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Long lasting pandemic effects on jobs

Timeframe for recovery to pre-pandemic employments levels by demographic segment, Estimate based on February 2021 poll. Image credit: McKinsey

The ongoing Covid-19 pandemic has had a strong impact on the job market and on its evolution. The idea that once the pandemic will be over everything will go back to the previous normal is no longer viable. True, employment levels will start to grow but that will take time, measurable in years and during this time companies will have adapted to operate with low levels of workforce and, most important, with a different mix of workforce.

In this respect the analyses published by McKinsey on February 3rd, 2021, resulting from interviews with several key companies in the US and the analyses of the economic recovery, showing that by November 2020 75% of the GDP loss have been recovered (in the US) but only 60% of workers laid off have been re-instated (that is out of 25 million jobs lost, 10 millions are still unemployed), points out several differences in the “demographic” of recovery. It should also be noted that of the jobs recovered, many have shifted to the gig economy.

As shown in the first graphic, the recovery will not happen before the end of 2022, with the sole exception of jobs paying more than 75k per year (top jobs). Hence the completion of the vaccination, expected in 2021, will not be enough to lead to a full recovery. The reasons, to me, have to be found in the restructuring of companies that are transitioning to a digital space. The Digital adoption, first used as an emergency crutch by most business (even the solid brick and mortar business have been forced to look for a -temporary- alternative, like restaurants that had to convert to take away during the lock down), has introduced a number of permanent changes in processes (both operation and business processes) that have paved the way to a Digital Transformation of the business. Although in many businesses this DX has been limited in depth, it has changed at least partially the enterprise processes, affecting the workforce, in volume and quantity.

The social distancing has accelerated the shift to automation (decreasing human presence) and of course it has been easier to automate menial activities. This is reflected in the graphic by the expectation that a full recovery for workforce with an income lower than 25k per year and for the ones less educated (without an high school attendance), that in many cases overlap, is not expected to see a full recovery in the time frame considered (up to 2025), indicating that a permanent change has taken place.

Employment losses early in the pandemic were caused by a sharp increase in temporary unemployment (like restaurants laying off cooks and waiters, ready to reinstate them as soon as the lock down would be lifted). Image credit McKinsey

Even more concerning is the estimate that 4.6 million jobs (see graphic on the side) will be permantly lost. It is important to notice that the amount of permanent losses has kept increasing during the pandemic, indicating a restructuring of the business sector (including automation of activities).

The growing impact of AI is also evident by the longer recovery time for the less educated workforce, as clearly shown in the first graphic. Interesting the fact that ethnicity does not seem to play a role (with the exception of Asian ethnicity that is expected to have a faster recovery, possibly resulting from higher education level on one side and of the clustering of this ethnicity -family work).

Also important to notice the different impact based on gender. Although men and women are almost equal in jobs (women 48%, men 52%) the number of women who lost (or decided to resign) represent 56% of the overall loss. In part this may be due to the choice of staying at home to take care of kids during the lock down but this does not explain the overall disparity,

It is also important to notice that these figures represent the US situation. Different Countries may have experienced a different impact. As an example, the latest figure of unemployment in Italy (December 2020) shows an increase in unemployment by 101,000 units (this is the “increase”, not the total!) and that increase is partitioned between 99,000 women and 2,000 men!

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.