The Pandemic Economy: Four Lessons We’ve Learned.
We’ve lived with the Pandemic for almost eight months and it often feels like years. We’ve been in rapid response mode every day, and the uncertainty never seems to end. What have we really learned?
As I described in The Big Reset back in March, the virus arrived at the peak of an economic cycle. We were fighting income inequality, worried about technology replacing jobs, and discussing a new form of responsible capitalism.
Well now, as the Pandemic shines a bright light on everything, these challenges are still here but in an even more magnified way. Let me share four lessons we’ve learned.
1/ Income inequality remains a big issue, and it may have gotten worse.
Income inequality, or the hollowing out of the middle class, is responsible for much of the social and political unrest in the United States. It gave birth to the 99%/-1% movement, Donald Trump, and it appears to be worsening. The 20 million jobs that disappeared this year are largely at the bottom of the income strata, further driving inequality.
The research is very clear: Deloitte broke down the economy into three groups of jobs: high wage (engineering, business, science, marketing), medium wage (arts, entertainment, education, community service, construction), and low wage (office, transportation, farming, healthcare).
As you can see from the list below, low wage jobs were six-times more impacted by COVID than high wage jobs. Roughly one in five people lost these jobs.
This impact is magnified by diversity. Low and middle-wage workers are much more diverse. The result: Black and Hispanic job loss is 40% higher than that of white workers this year.
And this has also impacted gender and generations differently. Women are now 30% more likely to be laid off than men, and young people, who are early in their careers and more susceptible to job loss, are also disproportionately affected. In fact 52% of young adults have moved back in with their parents (the highest level since the great depression).
And at the bottom of the income ladder, things are not going well. The Census Bureau poverty survey now reports that 14.4% of Americans with children report not having enough to eat some days each week, and this number rises to 22% for Black and Hispanic households. Unbelievably, child poverty in the US is now over 15%.
What’s going on? This is not just a recession, it’s an economic transformation. This week’s BLS report shows a significant increase in permanent job loss (3.8 million). Jobs in transportation, retail, and food service may never totally come back.
I’ve talked often about how the Pandemic is an economic transformation (listen to my podcast for more).
Here are the numbers: there were about 155 million jobs in the US before the pandemic. The number of long-term unemployed (more than 6 months) increased by 781,000 this month and is now at 2.4 million. Roughly 3% of all jobs were permanently destroyed so there are a lot of people who need to reinvent themselves.
Does the stock market indicate health? Not so much any more. We now live in a “have/have not” economy. For example, the top five Tech companies make up 20% of the S&P 500.
The bottom line for employers: we need to further invest in reskilling and job transformation next year. I talked last week with the CHRO of a large midwest bank and she told me that they transitioned 20,000+ branch workers to new call center positions. It was a big effort but clearly paid off.
This type of transformation will continue. Our job as business leaders is to help people transition well.
2/ Climate change is now very real.
If you were a climate change denier, I bet you’re coming around.
For those of us in California, we feel it every day. Not only are we worried about fires engulfing our neighborhoods, we now have smoke warnings for weeks at a time. It appears that the “fire season” is now permanently extended from June through November, and the Napa Valley may be permanently changed. There were so many hurricanes in the Southeast we’ve run out of names for them. And Arizona has seen more 110 degree+ days than ever before.
The energy industry has now woken up to this issue. BP reported a $16.8 Billion loss this quarter and announced a massive new investment in electric and renewable energy. They essentially wrote down billions of dollars from its oil reserves and vowed to be a zero-carbon company by 2050. Others will follow soon.
And even if you’re not in energy or transportation, your company can take action. The big Five Microsoft, Google, Workday, Apple, and Facebook have allocated billions of dollars to carbon credits. This money is going toward sustainable agriculture, forest management, and other carbon-reducing environmental programs.
Every company in every industry can take responsibility here, and as I’ll discuss below, your customers expect you to play a role.
3/ We are openly discussing racial justice.
This is a topic we can now discuss openly. Personally, I find this issue among the most disappointing themes of American life. We see evidence of racial injustice almost every day and it goes back to America’s 400-year old history of slavery. But now we can talk about it.
We are in the middle of a massive research effort on DEI best-practices (Diversity, Equity, Inclusion), and the passion toward this topic is explosive. Our discussions with DEI leaders this year shows an enormous reservoir of sadness, anger, and frustration in every company. This year it’s laid bare and we’re talking about it in an open way.
A great example is California Proposition 16, which intends to put Affirmative Action back on the ballot. I wouldn’t be surprised if it passes, and we go back to a world where it’s ok to mandate a focus on diversity.
And employees now demand change. The newest Edelman Trust research shows that 52% of workers expect their employers to take a position on systemic racism. The Pandemic brought this to light.
4/ Business must shoulder the responsibility of Trust.
The final lesson is a shift in the owners of our trust. As trust in the public sector plummets, business is being asked to do more. And this is both a responsibility and an opportunity.
According to new Pew Research, only 11% of Americans believe the government can effectively manage public health, 10% believe the government can protect the environment, and 13% believe the government can help people get out of poverty. We no longer believe the government will help us solve these problems.
The result? Businesses are being asked to help solve society’s problems.
Look at the data: people feel vulnerable, so they expect business to take on a citizenship role. And this means trust is the most important asset you now have.
I think this is a striking change.
A year ago the Business Roundtable talked about corporate responsibility like it was marketing. It was a well intended message, but really had very little impact.
Today, a year later, citizens are demanding that businesses step up. The issues of health, wellbeing, injustice, and the environment are laid bare and they’re falling on the shoulders of business leaders.
Is your company ready? I hope so, because this is a big shift. Consumers will change brands based on your response to these issues.
So this is a wakeup call for all of us. The Pandemic has laid bare the need to do the right thing, and do it well.
How do you create such trust? It comes down to three things: competence (doing your job well), ethics (doing your job fairly and transparently), and listening (paying attention to customer and employee needs). If you focus on these three things, you’ll drive trust in your company.
(You may want to read about Fortune’s 50 Companies That Change the World for some good ideas.)
It All Comes Together
In the next few weeks we’re going to publish a massive research study on Business Resilience, and what you’ll see is that people practices (HR investments) are central to responding to the pandemic. In fact I believe the Pandemic Economy shines a light on people investments like never before.
Where are we now? As we enter the Fall, we all need to think about financial and job support, care for the climate, open debate about justice, and a corporate focus on trust. We learned these lessons from the pandemic, let’s use them for the year ahead.
(HR professionals, join us in our Resilient HR Program which just launched this month. You’ll learn all about how to build a resilient organization and a resilient HR function, and in partnership with Accenture you’ll be able to join a whole series of Business Resilience roundtables in the coming year.)