The economics of a global emergency

Everyone is feeling the impact of the pandemic in one way or another, and those feeling it financially are in the millions. Current estimates put the United States’ unemployment rate in the teens, and there has been a record number of unemployment benefits claims. The International Monetary Fund said it expects this to be the worst global economic downturn since the Great Depression. 

When it comes to what happens next, nothing is certain. According to David Autor, Ford Professor of Economics at the Massachusetts Institute of Technology and co-chair of the MIT Work of the Future Task Force, the recession ultimately could be “transformative” for the country’s economy —  both positively and negatively  —  but this type of crash is almost unprecedented.

“We can’t really be super confident in the projections that we typically use,” Autor said. “For example, the Congressional Budget Office has terrific models that they use to forecast the unemployment rate, the return to growth, the output gap between potential and actual, and how that affects the rate of reemployment. But those models are based on past history, and that may not be a good guide.”

Related: COVID-19: The latest from The World

The main difference, Autor said, is that this crash wasn’t due to a bubble. It wasn’t a sluggish or fundamentally unhealthy economy that caused the current decline. Instead, it was a necessary, society-wide reaction to a pandemic. Economic models haven’t really taken that into account.

While we can’t know for sure how this will play out, we are seeing that anyone can be affected. Kate, who asked that her real name not be used because of concerns about future job prospects, is one of millions who has been laid off in the last few weeks. Up until recently, she thought that her job working in a DNA sequencing lab was stable. But as more places shut down, there were fewer samples to collect and Kate was let go.

“I didn’t think my job, the company, or any of it was in peril,” Kate said. “It was just like, ‘Oh, shut down for a month and everything’s fine, everyone will go back.’ But the fact that it might not be fine is starting to sink in.”

Logan Patino was also in an industry that seemed untouchable: technology.

“I think I was a bit naive when I started hearing about it,” Patino said. “I think I understood early on how serious it was from a health perspective, but when it came to the economy and people’s jobs and everything, I kind of thought, ‘Well, okay, I’m in tech, and tech always has jobs.’”

The startup Patino was working for had just received $400 million in funding in February, but that didn’t save his job.

“I mean, it can affect pretty much everybody —  and it will for the near future for sure,” Patino said.

While neither blue nor white-collar jobs are certain in the face of the recession, many blue-collar positions face the added threat of automation, which, according to Autor, is imminent. Studies tell us that automation does not happen in a linear fashion. Instead, robots are introduced to the workplace in bursts, largely concentrated during times of economic downturn, such as right now. In fact, Autor called the current recession “an automation forcing event.”

“Employers are going to learn quickly things that they could do without workers, that they thought they needed workers to do,” Autor said, “And once things go back to normal, employers are not going to unlearn that lesson.”

For people working jobs that remain driven by humans, though, there may be a bright side. Autor suggests that society may have a chance to re-examine how we treat and compensate people in positions that have proven to be essential in the current crisis, including caretakers, grocery store workers, trash collectors and janitorial staff.

“A lot of those people are taking great risks and they’re not well remunerated,” Autor said. “And we have an opportunity to re-examine whether that’s the deal we want to offer them because it doesn’t have to be that way.” 

Sarah Leeson is an associate producer with Innovation Hub. You can follow her @sarahbration.