren't so fortunate,
6:32
Speaker 1: and a survey of job seekers that zip Recruiter did
6:34
Speaker 1: in September, many people said they're relying on friends and
6:37
Speaker 1: family to make ends meet, and more people than ever
6:40
Speaker 1: also want a remote job, but those jobs remain concentrated
6:44
Speaker 1: in specific industries, so that's another source of the mismatch.
6:48
Speaker 1: Wh people are are holding out for remote work opportunities
6:52
Speaker 1: which have exploded in business and financial services and insurance
6:57
Speaker 1: and tech, but which are non existing in in other
7:00
Speaker 1: industries um like. But now people actually have a realistic
7:05
Speaker 1: prospect possibly finding a remote job. Those people are are
7:10
Speaker 1: waiting out for those jobs in part because the labor
7:13
Speaker 1: market is tight. People are also more empowered to be
7:15
Speaker 1: picky about respondents in a recent ZIP recruiter survey, so
7:20
Speaker 1: they don't feel the financial pressure to accept the first
7:23
Speaker 1: job offer they receive. And one final reason Americans are
7:29
Speaker 1: staying home their kids. Parents have pointed to the erratic
7:33
Speaker 1: nature of school closings and the high cost of childcare
7:37
Speaker 1: for their reluctance to re enter the workforce. Zack McGrath
7:41
Speaker 1: is a single father of an eleven year old son
7:43
Speaker 1: with special needs. He used to work in TV and
7:45
Speaker 1: film production before the pandemic and is now looking outside
7:49
Speaker 1: the industry because the hours don't give him the flexibility
7:51
Speaker 1: to look after a son. If classrooms shut down because
7:54
Speaker 1: of COVID cases, the school closing, you know, and even
8:00
Speaker 1: just the random four day quarantines are like the sword
8:04
Speaker 1: of Damocles. And even if I find this ideal situation,
8:09
Speaker 1: you know that it's clearly not out there. That's something
8:13
Speaker 1: that no employer is gonna want to deal with. You know,
8:16
Speaker 1: just for three days, I can't come in, I can't
8:19
Speaker 1: do anything. It's not gonna happen. So in a minute,
8:28
Speaker 1: I'm going to talk to the former head of President
8:30
Speaker 1: Obama's Council of Economic Advisors, about what's happening to the
8:34
Speaker 1: US labor market and just how this great mismatch between
8:38
Speaker 1: jobs and workers is going to get resolved, if it
8:41
Speaker 1: gets resolved. But first I want to head over the
8:43
Speaker 1: Atlantic to tell you about another country also looking for workers, Russia.
8:49
Speaker 1: Bloomberg Economy reporter on your Quinn in Moscow is here
8:52
Speaker 1: to explain on your thanks for joining Stephanomics. Russia is
8:57
Speaker 1: facing a similar problem filling jobs across the economy. But
9:01
Speaker 1: I guess in this case it's no mystery where the
9:04
Speaker 1: workers have gone, is it. Yeah, that's right, it's definitely so.
9:09
Speaker 1: Russia has long had a problem with its aging population
9:12
Speaker 1: because of low birth rates during the turmoil in the
9:16
Speaker 1: nine nineties after the fall of the Soviet Union UM,
9:20
Speaker 1: but now it's got more things that are adding to that.
9:22
Speaker 1: So for a long time the UM it relied on
9:28
Speaker 1: migrant workers coming from poorer countries that were part of
9:32
Speaker 1: the Soviet Union like Uzbekistan, Tajikistan and Kyrgyzstan to fill
9:36
Speaker 1: the gap that it couldn't fill with domestic workers. But
9:40
Speaker 1: after the pandemic that got a lot more difficult because
9:44
Speaker 1: traveling was more difficult and countries closed borders, and a
9:46
Speaker 1: lot of those people have gone home. So before the
9:48
Speaker 1: pandemic um it was estimated there about four point five
9:53
Speaker 1: million migrant workers in Russia, which makes it one of
9:56
Speaker 1: the top four destinations for migrant workers in the world.
