As someone who works directly in the labor market and who likes to read think tank pieces and articles by economists, it’s interesting to see smart people try to grapple in abstract terms with what I see every day.
Many of the articles written are by people who are in academia or who have a bird’s eye view of the economy but aren’t in the trenches.
People have been trying to make sense of how long the layoffs will continue, and I’ve seen some people describe layoffs in terms of a “wave,” kind of like the pandemic.
It doesn’t work exactly that way.
I read pieces about economics, but I also see the effects directly. I talk directly with the companies who are impacted and am hearing why they make the decisions.
I’ve also witnessed what happens to people who have been unemployed for a long time. It’s not just about money. The pattern of life long-term unemployment causes people is not pretty. Don’t assume you are immune. People are not meant to be out of work for a long period of time.
Some people thought this would just end up being a nice long sabbatical and a time to just stay at home and enjoy some extra time with family. That mentality shows a lack of understanding about business and the effects of economics on every part of life, including health and life and death. Economics is not the study of money. If we got rid of the entire money supply we would still have to deal with economics, the study of how we handle finite resources.
So why did companies lay off initially? And why are companies still laying off?
Here is what happened initially:
1. Companies and businesses that were heavily reliant on big crowds, such as sports and shows, laid off employees.
2. Companies and businesses got scared due to the uncertainty and started laying off.
3. Businesses deemed non-essential were shut down by law.
Some maybe thought the layoffs would end there, in part because the government did a lot to stimulate the economy and to try to keep employers from laying off employees.
And some thought this would just be short term and that people could just get back to work when the virus became contained.
But there are going to be more layoffs, and they will be a different kind of layoffs. The ones listed above were all related to the virus.
The next group of layoffs will be more related to economic matters, making them more similar to the 2007-2008 financial crisis.
4. Layoffs due to people and businesses spending less money.
5. Layoffs due to businesses losing money. For those who have not run a business, it’s important to understand that businesses can’t just take unemployment or be propped up for two months and then return to life as before.
Businesses sometimes make a lot of money, and sometimes they go on while losing money. Imagine going to work and having to pay to go to work. How long would you want to do that?
Businesses will take months or years to build back to where they were before. This means they will not be able to re-hire back to the levels where they were before.
Government efforts to prop up the economy will be essentially a band-aid. Expanded unemployment benefits will last four months then run out. Government aid to businesses will last even longer.
This will have a compound effect, and as people run out of money they will have even less money to spend if and when the virus subsides. Less spending will mean fewer jobs.
There are few industries now that have not been impacted. Food production is probably one of the least impacted industries, because people can still buy food. But even hospitals are having to lay off.
There’s another group of layoffs that will happen that no one is talking about yet. This will be longer term, especially if when this is over we go back to a “new normal” with more remote jobs.
6. Work-from-home jobs will be eliminated, or sent overseas.
At first many of the layoffs were happening to hourly or blue collar positions. Many salaried employees who worked in an office were able to work from home.
But if a company can figure out how to get you to work from home full-time, they can probably find a way to send the position overseas for a lot less money.
Economists have been talking about this for a while, and although we have lost some white collar jobs overseas we haven’t lost as many as we anticipated. This could change, especially as some developing countries build their infrastructure and teach their residents how to speak English more accent free.
If we start to re-open aggressively, we may be able to alter some of the devastation that we have done to ourselves. But if not, then we are going to create a financial catastrophe that will have ramifications that will affect us in many ways. And yes, it will be a matter of life and death to many of us.
It really comes down to our motivation and desire to work, which is one of the things that built our country.
Note: Nathan DiBagno is the owner and manager of AtWork Personnel Winston-Salem, a staffing and recruiting agency.