A Blog by Jonathan Low


Apr 13, 2021

How Fear of Covid Has Shrunk the Labor Force

Data reveal that fear of contracting Covid may be the predominant reason that there is such a labor shortage in the US right now. 

Growing vaccination rates could change that, but also suggest why the anti-vax movement is so insidious and economically as well as socially destructive. JL

Gwynn Guilford reports in the Wall Street Journal:

A year after the pandemic (started), 8.4 million fewer Americans hold jobs. One of the most important reasons that keeps (potential workers) at home: fear. A U.S. Census survey found that 4.2 million adults aren’t working because they are afraid of getting or spreading the coronavirus. Some of the long-term jobless in the U.S. appear to be holding out for jobs in which they would be safer from Covid-19. “Work from home” is the most frequent search term on job marketplace ZipRecruiter. 60% of applicants prefer remote work but just 9% of vacancies on ZipRecruiter offer that.

A little over a year ago, Chanee McLaurin was a few weeks into a new job selling insurance when she began to hear coughing in her office.

Co-workers, one after another, stopped showing up. Then she overheard a colleague whispering into her phone that she had been diagnosed with flu-like symptoms.

“I was like, ‘You know what? I’m going to go home. And I’m probably not going to come back,’” said Ms. McLaurin, who is 29 and lives in a suburb of Dallas.

When her employer, after letting staff work from home, called them back to the office in early May, Ms. McLaurin didn’t go. Although she wasn’t aware of any outbreak at her office, her job involved going door to door at businesses, and she feared what would happen if she caught Covid-19 and grew too ill to take care of her two-year-old daughter or infected her wife, an essential worker with a warehousing job.

A year after the pandemic burst onto the U.S. economy, 8.4 million fewer Americans hold jobs. There are many reasons, but one of the most important and least appreciated is the one that keeps Ms. McLaurin at home: fear. A U.S. Census survey conducted in the second half of March found that about 4.2 million adults aren’t working because they are afraid of getting or spreading the coronavirus.

Fear FactorVirus anxiety has sidelined millions of workersthroughout the pandemic.Number of U.S. adults who hadn't worked inthe past week because worries about gettingor spreading the coronavirusSource: Census BureauNote: June and July data reflect two-week average.Gaps due to pauses between survey phases.
.millionJune 2020'2101234567

The large number helps explain why some companies say labor is scarce even though the unemployment rate is 6%. It suggests that even with generous fiscal and monetary stimulus, the U.S. labor market might not fully heal until the virus is tamed.

Indeed, if fear of the virus keeps people out of the work force, it could add inflation pressure as employers seeking to meet stimulus-fueled demand are forced to raise wages to hire enough workers or keep those they have, and pass those costs on to customers. However, many economists assume a successful vaccine rollout would send a surge of people rejoining the labor force, enabling the economy to potentially thrive without inflation caused by supply bottlenecks.

The effort to tame the virus is in full swing, with more than a third of Americans having received at least one Covid-19 vaccine shot and President Biden calling for states to make all adults eligible for vaccination by April 19.

Still, about 15.5% of U.S. adults say they either definitely or probably won’t get vaccinated, according to the most recent Census survey. That’s down from 21%-plus in early January. Even with extensive vaccination efforts now in progress, daily new Covid-19 cases are on the rise again.

The U.S. unemployment rate is down steeply from its peak of 14.8% in April 2020. Economists say the current 6% figure somewhat exaggerates the health of the labor market because so many people without jobs aren’t looking for one, and thus don’t figure in the rate calculation. The labor-force participation rate—the share of adults either working or looking for work—has fallen to 61.5% from 63.3% before the pandemic, a decline of nearly 3.9 million people.

Lost GroundThe pandemic has pushed millions out of theworkforce.Share of U.S. adults working or looking forwork, percentage-point changeSource: Labor Department

Labor-force participation usually falls in recessions, as some people give up job hunting. But such discouraged workers accounted for just 3% of last year’s decline in workforce numbers, according to Labor Department data. This suggests that fear of the coronavirus might explain a lot of the remainder.