10:00
Speaker 1: But now we think it's about three million people um
10:05
Speaker 1: and all that has been made worse by high death
10:09
Speaker 1: rates from coronavirus as the government has been reluctant to
10:14
Speaker 1: lockdown the economy and vaccine hesitancy has been a big problem.
10:20
Speaker 1: How was it manifesting itself? This this shortage of labor?
10:24
Speaker 1: Where where do you see that? I know you're often,
10:26
Speaker 1: I'm sure talking to businesses across the economy. Yeah, so
10:31
Speaker 1: like in some other countries. At first there were big
10:35
Speaker 1: shortages in agriculture, but now that's spreading across the economy.
10:40
Speaker 1: So retail companies are also struggling to get enough people.
10:45
Speaker 1: Another factor is that coreer services are growing really fast,
10:50
Speaker 1: and they would have been staffed a lot by migrant
10:52
Speaker 1: workers in the past, but because those people aren't around
10:56
Speaker 1: anymore than people are shifting to work as carriers and
11:00
Speaker 1: leaving gaps in other parts of the economy. So UM.
11:04
Speaker 1: For example, X five Group, which is one of Russia's
11:08
Speaker 1: biggest retailers, said that high mortality rates are causing problems
11:13
Speaker 1: for its labor supply. UM and russ Agar, which is
11:18
Speaker 1: one of Russia's biggest agriculture companies, has been increasing wages
11:22
Speaker 1: to try and to try and get enough people and
11:26
Speaker 1: has had to try and automate some more of its
11:29
Speaker 1: work as it struggled to find enough stuff. And obviously
11:34
Speaker 1: one of the questions, you know, there's the there's been
11:37
Speaker 1: a talk of labor shortages and lots of different countries
11:41
Speaker 1: and UM. One of the question marks is about how
11:45
Speaker 1: much is going to feed into wages and how much
11:47
Speaker 1: that will then feed inflation and make this inflation that
11:51
Speaker 1: we're seeing in a lot of countries not so as
11:53
Speaker 1: not as temporary as as people were hoping. How is
11:57
Speaker 1: that playing out in Russia? Wages go up, is that
12:00
Speaker 1: pushing up inflation? Yeah? So, like I said, rus I
12:04
Speaker 1: grow say they've raised wages UM up to ten percent.
12:10
Speaker 1: In some sectors wags have been increasing more than that,
12:15
Speaker 1: and that's definitely feeding into inflation and inflation here is
12:20
Speaker 1: UM is a political problem for put into because um,
12:25
Speaker 1: it really hits living standards. And at the moment, uh,
12:30
Speaker 1: it's how high is it now? At the moment, it's
12:32
Speaker 1: at the highest in five years. It's about eight percent,
12:36
Speaker 1: which is a way above the Bank of Russia's target.
12:40
Speaker 1: And so Bank of Russia has been aggressively hiking rates
12:45
Speaker 1: to try and bring inflation down, but so far it
12:49
Speaker 1: doesn't seem to be having much of an effect. So
12:53
Speaker 1: this isn't just a problem for the economy. It also
12:57
Speaker 1: has the potential to slow down growth in Russia and
13:03
Speaker 1: even undermine Putin's popularity. Yeah, if you can't get so,
13:08
Speaker 1: you've got some you've got inflation and wages going up.
13:10
Speaker 1: But also the central bank kind of slamming on the brakes,
13:13
Speaker 1: slowing economy exactly. And people remember when there was runaway
13:17
Speaker 1: inflation in the nineties and how that hit living standards.
