'Long social distancing' could remove millions from workforce indefinitely

WASHINGTON (TND) — Several million Americans who left the workforce because of the COVID-19 pandemic may not be coming back, according to economists’ research.

A survey by a team of researchers found as many as 2.5%, or roughly 3 million people, have dropped out of the labor force and are planning to stay there indefinitely. Sectors of the economy that pay lower wages and have little room for remote work are going to be hurt especially hard by the trend, which researchers have termed “long social distancing.”

The same group also isn’t planning on returning to other pre-coronavirus activities like shopping at stores or going out to dinner.

Long social distancing taking workers out of the equation comes as the economy is facing a tight labor market with near-record-low levels of unemployment and 1.7 jobs available for every person without a job. Roughly 7% of all jobs in the U.S. economy are currently without a candidate to hire.

The effects of long social distancing could last for months or years, according to Steven J. Davis, an economist at the University of Chicago who oversees the survey along with Nicholas Bloom of Stanford and José María Barrero of Instituto Tecnológico Autónomo de México.

“I expect long social distancing effects on labor force participation to diminish over time,” Davis said. “That said, we find no evidence that it has yet to diminish, even though COVID-related deaths and hospitalizations have declined a lot in recent months. So, the effects of long social distancing are likely to decline slowly and last for months or years.”

People are most likely to commit to long social distancing with lower education levels, earnings and age.

In March, the number of employed workers was 1.2 million below pre-pandemic levels, according to data from the U.S. Department of Labor. Despite the recuperation in employment, the survey’s findings say millions of people are still missing.

The survey compares employment data from March with how many workers there would be if the workforce grew along with the trend it had from 2015 to 2019.

The U.S. labor force remains well below its pre-pandemic trajectory,” Davis said.

People without jobs are also most likely to commit to strong-form social distancing, which the researchers define as people with no plans to return to pre-COVID activities. Since July 2021, the rate of respondents with no plans to return has stayed above 10%.

The survey also found people without a job and not looking for one are most likely to commit to strong-form long social distancing, and could be a factor in missing workers. From January to March of this year, 23% said they have no plans to return to pre-pandemic activity.

Businesses will need to find solutions to the labor shortage while would-be workers continue to sit on the sidelines.

“Automation will likely take up some of the slack. The nature of work will also change for some people — one way to satisfy a desire for long social distancing is to work remotely,” Davis said. “Meanwhile, long social distancing will contribute to upward pressures on wages in some sectors, making their products and services more costly to supply.”

A tight labor market is complicating the Federal Reserve’s efforts to tamp down historically high inflation while not setting the economy into a recession. Fiscal policymakers are weighing increases in key rates, which would make it more expensive to borrow money for mortgages, vehicle loans, credit cards and corporate loans.

The White House has said the economy, which has near-record lows in unemployment and robust monthly job growth working in its favor, will be able to handle the unknowns of the future.

“The core question is whether the strength of the US economy is now an asset or a liability,” Brian Deese, director of the White House National Economic Council, said to The Associated Press earlier this month. “What we have done over the course of the last 15 months is driven a uniquely strong economic recovery in the United States, which positions us uniquely well to deal with the challenges ahead."