Reference no: EM132933918

Macroeconomics

COVID-19 Pandemic Effect on Labor Distribution

Early in 2020, China reported a new corona virus strain, COVID-19. This virus spread quickly, had no established treatment, and the death rate for COVID-19 appeared higher than other viruses. COVID-19 spread worldwide and led to a global pandemic. Nations made decisions that upended the normal rhythms and routines of everyone's life in order to save lives. Many areas of the world, including the U.S., shut down all but essential businesses for a period of time. This included schools, restaurants, childcare centers, some medical practices, and most retailers. In the U.S., shutdowns primarily began in mid-March and gradual re-openings began in May. Some people shifted to working from home. Others lost jobs and unemployment surged to 15% in April. Some lost jobs temporarily but many lost jobs permanently.

The pandemic affected women in the workforce in a unique way. Women-dominated industries, such as hospitality, childcare, entertainment, and some parts of healthcare experienced steeper declines in employment than other sectors of the economy. Women experienced more job losses proportionally, and many women's duties at home increased. Caring for children due to the closure of schools and childcare centers required more parental time and attention. Women assumed these duties in most families.

The Bureau of Labor Statistics (BLS) calculates unemployment by dividing the total number of people unemployed by the total workforce (the number of the people employed plus those looking for jobs). If someone is no longer looking for a job, they do not count in the denominator of the calculation and, thus, unemployment is lower.

In September 2020, the monthly jobs report showed a decline of unemployment; the rate was now 7.9%. Women opting out of the workforce caused a significant portion of this decline. In September 2020, 1.1 million people left the workforce and were no longer counted as part of the denominator of the unemployment calculation. Of that 1.1 million, 800,000 or 73% were women.

Women generally earn less than men. In fact, the average woman's salary is 18% lower than the average man's salary. Thus, in families with two incomes, most of the time the woman earns less than the man. The lower income earned by the woman incentivizes her to leave the workforce over the man when a family experiences additional needs at home, such as during the pandemic. In the long run, this trend could further exacerbate the wage gap. When a woman, who has left the workforce, decides to re-enter it, it is hard to secure a position at the same status and earnings level. Those who leave the work force likely re-enter in a lower level position with less pay. This exacerbates the gender wage gap. Time will tell how the pandemic effects the dynamics of wages and workforce gender composition.Directions: Read the Case Study ABOVE Regarding COVID-19 .

Then Answer the Four Questions

BELOW About the Case Study.

1. What is happening to the supply of women who are part of the workforce? What has motivated this change? Describe how different parts of the economy may have experienced shifts and changes in supply and demand. Provide at least two examples.

2. What has happened to demand in the workforce? Was this a shift in demand or a movement along the demand curve? Again, describe the effects on at least two different sectors of the economy.

3. How does the wage gap between women and men factor into the change in supply and demand in this case?

4. The book discusses how labor is derived demand. Thinking about the services demanded by families with two working parents, which sectors will be most affected by the trend of women opting out of the workforce?