13:21
Speaker 1: That means that it's much more of the front of
13:23
Speaker 1: people's minds here and consistently and polls people say that
13:28
Speaker 1: rising prices are the biggest problem. So one of the
13:32
Speaker 1: reasons the story had caught my eye was that there
13:35
Speaker 1: was some pretty aggressive tactics that the Russians. Russia being Russia,
13:40
Speaker 1: there's been some pretty extreme solutions to this problem that
13:44
Speaker 1: they've come up with over the years. And I guess
13:45
Speaker 1: and maybe looking to now. Yeah, so earlier this year,
13:51
Speaker 1: prisoners were brought in to work on railroad upgrades, UM,
13:56
Speaker 1: for for like cold transportation. UM. And that's kind of
14:04
Speaker 1: particularly scary here because it brings back echoes of labor
14:08
Speaker 1: camps and Soviet times where prisoners had to work in
14:11
Speaker 1: mining or forestry or well reconstruction. So for so far
14:15
Speaker 1: that's on a pretty small scale, but people are consistently
14:20
Speaker 1: talking about how to solve this with getting more prisoners
14:24
Speaker 1: to work. UM. In agriculture, they were looking at getting
14:28
Speaker 1: students to help with the harvest, and last year prisoners
14:32
Speaker 1: also helped with the harvest. And in some regions, UM,
14:37
Speaker 1: the government has also looked at bringing in the army
14:40
Speaker 1: to work on some construction projects. We've gotta worry when
14:45
Speaker 1: people start bringing the army to do anything. And I
14:48
Speaker 1: can imagine, Yeah, that's sort of shades of some of
14:50
Speaker 1: those sort of false labor camps and everything. Yeah, well
14:53
Speaker 1: all of those as well. I think companies aren't necessarily
14:57
Speaker 1: that keen on these ideas. Like I remember I was
14:59
Speaker 1: talking to one agricultural company about whether it would help
15:01
Speaker 1: to get prisoners to um collect the harvest, and they
15:05
Speaker 1: said there were a number of problems, including that they
15:08
Speaker 1: might not be very good at it. They might, you know,
15:10
Speaker 1: you need particular set of skills, especially if you're picking
15:13
Speaker 1: soft fruits, for example, and also sometimes prisoners run away,
15:17
Speaker 1: which is another problem. Then I can see that. And
15:22
Speaker 1: what about I mean the immigrants. Obviously it's part of
15:25
Speaker 1: the issue is that they're not coming back from from
15:28
Speaker 1: Central Asia in these places where they had previously come
15:31
Speaker 1: from to work in Russia. Are there any efforts underway
15:34
Speaker 1: to encourage them back. Yeah, so, um, they're looking at
15:41
Speaker 1: potentially putting on charter trains that would bring migrant workers
15:46
Speaker 1: from Tasha, Kent and Uzbekistan to Russia, which would take
15:49
Speaker 1: several days on the train. And there's also recently an
15:52
Speaker 1: amnesty which meant that migrants who had previously been expelled
15:58
Speaker 1: for various reasons be allowed back in now. But at
16:02
Speaker 1: the same time, there's a lot of stories and state
16:05
Speaker 1: media about migrant workers and crime, which looks like it's
16:10
Speaker 1: pushing the other way, even if the situation now is
16:14
Speaker 1: pretty extreme. Well on you, as we said that things
16:18
Speaker 1: are often extreme in Russia. But I appreciate you you
16:22
Speaker 1: telling us about this, uh, this challenge that Russia is
16:25
Speaker 1: facing on your Quinn great, Thanks very much, m H.
16:37
Speaker 1: Now we're going to shift the focus back west to
16:40
Speaker 1: the US and the labor market conundrum we heard about
16:43
Speaker 1: at the start of the program, and I'm delighted to
16:46
Speaker 1: have joining as Jason Furman, Professor of the Practice of
16:48
Speaker 1: Economic Policy at Harvard University and the Kennedy School of
16:51
Speaker 1: Government and a senior researcher at the Peterson Institute in Washington,
16:55
Speaker 1: but previously chair of President Obama's Council of Economic Advice US. Jason,
17:01
Speaker 1: thank you for joining Stephanomics once again. And the picture
17:04
Speaker 1: we had at the start of the program was an economy,
17:07
Speaker 1: a US economy in which there were job vacancies everywhere,
17:10
Speaker 1: it seemed, but no work for the unemployed. How would
17:14
Speaker 1: you characterize it? It's a labor market like none of
17:17
Speaker 1: us have ever seen before. Where about you know, six
17:20
Speaker 1: or seven million jobs short of where we should be,
17:24
Speaker 1: but there's still millions and millions of job openings, and
17:28
Speaker 1: so overall the problem looks more like labor supply than
17:32
Speaker 1: the problem we're more used to normally, which is labor demand.