A handful of studies, including one by Austan Goolsbee and Chad Syverson of the University of Chicago, have used cellphone location data to track individuals’ travel patterns and found that voluntary behavior changes during the spring of 2020 drove the collapse in mobility more so than government-mandated shutdown orders did.

During more-recent outbreaks, fear appeared to be a major driver of consumer behavior, according to a similar data analysis by Mr. Goolsbee, a former Obama administration economist. The magnitude of the effect on consumer behavior “makes it plausible that the labor-supply effect of fear would be equally important in understanding what’s happened,” he said.

The precise effect of fear on the labor market isn’t clear because it isn’t something the government tracks. The Labor Department’s monthly jobs survey in March found that the pandemic had prevented 3.7 million people from looking for a job in the prior four weeks, but didn’t specify the reason. For example, it couldn’t be determined how fear of the virus factored in; a role that more-generous government support programs might have been played was unclear.

The Labor Department survey results and the 4.2 million number cited by the Census survey aren’t directly comparable because of differences in questions asked, but both suggest that wariness about catching Covid-19 explains a substantial portion of the labor-force decline.

Ms. McLaurin in the Dallas area wasn’t worried at first when the coronavirus appeared in early 2020. She had heard that Black people such as herself were less at risk.

Then her sports-nut wife told her that Utah Jazz guard Donovan Mitchell, who is Black, had tested positive. Soon, virus talk spread in Ms. McLaurin’s social-media feeds. She was glued to her phone as friends launched video blogs describing their Covid-19 bouts, including their struggles to breathe. News footage from Italy of coffins stacked in army trucks especially alarmed her.

“It was people’s families and kids and aunts and uncles and moms and dads,” she said.

Except for a Mother’s Day gathering at her grandparents’ house, it was mid-June before Ms. McLaurin, who served eight years in the Marines that included a stint in Afghanistan, ventured beyond her backyard. When the food supply dwindled, she seized on the need for groceries as impetus to leave the house. But as she hovered by the front door, car keys in hand, her nerves always failed.

Ms. McLaurin’s wife, Angel McLaurin, remained at her warehouse job through spring and summer. In late September, she learned on social media of three co-workers who were out because they had tested positive. Her employer had told them of only one. She wondered how many others there might be. A few days later, Angel, too, left her job.

Now neither woman works. They received government stimulus checks, and both get disability benefits from the military, but they haven’t applied for unemployment benefits.

Chanee McLaurin has made peace with a tanked credit score and more credit-card debt. “I’m not going to say it wasn’t a struggle,” she said. “But in my house, we’ve never had Covid. So it was worth it for me.”

Fear is a part of every recession. One of John Maynard Keynes’s seminal insights was that swings in economic activity have a fundamentally emotional basis, said George Loewenstein, a professor of economics and psychology at Carnegie Mellon University. Economists can estimate the economic effects of changes in income or wealth, but not of fear.

Emotions can be more closely related to the vividness of imagery than to statistical probabilities, said Mr. Loewenstein. He pointed to the alarm greeting reports last spring that a small number of children with Covid-19 had contracted a serious condition called multisystem inflammatory syndrome.

“The reader doesn’t think, ‘Well, how often is this actually occurring?’” Mr. Loewenstein said. “Instead we think, ‘This is a horrible story—I don’t want that to happen to me or my children.’”

Other times, fear is closely linked to actual risk. A Franklin Templeton-Gallup Economics of Recovery study in October concluded that Black women were about twice as concerned as white women about the pandemic getting worse and the possibility of dying from Covid-19. That finding had a basis, in that Black and Latino workers are more likely than whites to be in jobs where teleworking isn’t feasible, according to the Labor Department, as was the case for the McLaurins.

