What a Global Pandemic and an Expanding Pay-Gap will likely Produce
Just when the world slowly came to realize that the Coronavirus already had the globe in a tight grip, a first wave of CoVid-19 related deaths were registered as a first “big hit” on civilization. The second big hit was on the economy.
As the countries responded with precautionary measures to help constrain the virus, the market responded with mass-layoffs in order to constrain growth losses from expected revenue-dips.
36 Million U.S. Americans filed for unemployment at the onset of the pandemic, whereas European countries tried to avoid mass-layoffs like these with direct governmental support.
Observably, a great number of industries were directly affected by the restrictions, such as the entire Tourism-sector, and most of the service industry. Thus, layoffs were expectable, but let’s have a look how things were unfolding.
Filling the Pockets of the Wealthy
Just at the end of 2019, an idea of the of the forthcoming pandemic through news from China caused a record number of CEOs to resign from their positions. More than 1600 CEOs were leaving their companies, and whopping payouts along with them. But this was not the only observable trend of top-layer behaviour due to CoVid. CEO’s compensation has risen all throughout the pandemic.
A total increase of executives bonuses and payouts of 5% was reported, meanwhile the employed workforce diminished greatly while their total pay fell by 2%. Also, these employee groups were largely withheld from bonuses, with arguments of economic downturn and uncertain market developments ahead.
One disheartening observation was the laughable 1% pay increase for NHS staff in the United Kingdom. Some other countries (e.g. Germany) reacted with one-time bonuses for healthcare workers.
The Response of the Workers
While at this time last year, labour market reports were about mass-layoffs and skyrocketing unemployment-rates, In May 2021, there are vast statements about labour shortage for open jobs.
And how come? Aren’t these contradictory occurrences?
A change of sentiment of the working class can be observed here. Not only are people burned out by the effects of the pandemic — not the least its impact on mental health — but workers express their unwillingness to return to a job market that dumped them unhesitatingly as a first response to the crisis, all while large cash-outs and wealth-shuffling among the richest could be observed in real-time.
The workforce expresses their sentiment of distrust towards working conditions and wage levels with a high vacancy rate. As a consequence, reforms are being discussed. One of them being the debate about raising the minimum wage in the United States. A long overdue measure since it hasn’t been raised since 2009.
What Changes the Pandemic actually Caused
The pandemic was not at all the initiator of wage gaps, but merely a catalyst to reveal a 20 year long trend rather quickly, and a necessity for changes along with it. Uncertainty and consequential fear reactions — from those in power — did the rest.
Shifts in economic trends could be observed since mid 2018, when Gold Prices soared suddenly, and stranger things happening from thereon.
Ultimately, the CoVid crisis response was just the needle that burst the bubble of fidgety economic developments all at once. What the pandemic has mostly caused is a great distrust in the economic system. Employees feel burnt out and undervalued, and report a general sense of loss of control over their situation. Mental health issues have been rising in extremes as a consequence.
Why filling Pockets is bad for the Economy
Ever Played Monopoly? — my excuses for the bold analogy but it explains current trends best. The most recent observations show an economic downturn due to job losses and low pay.
When workers are being paid low wages, their purchasing behaviour shifts largely towards essential goods and away from goods and services that can be spared, which ultimately results in an economic slope. Thus, large gaps in wealth-distribution are bad for every participant of the economic market.
Henry Ford already understood this concept 100 years ago, and paid his workers a higher minimum wage with the anticipation that it would increase total sales of his goods — and it did.
Wobbly Grounds for an Economic Comeback
It might just be me, but it feels as if the pace of economic developments is hard to keep up with, and one market reaction chases the next. While the pandemic seems to be on a regressive route, developments such as the mentioned high vacancy rates are noted. But with a demand for higher salaries and a minimum wage elevation comes a simultaneous inflation of essential goods and food prices.
This market response is accredited to the U.S. government economic relief bill, which had sent out stimulus checks to U.S. citizens. Suppliers reacted quickly with feigned shortages and price increases of essential goods before a discussion about wage increases could take place in a fruitful way.
A rational forecasting would be that wages have to increase eventually, and/or working conditions be adapted to the pay that is offered. The high yields of upper class employees must be redistributed fairly throughout all layers of organizations to secure economic stability!
… and now that we all had a good laugh, what would more likely happen?
The pandemic has caused major shifts in economic key drivers and sentiments towards baseline working conditions.
Harsh cutbacks of international mobility — in both, leisure and business activity — due to the virus, had local businesses rethink their approach to sustainable supply of goods and services in times of crisis. This could lead to a de-globalization trend resulting in a comeback of extinct professions in the western world. Distrust of workers in big business is growing, contributing to a likely upheaval and rethinking of employment conditions.
Meanwhile, the structure of office jobs will likely change entirely. Since lockdown measures have been demanding a restructuring of office work, it is highly unlikely that there will be a complete comeback to the status quo. Plus, de-urbanization trends are on a high rise, which could tie in with a return of career variety and the formation of smaller communities.
This piece may have started out dismally, but a look at current data and reports reveals the market’s potential to reform itself, and raises hope for the years ahead. Change is due and change is coming. Market transformations offer new opportunities that give room to innovation and progress.