Why Covid's Drag On Workforce Proves To Be Persistent

Despite the lowering of infection, hospitalization and death rates due to Covid, the virus continues to have an impact on the number of people in the workforce as well as on productivity, which has been sliding for the past few months. 

The reason for this persistence appears to be the growing influence of long Covid which lead to extended absences. In addition, with over 1 million workers out for Covid-related illness in October 2022 alone, the affect on teamwork, customer relations and, especially, service jobs, means that it continues to show up in economic analyses. JL 

Gwynn Guilford and Lauren Weber report in the Wall Street Journal:

At least one million people weren’t working in October because of current or past Covid infections.The virus is having a persistent effect, keeping millions out of work and reducing productivity and hours of millions more, disrupting business operations and raising costs. In the average month this year, nearly 630,000 more workers missed at least a week of work because of illness than in the years before the pandemic. “Even if people have immunity and death rates are now much lower, they’re still getting Covid. It’s a strain on workers, and a lot of businesses can’t fill shifts.” Short-term Covid absences has held steady through the pandemic, but extended absences due to long Covid has been adding up.

Two-and-a-half years after Covid-19 emerged, reported infections are way down, pandemic restrictions are practically gone and life in many respects is approaching normal. The labor force, however, is not.

Researchers say the virus is having a persistent effect, keeping millions out of work and reducing the productivity and hours of millions more, disrupting business operations and raising costs.

In the average month this year, nearly 630,000 more workers missed at least a week of work because of illness than in the years before the pandemic, according to Labor Department data. That is a reduction in workers equal to about 0.4 percent of the labor force, a significant amount in a tight labor market. That share is up about 0.1 percentage point from the same period last year, the data show.

“That may sound tiny, but having that persistent difference over a period of two-and-a-half years is a big deal,” said Jason Faberman, senior economist at the Federal Reserve Bank of Chicago.Another half a million workers have dropped out of the labor force due to lingering effects from previous Covid infections, according to research by economists Gopi Shah Goda of Stanford University and Evan J. Soltas at the Massachusetts Institute of Technology. In a Census Bureau survey in October, 1.1 million people said they hadn’t worked the week before because they were concerned about contracting or spreading the virus.

The resulting labor shortages are contributing to upward pressure on wages and inflation, one reason the Fed delivered its fourth consecutive 0.75 percentage point interest rate increase last Wednesday. On Friday, the Labor Department reported brisk job growth in October, but health-related absences remained elevated and the labor force contracted slightly.The virus’s lingering effects on staffing have forced employers to change how they operate, such as keeping more people on payroll so that work continues without interruption during surges of infections, and cross-training staff and standardizing processes so that one person’s absence doesn’t slow down a project. That has made many companies less efficient.

“Even if people have immunity and death rates are now much lower, they’re still getting Covid. It’s an incredible strain on workers, and a lot of businesses can’t fill shifts,” said Claudia Sahm, a former Fed economist and founder of macroeconomic policy research firm Sahm Consulting. “Every time we have a wave, it sets us back and slows down the recovery.”

Richard Onken, owner of an architecture and design firm in Elkhorn, Neb., said that about 60% of his two dozen employees, many working from home, got Covid in October 2020 during an early wave. When Omicron surged early this year, about a fifth of his employees got sick, with most absences lasting three or four days.

“I think with Covid, we’ve gotten to the new normal,” Mr. Onken said. Absences, along with people showing up but working less efficiently or at a lower capacity than normal, have bitten into productivity, he said, which makes it harder to meet clients’ expectations. Absenteeism has been declining, he said, but remains a problem.

“Clients are done with the Covid excuse,” he said. “They’re not listening to it anymore. ‘Oh, you’ve got someone with Covid, well, who’s going to pick up the slack and take their place for a week or two while they’re out?’ ”

Aaron Sojourner, a labor economist at the W.E. Upjohn Institute for Employment Research, estimates that at least one million people weren’t working in October because of current or past Covid infections. Aside from a few big spikes, the number of short-term Covid absences has held relatively steady through the pandemic, on average, but the number of extended absences due to long Covid absences has been adding up.

All told, he said, “It’s a drag on the economy’s productive capacity and output, and creates some inflationary pressure and disruptions.” These are likely to worsen if past patterns of rising infections in winter hold, he said.

Covid has played out differently in the workplace than some other notorious pandemics. The bubonic plague in the Middle Ages and the 1918 flu killed sizable percentages of working-age people. Of the more than one million Americans that Covid has killed, about 300,000 of them have been workers, equivalent to only a 0.2 percent reduction in the labor force, estimates Wells Fargo & Co. senior economist Sarah House.

Mortality has fallen significantly because of vaccines and less deadly variants, and deaths from Covid are now concentrated heavily among the elderly. Still, Covid killed more than 3,200 people ages 18 to 64 in August and September, according to death certificate data from the Centers for Disease Control and Prevention.

Covid keeps millions out of the labor force when they get sick, many of them staying home until they test negative or are otherwise cleared to return to the workplace. People who miss seven or more workdays because of Covid and who apply for short-term disability or apply for leave under federal or state laws are out an average of 13 workdays, according to data from Sedgwick, a large administrator of leave claims for self-insured employers.

