The “R’s” of the New Economy
There has been a significant discontinuity in the economic environment centered on the COVID Pandemic. Its effects took hold in the US in early 2020 and began to fade by mid-2021. However, the lingering effects are substantial and chronic. The world has drastically changed in the past three years and the future will look very different than the past.
The transition has been defined by three “R’s.” Resignation. Remote Working, and Retirement. Collectively, they will help define the “New (new) Economy.”
Much has been said about the “Great Resignation.” A significant number of people (particularly GenX and younger) are either dropping out of the workforce (at least temporarily) or looking for other employment opportunities. There were a record number of people voluntarily resigning their jobs starting in early 2021. These were largely from mid-career professionals (rather than entry level positions). This appears far from abating. According to one of the largest surveys of the global workforce, twenty percent of workers plan to quit their jobs in 2022.
The (sometimes) forced, exit from the workplace during the Pandemic also impacted the older workforce. Persons in this demographic represented a larger share of the unemployed compared with the previous recession. Of those laid off, 40% were permanent job losers. It appears that many Baby Boomers took the opportunity (if one can call it that) to reevaluate their options. There were some incentives for early retirement; in other cases, the chaos and (perceived) health risks also caused many older workers to opt out of the workforce. In 2020, the FED reported that 3 million additional workers retired than normal.
COVID-19 mitigation rules (e.g., social distancing and quarantining) vacated much of the workplace. This led to implementation of “work from home” policies that have been formalized in Remote Working protocols. Not long ago, a conference call was a group of people yelling at a device in the center of the conference table. Few people used their computer’s camera or knew what a “Zoom” meeting was. Now, companies have begun to formalize such programs and employees (now used to their freedom) are demanding such a status. My son and wife are now full-time remote workers for the US government.
The effect of these factors (resignations, retirement, and remote working) has set the stage, creating both impediments and opportunities. The impact may be identified in four additional “R’s” – Reduction, Relocation, Reluctance and Realignment.
The first two factors, (resignation and retirement) have had a negative impact on the number of potential employees in the workplace. The Reduction of available employees since the layoffs during the pandemic has hit some industries hard. Many younger workers appear to be “taking their time” moving to new employment. The exit of Baby Boomers and subsequent loss of skilled workers, particularly in jobs that latter generations are not replacing (e.g., construction and manufacturing) has dramatically impacted operations. Economists believe the resultant labor shortage could last for at least the next decade.
Clearly, our region is set to capitalize on the Relocation trend. In plain terms, the “herd” is on the move. As people transition to “permanent” remote working, they have begun to rethink their domicile. “If I can work from anywhere, why not move to a place I really want to live?” There has been a significant migration from some urban areas to “nicer” places (like the Appalachian Highlands).
Our region has recognized this shift. Johnson City (through its partnerships) launched a program to offer up to incentivize remote workers to move to the city or Washington County. The program has had some success. However, we have not been able to implement a truly regional approach. Again, our petty regional squabbles may be impeding our accomplishments, although the influx of new citizens would indicate we may succeed despite ourselves.
These trends have resulted in a significant Reluctance of other potential employees to enter or re-enter the workforce. One has only to observe the plethora of “Now Hiring” signs to recognize the magnitude of the problem. This is most evident at the lower end of the pay scale. Employees are simply unwilling to return to difficult work environments for poor wages. In our region, the labor participation rate (the number of people employed or actively seeking a job versus the total available population) is approximately 10% below the state and national figures. Whether this is directly related to this phenomenon is debatable, but it certainly has not helped the situation.
Finally, there is the significant Realignment of the economy underway. While, many people are seeking higher salaries, over two-thirds say they are seeking more fulfilment in the workplace. There appears to be a growing mismatch between job openings and the skills of the unemployed. The emerging New Economy is substantively different than before while the workforce skill base remains largely the same. Retraining the workforce is critical to long-term success. Our region has recognized this need and has developed numerous programs to address the issue. However, we face a “chicken or the egg” situation. Without a skilled workforce, business will not relocate here. Without jobs, there is less incentive to spend time acquiring new skills. We must address both simultaneously.
For our region to succeed, we must acknowledge and address not only the positive trends of the New Economy, but the negative factors as well. It is all well and good to attract a limited number of remote workers, but without a substantial active labor base, our prospects for large scale growth will be limited. We have the seeds of a solution, but the failure to create a truly “Regional Approach” creates a self-limiting proposition.