- In executive circles, the reality of large-scale layoffs is viewed as all but certain.
- Short-term measures won't prevent lost jobs in sectors including airlines, and at the millions of companies that took expiring stimulus loans.
- The pandemic is an 'automation-forcing event' and 40% of lost jobs may never come back.
With stop gap federal measures to shore up the economy set to expire, we are likely to face a second wave of unemployment that requires sharp — and systemic — solutions to another looming crisis. As our nation's governors grapple with this summer's spread of coronavirus, an insidious economic problem looms large: the second wave of layoffs.
When the pandemic arrived, millions of Americans felt an immediate and dire economic impact, with more than 40 million workers filing for unemployment since the beginning of March. Congress moved quickly — enacting the CARES Act and putting in place numerous short-term measures to stanch the economic bleeding — injecting stimulus, making incentive-laden loans and extending and expanding unemployment benefits.
Although we may not agree on the merits of these, and other efforts designed to prop up the economy in a time of crisis, the reality is that each of them come with an expiration date.
On July 31, the $600 boost to unemployment benefits will go away for millions of Americans. Next month, many of the 4.6 million companies that took stimulus loans may begin to terminate employees as funds run out, according to a recent survey. And on October 1, layoff-prohibitions tied to our $25 billion bailout of the airline industry are set to expire.
As these and other short-term economic props disappear, a measure of economic stability will evaporate for unemployed and furloughed workers, many of whom are trying to wait out the economic impact of the pandemic. In a vacuum, this itself could be a crisis but it is more likely a harbinger. Throughout the fall and into the end of 2020, businesses — small, medium and large and in a diverse range of industries — will face grim economic conditions and difficult workforce decisions.
In executive circles, the reality of large scale layoffs is viewed as all but certain and available data suggests continued difficulty for the economy. Earlier this week, Goldman Sachs predicted that the U.S. economy would contract further than previously expected — at a rate of 4.6% compared to 4.2%. United Airlines, likewise issued a memorandum to employees signaling the risk of furloughs and layoffs in the months to come.
As the workforce implications of these and other political "poison pills" take hold, they will have far-reaching implications for the U.S. labor market.
Another raft of financial stimulus from Congress could provide a short-term fix. That alone won't fuel the sort of sustained growth policymakers expect from the post-COVID economy, and worse may yield a "sugar high." No injection of capital will address an underlying reality for millions of workers who were struggling to keep pace with the demands of a rapidly evolving labor market months ago, when we were still in the tightest labor market in fifty years.
Prior to the pandemic, research indicated that seven in ten white-collar employers were already laying off workers because technology made their jobs "irrelevant or redundant." Now, some estimates suggest that as many as 40% of lost jobs will never come back. The pandemic has evolved into what MIT economist David Autor has called an "automation forcing event." Workers urgently need new skills and training to get jobs or to remain employed in an era where jobs will be scarce — and where the shelf life of skills will continue to shrink.
Rather than simply prioritizing short-term economic stability for companies, Congress must make investments in the people who are hurting the most. Those investments should be in the sort of education and training that can build resilience in the face of continued economic turmoil. Getting America not just back to work, but into the jobs of the future, will require change on both the supply and demand sides of the labor market.
On the supply side, we need massive, new investments to ensure that individuals have the wherewithal to pay for training programs. Our workforce development infrastructure was weakened by decades of anemic investment long before the pandemic. Underfunded to support 3.5 percent unemployment in the pre-pandemic economy, that system has nowhere near the resources it needs to fund training for the tens of millions of workers represented by 11.1% unemployment, a number many expect to climb higher this fall.
But public investments can't focus on training alone: Displaced workers, disproportionately low income and people of color who lack access to the social capital so many of us take for granted in our job search, will need coaching and career support. That support will allow them to successfully navigate the torrent of marketing materials and commercials from a maze of thousands of sometimes unscrupulous trade schools. Additionally, federal policy makers must recognize that transportation, child care, and other factors too often get in the way of access and success for displaced working adults. So-called Opportunity Accounts may be one way to close these gaps, providing the resources to allow underserved groups to take advantage of training and to unlock its many benefits.
Of course, the solution must not fall entirely to the government.
Closing skill and equity gaps will challenge employers to think differently; searching for talent in unconventional places and communicating not just the credentials and experience, but the skills they desire to would-be employees in ways that enable them to more precisely target, and reduce the cost of upskilling.
Hiring for potential as much as pedigree holds potential to create a more inclusive future. It will also remediate the widening wage and economic inequality that emerged in the wake of the Great Recession. Of the 7.1 million net jobs lost during the economic downturn that followed the financial crisis in 2007, nearly all were occupied by workers holding less than a bachelor's degree. But only 3.2 million of the jobs added during the recovery went to that population — and the vast majority of those were people with an associate's degree or at least some college education.
Employers in need of trained workers can utilize creative funding tools like Career Impact Bonds, which expand access to high-quality, career and job focused training. Employers must support the sort of investments in higher education that create career and economic mobility for workers, coupled with a recognition that workers who don't fit neatly with historic proxies for talent can still have the skills that they need to close still present skill — and equity gaps.
Addressing the second wave of the unemployment crisis will also require unprecedented collaboration among employers standing on opposite sides of the growing labor market riptide. Because while many segments of our economy are imploding right now, others are growing. Employers on both sides of the hiring spectrum must be engaged in a process that links laid-off workers with opportunities or one that sets a clear standard for how to attain them.
Beyond the work of individual actors, displaced workers need employers and training that rarely speak the same language to come together, with a shared sense of responsibility to create a more seamless transition for workers. Coalition efforts, such as the newly formed SkillUp Coalition, which leverage partners tackling these issues from multiple vantage points, are a vital way to address the situation on the ground.
The stark reality is that our country, already in the midst of a historic and in many ways unprecedented recession, is certain to face more economic pain in the months ahead. We stand a better chance at recovering quickly and equitably if we deal with it in a sustainable way. We must move past short-term fixes and avoid thinking that — like the coronavirus itself — waiting it out will be enough.
—By Maria Flynn, CEO of national nonprofit JFF, and Jane Swift, president of edtech nonprofit LearnLaunch and former Massachusetts Governor