Post-COVID: A look at jobs, spending and how this pandemic impacted workers
Expert: Pandemics throughout history negatively impact the powerful. COVID-19 didn’t.
MOUNT VERNON, Iowa (KCRG) - Todd Knoop has had a front-row vantage point for the economic impact of COVID-19, even from his office at Cornell College.
In June 2020, the BBC published an in-depth piece that took a detailed look at what the unknown of the pandemic might bring, from an economic view. Knoop, a longtime professor of economics and business at Cornell, offered his predictions.
“Mr. Knoop’s prediction was right on the money,” the BBC wrote last month in reviewing the projections that turned into prophecy. “Congress passed a series of aid packages worth trillions of dollars. He believes these supports, which included direct payments to Americans and extended unemployment benefits, helped keep many people afloat, even when they were out of work.”
In our recent interview, on-site at Cornell, Knoop noted one major difference in the COVID-19 pandemic and other similar cases throughout history.
“One of the interesting things if you look through history, natural disasters and pandemics, they actually tend to promote equality as they tend to hurt the elites,” Knoop said. “I think we’ve seen something like different this time. People who were working virtually, (in) I.T. or education-intensive jobs, have figured out a way to get around this. They already have a lot of wealth tied up in their house. Housing market going up. Stock market going up. Savings is high. They haven’t been able to spend it. They’re ready to go.”
The wealth that people may have connected to their real estate also plays a role in how people spend money. We’re seeing a robust surge in housing values, nationwide and here in Eastern Iowa. Knoop connects that to how people think about finances.
“Even during the 2008 Financial Crisis, when people saw the value of their house go down, even if they weren’t going to sell their house, they felt poor,” Knoop said. “The same is happening now. People see housing prices going up. They may not even plan to sell their house, they know it’s more valuable, they feel wealthier. That does encourage spending. The pandemic has had a lot of consequences on spending priorities. People spend a lot of time at home over the past year. They think ‘wow, I’d like to go this to my house’ or ‘this house isn’t working out for me, I need a bigger place’. Given that many people are working virtually, they’re thinking of their houses as their offices. That’s changing a lot of spending practices on houses. I need to expand my house or think about moving someplace else with enough space for a work life and a home life.”
Knoop noted there is a very notable split in how the pandemic impacted various sectors of the economy. We’ve seen this for months with empty restaurants and hotels. People stopped spending discretionary income for much of 2020.
“In large part, what we’ve learned from this pandemic is that people can do quite well in the pandemic,” Knoop said. “A lot of people think their working lives have improved, virtually. The problem is not every job can do that. There’s many jobs that have to be in person. These are jobs that are less skilled, labor-intensive, don’t require as much education and pay less. There’s a big inequality in this. People who are high-educated, high-skill, high-pay sector have done very well and those who are not, have not.”
That inequality, Knoop says, it not always directly connected to a person’s job or income. There are also other related facets of life that are still tied into work.
“A lot of people who’ve lost their job, reliant on health care, may not have stable daycare for their kids,” said Knoop. “Those are people with a lot of uncertainty, pre and post-pandemic.”
The past years since the Great Recession of 2008 also featured extremely low levels of inflation. The price of most everyday goods has been, relatively, stable for years. Expect to see those prices tick up a bit and, for some, that may lead to a bit of surprise when buying common items.
“We don’t see a lot of evidence of that right now but we’re seeing in specific sectors, that it’s starting to go up,” Knoop said. “The other thing going on with inflation is that we’re very accustomed to very low inflation. Since the 2008 financial crisis, inflation has been between 0% and 1%. Historically much lower than it has been. Even a rise to 2% is going to seem high even though The Fed has told us that’s its long-term goal, 2%. Just getting back to their long-term goal is going to take a while to, psychologically, adjust to that.”
As people who kept their economic standard of living throughout the COVID-19 pandemic finally get those getaways this summer, Knoop also takes a look at a long-term strategy, one that requires a strong economy to advance.
“The next year, year and a half will be a very good time, economically,” Knoop said. “As an economist, we would say ‘that’s actually a good time to invest in the things we haven’t been invested in’. As the economy booms and people feel wealthier, this is probably the time to think about focusing on the long-term goals for our society. Trying to alleviate the long-term impacts of inequality, particularly on how COVID impacted education and health. Our health care system is a disaster, by most standards, and not serving the American public. It’s hurting our economy. Think about ways to provide better, more equitable health care. Our education system is doing nothing to reduce inequality and it’s probably not doing very much to prepare our workforce for our the economy is evolving. Those are two real investments that, with a booming economy, with resources at the private and government level that we should think about investing in.”
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