In the average month this year, 890,000 more workers were out for at least a week because of their own illness—Covid or other—child-care problems or an unspecified reason than in the corresponding months between 2017 and 2019. In addition, in the average month, some 2.3 million employees who were normally full-time worked less than 35 hours a week due to their own illness or child-care problems. That is about 490,000 more workers out each month, on average, than the corresponding month in the three years before the pandemic.

“It’s bound to have had an adverse effect on productivity because, if workers are absent because they happen to have Covid, that interrupts the whole flow of work,” said Robert J. Gordon, an economist at Northwestern University. His research shows that in services involving close contact among employees, productivity fell at a 0.7% annual pace during the pandemic, while remaining flat, on average, for manufacturing, and rising steadily among industries with high rates of telecommuting.

Such absences take an economic toll on households. Less than half of reported work absences for illness, child care or family or personal obligations between March 2020 and February 2022 were paid, and the burden of unpaid time off fell mostly on low-income households, according to a study by the Urban Institute, an economic and social policy research group. That added up to $28 billion more lost to unpaid absences compared with the two years before the pandemic, the study found.

The research from Ms. Goda and Mr. Soltas, the economists, found that after workers suffered a weeklong health-related absence, they were more likely to exit from the labor force over the next 14 months. That translates to a continuing reduction in the labor force of 500,000 workers, they calculated. The average worker’s earnings fell by about $9,000 over 14 months following a weeklong absence for health-related reasons during the pandemic, they said.

Ms. Goda said the analysis reflected the broad health consequences of Covid-19, including, among older workers, early retirement.

The impact suggests the influence of long Covid—the emergence, persistence or recurrence of symptoms a month or more after an initial infection has passed. A recent CDC study found that 19% of U.S. adults who had contracted Covid, about 7.5% of the adult population, were still experiencing symptoms in June 2022, at least three months after infection. An earlier study by European and U.S. researchers, based on data from 2020, found that 2.3% of individuals who had previously tested positive for Covid were experiencing symptoms three months later.

There is no single definition of long Covid and no diagnostic test to confirm it. Among the most common symptoms patients report are fatigue, brain fog, shortness of breath, heart palpitations and headaches. Around 420,000 workers ages 16 to 64 likely left the labor force because of long Covid, according to a new analysis of disability data by Louise Sheiner and Nasiha Salwati of the Brookings Institution.

“There’s never been anything quite like this,” said David Cutler, a health economist and professor of economics at Harvard University. “It is, if you will, a mass disabling event.”

Stephannie Milton, 32, a medical biller in central Texas, got Covid in January 2021. It felt like a bad flu that lasted two weeks. Then she began experiencing migraines, and by that February she was getting them almost every day. Her employer told her to rest when a migraine came on. Then Ms. Milton began having intense pain in her back, legs and hands, and trouble focusing enough to complete tasks at work.

“Brain fog is especially insidious because you don’t realize it’s happening,” she said. “I would be at my desk trying to solve a problem that should take me 30 seconds and realize it was taking me five minutes.”

Her employer asked her to return to the office in June 2021. Worried she couldn’t drive home when a migraine came on, or rest comfortably during bouts of pain, she left her job. She and her partner went on food stamps to support their three young children. She now needs a wheelchair to get around outside her home.

After almost a year of navigating red tape, she began receiving long-term disability insurance through her previous employer in March, equal to 60% of her previous income. “I was early in my career, and I absolutely had room to grow,” she said. “But as long as this lasts, and I see no end in sight, I’ll make 60% of what I was earning at the very beginning of my career.”

Ms. Goda and Mr. Soltas, the economists, attribute nearly 60% of the loss in total income due to Covid-related illness to people leaving a job, and the remainder to those who reduced their hours or shifted to lower-paying jobs.

Part of the weak productivity may be related to burnout and the stress workers are feeling after more than two years of pandemic life. Lisa Kirk, owner of a small environmental and mineral-resource consulting firm in Bozeman, Mont., has watched employees struggle with unpredictable child care, quarantines and other disruptions. Productivity has suffered, she said.

“Even parents who really kept the ball rolling through the worst of this…they’re exhausted,” she said. One employee took a partial leave. Another started putting in less effort, and no longer works at the company, she said. “I can’t run this company effectively if people are just deciding not to show up for whatever emotional reason it might be,” she said. “And they’re not saying, ‘I can’t do my job, I need help.’ They’re just not doing it.”

Jim Conway said he stopped working as a restaurant server over worries about contracting Covid.PHOTO: JIM CONWAY

Even for some who don’t have Covid or long Covid, the virus is a deterrent to work. For 16 years, Jim Conway was a server at an Olive Garden restaurant near Pittsburgh. The pandemic shut down that restaurant in March 2020, and when it reopened for takeout only, Mr. Conway, 62 years old at the time, decided not to return.

Fearful of contracting the virus, he said, he retired two years ahead of schedule. “Had I been younger,” he said, “I wouldn’t have worried about it. But they were showing pictures of people going to hospitals, and I didn’t want that to be me.”