Black and Latino people die from Covid-19 at around twice the rate of whites and are hospitalized at roughly three times the rate, according to calculations by the Centers for Disease Control and Prevention. The calculations relate to the whole population, not just people who get Covid-19, and take age into account.

Nonwhites are more likely to live in multigenerational households and with people whose health or age leaves them particularly vulnerable, according to analyses by the Pew Research Center and the Center for Public Integrity, two nonpartisan organizations that research public policy issues.

Some 230 miles south in the Houston suburbs, Chanee McLaurin’s cousin, Chauntae Noe, is out of the workforce, too. The 27-year-old spent four years at a popular blow-dry bar in Houston, doing hair and makeup. She earned solid money and enjoyed making people feel good about their appearance, especially for weddings, proms or the annual Houston rodeo and country-music festival.

Ms. Noe was on parental leave when the pandemic arrived. She, her fiancé and their two daughters live with her grandparents, both of them diabetic. Except for her fiancé, a UPS deliverer, no one left home except to get groceries and to go on a socially distanced family getaway.

“If I can prevent [Covid-19] by just staying in the house, that’s what I’m going to do,” she said.

Ms. Noe had been aiming to return to work in the summer but shelved those plans indefinitely because of concern about catching Covid-19 at work and spreading it to her grandparents. In June, her grandfather was diagnosed with cancer, sealing the deal.

“I’m in people’s faces—I do makeup,” she said. “Even with the precautions, it was just too much” risk.

Some of the long-term jobless in the U.S. appear to be holding out for jobs in which they would be safer from Covid-19. “Work from home” is the most frequent search term on job marketplace ZipRecruiter. Julia Pollak, a labor economist there, said 60% of applicants prefer remote work but just 9% of vacancies on ZipRecruiter offer that.

The anxiety Ms. McLaurin and Ms. Noe speak of makes standard recession-fighting policies work less effectively, according to some economists.

By the same token, people’s worry about going to work could quickly recede if vaccination curbs the pandemic, said Mr. Loewenstein of Carnegie Mellon. “When people are in a state of fear, they have a hard time imagining being out from under the cloud,” he said.

People getting vaccinated should increase demand for all the things they have done without for the past year, while also allowing many to return to the workforce, said Mr. Goolsbee of the University of Chicago. “That means the recovery could be rapid but without the normal inflationary bottleneck of a traditional business cycle,” he said.

However, if vaccines fail to quell fears about the virus, a resulting labor shortage could contribute to inflationary pressures, said James F. Smith, a macroeconomist at EconForecaster LLC.

“There’s plenty of capacity, but there are unknowns,” he said. “What if tens of millions of people are afraid to go back to work and they don’t monetarily have to, at least until September, because of all the various and sundry subsidies? That could be a problem.” Unemployment-insurance beneficiaries receive an additional $300 a week until early September under the relief law passed in March.

Ms. Noe and her cousin Ms. McLaurin both say they are unlikely to get vaccinated, citing concerns about the level of testing and reactions they’ve heard about. The Centers for Disease Control and Prevention says vaccines are safe and effective.

With her grandfather now cancer-free, Ms. Noe’s worries about the virus have eased slightly. She hasn’t gone back to work. The salon business is so slow that her pay would only cover commuting costs, she says. She is researching certification programs in a more stable field.

For Chanee McLaurin, virus worry has receded enough so that she now shops for groceries and has sent her daughter back to daycare, but the fear is easily roused. In mid-February, she was chatting with a DoorDash deliverer who casually mentioned having had Covid-19 the previous month.

“I was like, ‘You had Covid last month and you’re DoorDashing? Last month was two weeks ago!’ ” she said. After a hasty exit, she sanitized the bag and sprayed down the entryway.

“It just took me back all over again,” Ms. McLaurin said. “I don’t know if she still has Covid and I’m sick already. It freaked me out so bad.”


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