17:37
Speaker 1: And of course some say this isn't when people talk
17:39
Speaker 1: about job shortages, real worker shortages, that it's really it's
17:46
Speaker 1: not a shortage of of workers, it's a shortage of
17:50
Speaker 1: good jobs that if the wages will hire, people would
17:53
Speaker 1: be doing these jobs. Yeah, I mean, you do have
17:55
Speaker 1: to ask why two years ago people were doing these
18:00
Speaker 1: jobs at a certain wage and now they don't want
18:02
Speaker 1: to do those jobs at the same wage, only want
18:05
Speaker 1: to do them at a higher wage. The way I
18:08
Speaker 1: teach my introductory economics students, we would describe that as
18:11
Speaker 1: a shift of the supply curve. To get the same
18:14
Speaker 1: amount of labor as before. You can only get there
18:17
Speaker 1: if you're doing it at a higher wage than it
18:20
Speaker 1: was before. And how do you think that's going to
18:23
Speaker 1: play Is he going to just play out in wages
18:26
Speaker 1: reaching a higher level or are they going to be
18:29
Speaker 1: you know, are there sort of deeper skill mismatches at
18:32
Speaker 1: work where the people who are looking for jobs are
18:36
Speaker 1: just not the same, just not the right people for
18:40
Speaker 1: these many vacancies that are there. Right, So, first of all,
18:43
Speaker 1: large dose of humility, as in order. No one predicted
18:47
Speaker 1: that the labor markets were gonna look nearly this extreme
18:50
Speaker 1: at this point in time. I certainly didn't, and so
18:53
Speaker 1: I'm not going to tell you I know for sure
18:55
Speaker 1: what it's going to look like. UM a year or
18:57
Speaker 1: two from now. UM, if forced to my best guess,
19:01
Speaker 1: I think there are enough temporary factors that explain where
19:06
Speaker 1: we are now related to COVID, coming out of COVID
19:10
Speaker 1: and in the United States, the policy response to COVID
19:14
Speaker 1: that I think we'll get of the way back to
19:17
Speaker 1: where we were. Um, it just may take a year
19:21
Speaker 1: or two to get there, But you know, there's a
19:24
Speaker 1: risk to that and a risk that this is a
19:26
Speaker 1: more permanent change. And I guess one of the ways
19:29
Speaker 1: that we get from here to there would be wages
19:32
Speaker 1: going up and then inflation going up, potentially staying up.
19:36
Speaker 1: You know, we had another round of pretty eye popping
19:40
Speaker 1: US inflation numbers this week. Do you think that is
19:43
Speaker 1: going to play a part that we will see more
19:45
Speaker 1: during enduring inflation driven by wages another place where humility
19:50
Speaker 1: is in order. UM, we haven't seen wage price spirals
19:54
Speaker 1: for a very long time. If there's anything that could
19:57
Speaker 1: bring a wage price spiral back, it is what we've
20:01
Speaker 1: seen with extremely high inflation this past year, and um,
20:08
Speaker 1: you know the way that's affecting workers and labor markets
20:11
Speaker 1: and businesses. So I think that's a distinct upward risk
20:15
Speaker 1: for inflation at this point in time. I guess we
20:19
Speaker 1: should have a little pause just to sort of reflect
20:22
Speaker 1: on on those latest inflation numbers, just to put them
20:27
Speaker 1: in put it in perspective for us, just what happened
20:29
Speaker 1: one month, let alone what's happened on the twelve month horizon. Yeah,
20:33
Speaker 1: so in October the cp I went up zero point
20:36
Speaker 1: nine percent. A bunch of that was gasoline more expensive,
20:40
Speaker 1: that's something global. But you strip out the vaulatile components,
20:43
Speaker 1: the core cp I was up zero point six um.
