The pandemic has been a wake-up call for the US job market

Posted on December 29, 2021

After decades of relying on low-paying services jobs that come with few benefits, the coronavirus has made clear the nation needs to take care of its workers.

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Hazard pay, paid sick leave, remote working options have all became hotly debated topics during the first wave of the pandemic. Companies like Amazon (AMZN), which also owns Whole Foods, grocery store chains Kroger (KR) or Albertsons temporarily provided hazard pay for their workers, for example.

Nearly two years into the outbreak in the United States, the conversation has shifted to a labor shortage — businesses just can’t find enough workers. Meanwhile, lawmakers and economists are trying to figure out what’s still keeping people on the sidelines.

It’s a complicated puzzle that includes pieces like child care and early retirement, but one lesson from the pandemic is that workers have had it with bad jobs.

A shock to the system

Covid is changing our relationship with work, Brookings’ Stephanie Aaronson, director of the Economic Studies program, told CNN Business last month.

Economists believe this is the biggest shock to the labor market since World War II prompted a shift in labor force participation as more women entered the work force. But unlike 75 years ago, the labor force participation has fallen as a result of the pandemic.

At first, businesses laid employees off en masse as the economy shut down. When it began to reopen in the early summer of 2020, millions were rehired but some either never returned or didn’t return for long.

In some industries in particular, workers seem to have had enough: Relatively low pay and job security, interacting with strangers during a health crisis and having to enforce safety protocols turned some workers off their jobs in areas like hospitality and food services.

Restaurants and some retailers raised wages or offered sign-on bonuses to fill their staffing needs. In some places in America, fast food chains advertised paying only a few cents more than the competition across the street to attract workers.

And yet — as of October — there were more than 11 million jobs available in the nation and not nearly enough bodies to fill them.

This is great for workers who can move to jobs with better pay or benefits.

Yet economists worry that some of the enticements employers currently offer to get staff in the door won’t improve the pay of lower wage earners in the long term.

Paying workers their due

Wages are rising in America because businesses’ need for workers is forcing them to pay up. That’s unlikely to change any time soon.

Higher labor costs just become a regular part of what’s driving up inflation in the coming years: Eating in a restaurant, for example, is already more expensive as food prices and staffing costs surge.

“It’s a sticker shock when you actually have to pay the real value of something,” said Kate Bahn, interim chief economist at the Washington Center for Equitable Growth.

This is especially true given the sheer number of services jobs Americans interact with every day, from food deliveries and coffees to go to various cleaning or janitorial services.

“Wages were not set based on market forces but based on power disparities,” said Bahn, meaning that people at the lower end of the income spectrum traditionally didn’t have the means or power to ask for just pay.

But the pandemic may have fundamentally changed this dynamic: The old power mismatch “reflects an unhealthy and fragile economy,” said Bahn. “We have this once in a lifetime chance to do something about it.”