Boston Fed’s 66th Economic Research Conference examines impacts of COVID-19 on labor markets
Researchers explore how changes in remote work, automation will affect economy’s future
COVID-19’s uncertain and long-term effects on labor markets – including the impact of the rapid rise of remote work – were the focus of economists who gathered for the Federal Reserve Bank of Boston’s 66th Economic Conference.
The event, titled “Labor Markets During and After the Pandemic,” was held at the Bank on Friday and Saturday, Nov. 18 and 19. Among the questions it examined were:
- What challenges and opportunities has remote work created by “decoupling” work and residence (that is, by enabling employees to live farther from their workplaces)?
- How might employees’ remote or in-person work preferences affect their compensation?
- What is the impact of automation – and the growing adoption of AI – on economic inequality and workers’ wages and employment opportunities?
The conference also explored the surge in new businesses during the pandemic and whether the pandemic has exposed a need for alternatives to unemployment insurance that would help to preserve worker-firm relationships during downturns.
“The increase in remote work is just one example of longer-term trends that the pandemic may have accelerated, or in other cases slowed,” said Boston Fed President Susan M. Collins in her opening remarks.
“These trends are relevant because they affect our understanding of the cyclical position of the economy, and also because they matter for what the Fed considers to be maximum sustainable employment,” she said.
Papers shared during the conference
Researchers presented six papers during the two-day conference. Topics ranged from COVID-19’s impacts on international migration to wage growth during and after the pandemic. The conference papers and video recordings of each session are listed below and available here.
- “‘Missing’ Workers and ‘Missing’ Jobs Since the Pandemic,” Ayşegül Şahin (University of Texas at Austin) and Bart Hobijn (Federal Reserve Bank of Chicago)
- “Retirement during the COVID-19 Pandemic,” Courtney C. Coile (Wellesley College)
- “Changes in International Immigration and Internal Native Mobility after Covid-19 in the US,” Giovanni Peri (University of California, Davis) and Reem Zaiour (University of California, Davis)
- “Short-Time Compensation in the U.S. and California from 2000 to 2022: A Descriptive Analysis of Program Incidence and Worker Outcomes,” Gustavo Rodriguez (University of California, Los Angeles), Kara Segal (University of California, Los Angeles), and Till Marco von Wachter (University of California, Los Angeles)
- “Surging Business Formation in the Pandemic: Causes and Consequences,” Ryan A. Decker (Federal Reserve Board of Governors) and John C. Haltiwanger (University of Maryland)
- “Where Have All the Workers Gone? Recalls, Retirements, and Reallocation in the COVID Recovery,” Eliza Forsythe (University of Illinois), Lisa B. Kahn (University of Rochester), Fabian Lange (McGill University), and David G. Wiczer (Stony Brook University)
Author presentation: What’s causing ‘missing’ jobs?
In a session called “Has the Coronavirus Transformed the Labor Force?” Ayşegül Şahin presented “‘Missing’ Workers and ‘Missing’ Jobs Since the Pandemic.” Şahin is the economics chair at the University of Texas at Austin and an adviser to the Federal Reserve Bank of Dallas.
She said that since the pandemic, payroll employment has fallen by 5.8 million jobs relative to its pre-pandemic trend. In the paper, Şahin and coauthor Bart Hobijn, a senior economist and economic advisor at the Federal Reserve Bank of Chicago, dispute the view that the pandemic alone created a shortage of workers and a subsequent drop in job creation. They say that perspective assumes pre-pandemic job growth trends would have continued and ignores a longtime decline in the labor force participation rate.
In her conference presentation, Şahin cautioned against attributing the slowdown in job creation to policy alone.
“We should be careful in evaluating labor market developments and take into account that the trends that were there before the pandemic started are pushing us into slower payroll growth and participation growth,” she said.
Economists ask: Will remote work last, and who will it benefit?
In a panel discussion called “Is Remote Work Here to Stay?” researchers discussed whether companies would continue offering employees remote and hybrid work options – and, if they do, which workers would benefit most from those options.
Peter Cappelli, a professor of management at the University of Pennsylvania, noted that the effects of maintaining remote work could include the increased use of “tattle-ware,” or software employers use to track remote employees, and changes in commercial real estate prices.
Matthew E. Kahn, a provost professor of economics and spatial sciences at the University of Southern California, said “untethering” remote workers from the cities where their companies are located could improve the quality of life for those workers and others. He said it also could enable the formation of new “geographic clusters” – and therefore more job opportunities – outside of major cities.
But Steven J. Davis, a professor of international business and economics at the University of Chicago, said cities that depend on taxes generated by commuters could be hit hard by the continuation of remote work.
How will automation and AI impact the workforce after COVID-19?
Keynote speaker Daron Acemoglu, an Institute Professor at the Massachusetts Institute of Technology, discussed automation – when technology replaces human workers – and its historical effects on inequality, wage declines, and worker displacement. He focused on the potential impact of artificial intelligence, or AI, becoming more prevalent in the workplace.
New technology such as AI doesn’t necessarily have to replace workers, he said. It can also create demand for jobs that require new skill sets. However, data shows that many companies that have adopted AI are using it to automate jobs, and they tend to hire fewer people than their peers, Acemoglu said.
He pointed to two reasons why companies’ experiences with COVID-19 are likely to foster more automation: 1) social distancing and worker absence increase the desirability of reliable machines over workers, and 2) pandemics can reduce labor supply and increase wages.
“If all you do is invest in automation … (and) you don’t have the technologies for creating good jobs and new tasks, then higher minimum wages are just going to encourage (more) automation,” he said.
Learn more about the conference participants, read the papers, and watch presentations here.