20:47
Speaker 1: And that's a real blow to the transitory stories which
20:50
Speaker 1: had been pointing out the slowing. Of course c p
20:54
Speaker 1: I projecting more slowing, of course c p I. So
20:58
Speaker 1: I think this report, broadly speaking, says, buckle your seat belts.
21:02
Speaker 1: You know, this isn't slowing down dramatically anytime soon. And
21:08
Speaker 1: as you suggest, I mean that's even after taking out
21:10
Speaker 1: quite a few things. I mean, sometimes when people talk
21:12
Speaker 1: about the core and taking out the volatile things, you know,
21:15
Speaker 1: for some people that's taking out all the things they
21:17
Speaker 1: actually want to buy on a given day. Oh yeah. Oh. Politically,
21:22
Speaker 1: what matters actually is almost the opposite of core. It's
21:24
Speaker 1: what's happening to food prices and gasoline prices. UM. Core
21:29
Speaker 1: is a good construct analytically because it gives you a
21:32
Speaker 1: better prediction of where inflation will be a year from now.
21:35
Speaker 1: But to understand what people have experienced over the last year, Um,
21:39
Speaker 1: they've experienced prices up six point two percent, and and
21:44
Speaker 1: they hate that. And I know we're going to you're
21:47
Speaker 1: gonna start talking about humility again. But when you have
21:51
Speaker 1: you know, you're sitting in sitting at Harvard at least
21:54
Speaker 1: some of the time, and you know, with your with
21:56
Speaker 1: that more academic kind of long term perspective, I just
22:00
Speaker 1: under what you were thinking now about the legacy of
22:03
Speaker 1: COVID for the for the labor market. I mean, when
22:05
Speaker 1: a lot of people lose their jobs, and it was
22:07
Speaker 1: a really a lot of unprecedented number of people in
22:10
Speaker 1: a short time last year, we tend to worry about
22:13
Speaker 1: not just the immediate loss of output that they aren't
22:17
Speaker 1: able to produce because they're not in work, but the
22:19
Speaker 1: know how that they've built up in those jobs which
22:22
Speaker 1: might be lost forever might affect their human capital and
22:25
Speaker 1: the human capital of the country. UM. We had hoped
22:28
Speaker 1: that that would not be such a factor this time,
22:31
Speaker 1: because not least because it was a relatively brief crisis,
22:35
Speaker 1: but also a lot of the most affected sectors were
22:38
Speaker 1: places where there weren't a lot of specific skills to
22:42
Speaker 1: be lost. UM, what do you what do you think
22:45
Speaker 1: one year on about the sort of human capital cost
22:49
Speaker 1: of that enormous spike in unemployment we had last year.
