Economic

Shaken and stirred: Back to work in the ‘snow globe economy’

Two years into the COVID era, the economic data show us creeping back to something like the before-times. We’re saving less, spending more, and getting back to work. While some Americans remain on the sidelines, the number of U.S. jobs is near its pre-pandemic peak. March was the month many employers finally welcomed (or dragged) many of us back to the office.

Back to normal? Hardly. Even if we are taking the same elevator up from the parking garage, we are not the same people walking back to our desks or stepping behind the counter.

The lauded “V-shaped recovery” — the fastest rebound from a modern U.S. recession — can’t account for our post-COVID brains, where the future of the labor market is taking root.

In a recent conversation unpacking what we’ve been through, an economist colleague at the Minneapolis Fed offered up the metaphor of a snow globe: Things are finally settling down, but we’ve been mightily shaken up and we’re not landing where we started. That inspired us to reach out to other economists studying how COVID has changed our approach to work.

First, take all this quitting. A record 47 million people quit their jobs in 2021, and in 2022 workers continue to say “hasta la vista” at rates un-heard of before COVID. Now consider that for each of those 47 million, a bunch of coworkers watched them walk out the door.

University of California, Berkeley, economist Benjamin Schoefer told us workers are typically oblivious to the earnings of others, even those in similar jobs. We learn when we or our colleagues job hunt or land a new job elsewhere. This happened at an incredible pace in the past two years because of mass layoffs followed by mass quitting. The pandemic was an eye-opening moment — especially for lower-wage workers, when some of these usual “information frictions” fell away.

That information can be power. Nick Bunker, research director at the job-search site Indeed, sees the historic quitting trend as a bargaining chip for employees: “You can go to your current employer and say, ‘Hey, look, there’s all this demand out there and all these people are quitting their jobs. It’d be a shame if I left.’”

The pandemic also fundamentally changed our relationship with technology. As businesses pivoted swiftly to remote work, many of us discovered that we could work productively over Zoom meetings and at home offices. Indeed, many of us prefer it. Has time at home, reclaiming the hours from our commutes, increased the value of our leisure time in our internal cost-benefit calculations?

Nearly 40 percent of recent job-quitters told the Survey of Working Arrangements and Attitudes that they quit to have more time working from home. On average, employees are willing to absorb an 8 percent pay cut to work from home part-time.

Living through COVID appears to have made us more willing to step onto a less ambitious career path, said University of Utah economist Andra Ghent, “willing to say: Long-term, maybe this isn’t going to increase my wages as much, but I won’t put myself on the same trajectory” as before.

Changes to how we can do our jobs, as well as how we want to do them, mean negotiating pay and benefits packages with prospective employers just got more complicated. Employers are understandably concerned about the long-term costs of a workforce that only ever interacts in short, structured Zoom calls. What happens to innovation and on-the-job learning if employees don’t bump into each other on a daily basis?

The choice to work more from home could be undermining our own professional growth in ways we can’t yet appreciate, said behavioral economist George Loewenstein of Carnegie Mellon University. Loewenstein provided our most sobering conversation, worrying that the darker aspects of the pandemic — such as social isolation and the insecurity that comes with unemployment — will play out in ways we can’t see yet, especially for younger workers. “I suspect there is a massive mental health crisis that we’re not fully aware of,” he said.

Add to all this a massive staffing and cost crisis in the child care industry, laid bare and made worse by the pandemic. Mothers were far more likely than fathers to provide care when other sources disappeared, and they reduced their labor in response, according to analysis of survey data by Gema Zamarro of the University of Arkansas. This could have long-term consequences for millions of women: Economic research shows that earnings remain depressed after periods of non-employment.

A tug-of-war over remote work. Contagious quitting. A shifting relationship to our jobs. We might be back at our desks, with the worst days of COVID-19 behind us. But this swirling snow globe is far from settled.

Lisa Camner McKay and Jeff Horwich write about economics for the Federal Reserve Bank of Minneapolis. This essay is adapted from “The Snow Globe Economy” in the latest issue of “For All,” the magazine of the Opportunity & Inclusive Growth Institute. Read and subscribe for free at http://minneapolisfed.org/for-all  Follow the authors on Twitter @LisaCamnerMcKay and @JeffHorwich



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