22:52
Speaker 1: I think it's likely meaningful. There's been a lot of
22:55
Speaker 1: long term unemployment. People really do lose skills, they lose
23:00
Speaker 1: out on the training they were getting on the job,
23:04
Speaker 1: they get dislocated in a certain way. All the evidence
23:07
Speaker 1: we've had from the past is that can have long
23:10
Speaker 1: term impacts on sustainable unemployment rates, on wages, and on
23:16
Speaker 1: productivity in the economy. That's compounded by the fact that
23:20
Speaker 1: we've had low business investment for the last year and
23:23
Speaker 1: a half and some of the steps you'll need to
23:26
Speaker 1: take to harden against COVID. It's possible that work from
23:30
Speaker 1: home and you know, doing teleconferences rather than flying places
23:35
Speaker 1: will make up for all of that, But I would
23:39
Speaker 1: go with the evidence we have from the past, and
23:42
Speaker 1: the evidence we have from the past says experience here
23:46
Speaker 1: is quite negative. There's a bit of hope. Um, I
23:49
Speaker 1: hope that hope triumphs over experience, but I wouldn't I
23:52
Speaker 1: wouldn't count on it. But it's interesting. This was something
23:55
Speaker 1: that that I had thought about for some papers that
23:59
Speaker 1: we've put together for for the New Economy Forum that
24:01
Speaker 1: Bloomberg's holding in Singapore next week. At this sense of
24:05
Speaker 1: this idea of whether what the long term impact on
24:08
Speaker 1: productivity and output might be of this crisis, and whether
24:12
Speaker 1: it might be different from other recessions. As you say,
24:14
Speaker 1: you know, the lesson usually is recessions always cause some
24:17
Speaker 1: permanent damage, especially to human capital, but also the investment
24:22
Speaker 1: base of the country. But you do have you know,
24:25
Speaker 1: the International Monetary Fund and some other important forecasters now
24:29
Speaker 1: suggesting some kind of COVID dividend for at least some
24:32
Speaker 1: of the advanced economies, including the US that actually whether
24:36
Speaker 1: it's the infrastructure investments by the US administration post COVID,
24:41
Speaker 1: or some of the productivity changes that you talked about
24:44
Speaker 1: working from home, faster digitalization all of US, or maybe
24:49
Speaker 1: companies using automation more. But all of us using kind
24:51
Speaker 1: of teller teller working and all the things more that
24:55
Speaker 1: all of that was actually going to put the economy,
24:57
Speaker 1: the economy at least in a better place than it
25:01
Speaker 1: than we would have expected pre COVID. Do you does
25:04
Speaker 1: that make any sense to you? Or do you think
25:06
Speaker 1: that there's an we're underestimating some of the negatives that
25:09
Speaker 1: you just mentioned. Yeah, I think that's certainly possible. Um,
25:13
Speaker 1: we could have a COVID dividend coming out of this. Now.
25:16
Speaker 1: I should point out the I, M F and other
25:18
Speaker 1: forecasters we're expecting for the United States that we'd see
25:22
Speaker 1: that dividend as soon as Q four of one. They
25:26
Speaker 1: had a forecast for g d P post pandemic that
25:29
Speaker 1: was higher than their pre pandemic forecast. Um, that's not
25:33
Speaker 1: I'm going to materialize. So the schedule for this dividend materializing,
25:37
Speaker 1: at least in the United States m keeps getting pushed out.
25:42
Speaker 1: But I do broadly think that anyone saying that is
25:47
Speaker 1: has a sort of hopeful narrative about the present that
25:50
Speaker 1: we don't really have any evidence or data for this logic,
25:53
Speaker 1: this theory. There's intuition, but there's no hard data, and
25:56
Speaker 1: that that's going to overcome the very very strong data
25:59
Speaker 1: we have about what's happened historically when we've had periods
26:02
Speaker 1: of prolonged high unemployment and under investment. Clearly there has
26:08
Speaker 1: been great concern that during the pandemic, but potentially also
26:13
Speaker 1: in the legacy of the pandemic, inequalities that we already
26:17
Speaker 1: had are going to have been entrenched and even accelerated
26:21
Speaker 1: intensified in some cases, and you've almost highlighted them in
26:25
Speaker 1: some of the things that you've You've said, you know
26:27
Speaker 1: that the potential for people to lose human capital having
26:31
Speaker 1: lost jobs, just as actually some of the more skilled
26:35
Speaker 1: and well positioned members of the workforce are actually enjoying
26:39
Speaker 1: more productivity, enjoying working from home, potentially even relocating to
26:45
Speaker 1: bigger houses outside the city and other things. So how
26:48
Speaker 1: do you see that sort of inequality impact of COVID. Yeah,
26:53
Speaker 1: the last two years have been a huge blow to
26:55
Speaker 1: market incomes for households towards the bottom of the economics spectrum,
27:01
Speaker 1: but a hugely progressive response that at least temporarily helped
27:05
Speaker 1: them much more than it helped anyone else. Um, of course,
27:08
Speaker 1: that response is mostly ending except for money for children,
27:11
Speaker 1: which looks like it will last at least another year.
27:14
Speaker 1: I hope longer than that. Um, you have seen faster
27:19
Speaker 1: wage growth for lower wage workers than higher wage workers.
27:23
Speaker 1: We saw that before the pandemic, We've seen that during
27:26
Speaker 1: the pandemic, So you know, all in I think it
27:32
Speaker 1: will be roughly neutral for income inequality and has raised
27:37
Speaker 1: wealth inequality because we've seen what's happened to equity markets
27:41
Speaker 1: and the like. And finally, I think we spoke at
27:45
Speaker 1: the beginning of the year when the history of the
27:49
Speaker 1: Biden administration was a book that had still all empty
27:52
Speaker 1: pages and there was we were thinking about how transformational
27:57
Speaker 1: their President Biden's economic policies might be and considering the
28:04
Speaker 1: economic yeah, the economic impact of this one year and
28:07
Speaker 1: the programs that were unveiled in the first few months
28:10
Speaker 1: of the administration, it's it's been a pretty hard slog
28:14
Speaker 1: I know, you won't want to knock the people who
28:16
Speaker 1: are doing some of the jobs that you've done in
28:18
Speaker 1: the past, but we know where are where do you
28:20
Speaker 1: think we are now? And how are we doing relative
28:23
Speaker 1: to that kind of transformative hope that some people might
28:26
Speaker 1: have had at the beginning of the year, given the
28:29
Speaker 1: political hand the White House has been dealt. They're running
28:33
Speaker 1: ahead of my expectations for what they'd be able to pass.
28:37
Speaker 1: They need to get unanimity for one part of their agenda,
28:41
Speaker 1: which is going to be really hard to do, but
28:43
Speaker 1: it looks like they're probably going to do it. And
28:45
Speaker 1: they actually got bipartisan support, especially in the Senate um
28:48
Speaker 1: for another part of their agenda. So they're getting more
28:51
Speaker 1: done than I expected. They're getting, you know, of what
28:56
Speaker 1: the President wanted done, and he wanted quite a lot,
28:58
Speaker 1: and of a lot art is still a decent amount.
29:02
Speaker 1: But no, it's not going to change everything. Um. It's
29:05
Speaker 1: not going to set climate change. It's not going to
29:08
Speaker 1: make even preschool universal, so um. But it's it's I
29:12
Speaker 1: think it's a good start, um for in terms of
29:14
Speaker 1: medium and long run fiscal fillers. A good note to it.
29:17
Speaker 1: Jason Firman, thank you very much. Thank you. That's it
29:31
Speaker 1: for this episode of Stephanomics. Next week we'll be in
29:34
Speaker 1: Singapore with special episodes from the Bloomberg New Economy Forum, including,
29:39
Speaker 1: among other highlights, Larry Summers on inflation and the dangers
29:43
Speaker 1: of woke central banking, the future of cities, where the
29:47
Speaker 1: green finance really can save the world, So tune in
29:50
Speaker 1: for all that and follow at economics on Twitter for
29:53
Speaker 1: more news and analysis from Bloomberg Economics, from the New
29:56
Speaker 1: Economy Forum and around the world. This episode, it was
30:00
Speaker 1: produced by Mangus Hendrickson, and the story from the US
30:03
Speaker 1: was reported by Jill Shah and Katia Dmitrieva. Special thanks
30:07
Speaker 1: also to Anya Quinn and Jason Furman. Mike Sasso is
30:11
Speaker 1: executive producer of Stephanomics and the head of Bloomberg Podcast
30:14
Speaker 1: is Francesco Levi.