Many jobs lost during the coronavirus pandemic are simply not coming back

Job postings are at an all time high, leaving the impression that employers are hiring like never before. But many companies that laid off workers during the pandemic already predict they will need fewer workers in the future.

As with past economic shocks, the pandemic-induced recession prompted employers to invest in automation and implement other changes designed to dampen hiring. In industries ranging from hotels to aerospace to restaurants, companies have been reviewing their operations and finding ways to save on labor costs in the long run.

Economic data shows that companies have learned to do more with less over the past 16 months. Production has almost returned to pre-pandemic levels in the first quarter of 2021 – down just 0.5% from the end of 2019 – even though American workers spent 4.3% fewer hours than they did at the end of 2019. ‘before the health crisis.

“When demand drops, it’s a natural time to retool or invest, because you won’t lose customers or sales while you tinker and shut things down,” said Brad Hershbein, senior economist at the WE Upjohn Institute for Employment Research. “You don’t want to interrupt business when it’s at its peak. “

The changes will require many workers to adapt. While the job market is currently strong for high-paid professionals and low-wage service workers, not everyone can find a match for their skills, experience or location, creating a paradox of relatively high unemployment combined. record job openings. Economists say it can be a protracted process for some laid-off workers to find jobs or learn the skills needed for new careers.

Raytheon Technologies Corp.

RTX -0.49%

, the largest US aerospace supplier in terms of sales, laid off 21,000 employees and contractors in 2020 amid a drastic drop in air travel. Raytheon said in January that efforts to modernize its factories and back office operations would increase profit margins and reduce the need to restore all of those jobs. The company said most, if not all of the 4,500 contract workers who were made redundant in 2020 would not be recalled.

The pandemic has accelerated some of the company’s plans to automate factories and implement more digital technologies, said Paolo Dal Cin, executive vice president of operations and supply chain at Raytheon, who was trained last year through the merger of Raytheon Co. and United Technologies Corp. .

“We have over 500 automation and equipment upgrade projects that we plan to roll out over the next three to five years,” he said in an interview. Among them, the company connects more than 20,000 devices to its networks so that the data is collected automatically and sent to engineers, quality inspectors and others. Some of these data collection activities were previously handled by contract workers who in many cases will no longer be needed.

Raytheon plans to add people selectively while reassigning current employees whose tasks are automated. Mr. Dal Cin said that some projects focus on quality as well as saving labor, for example by automating the assembly or production of complex parts where precision and accuracy can be improved through to technology.

Low-wage work is in high demand and employers are now competing for applicants, offering incentives ranging from sign-up bonuses to free food. But with a lot of unemployed, do these offers work? Photo: Bloomberg

In low-wage sectors such as hospitality and leisure, the pressure to reduce personnel costs is partly driven by short-term labor shortages and expectations that wages will continue to rise. due to a combination of market forces and possible changes in local and federal laws.

In May 2020, as Covid-19 increased in the United States and the travel and hospitality industries widened, the CEO of Host Hotels & Resorts Inc.,

a major operator of Hyatt and Marriott hotels, described the pandemic “really as an opportunity to redefine the hotel’s operating model”.

CEO Jim Risoleo said the hotel chain plans to cut housekeeping at many of its properties and reconfigure its restaurant operations. “It will really be about going for housekeeping services rather than opting out in the future,” he said on a November call with analysts and investors. The company also cut management staff by 30% in 2020 in its food and beverage department and said the changes will be permanent. The company did not respond to requests for comment.


“If you are a merchant, if you introduce 10 cash points, it is not very expensive.


– MIT economist Daron Acemoglu

Other channels are moving in the same direction, in part to address current challenges in recruiting staff. Last week, Hilton Worldwide Holdings Inc.

announced a CleanStay program, claiming that most of its US properties adopt “a flexible housekeeping policy,” with daily service available on request. “A full deep cleaning will be done before check-in and every five days for extended stays,” he said.

Daily cleaning will always be free for those who request it. But Hilton companies “will have a higher margin and require less manpower than before Covid,” CEO Christopher Nassetta said on a conference call in February. The company declined to comment on how many fewer housekeepers it would employ after all of the changes are implemented.

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Unite Here, a union that represents hotel workers, released a report in June estimating that ending daily room cleaning could lead to the loss of 180,000 industry-wide jobs, based on figures from employment before the pandemic, in a workforce comprised primarily of black and Hispanic women, many of whom were immigrants. The union has negotiated agreements with some hotels and localities to require daily cleaning.

Restaurants have become rapid adopters of technology during the pandemic, as two forces – labor shortages that drive up wages and the desire to reduce close contact between customers and employees – increase return on these investments.

In the Dave & Buster’s Entertainment dining and entertainment chain Inc.,

customers are now using digital tablets to order food and drink, allowing managers to schedule fewer servers, the company’s chief operating officer, Margo Manning, said on a call with investors in June. Applebee’s now uses tablets to allow customers to pay at their tables without calling a waiter. Handheld screens provide protection against workforce inflation, according to John Peyton, CEO of Applebee’s parent company, Dine Brands Global. Inc.

Dave & Buster’s restaurant and entertainment chain is using technology to reduce its server requirements.


Photo:

Timothy Fadek / Bloomberg News

The U.S. tax code encourages investment in automation, especially after the Trump administration’s tax cuts, said Daron Acemoglu, an economist at the Massachusetts Institute of Technology who studies the impact of automation on workers. Businesses pay about 25 cents in taxes for every dollar they pay workers, compared to 5 cents for every dollar spent on machinery, because companies can write off capital investments, he said.

Given the cost and complexity of large automation projects, they are not always the right solution for companies facing labor shortages or looking to cut costs, Acemoglu said. But there are many piecemeal automation steps that businesses can take that can be profitable, he added. “If you try to completely reorganize your factory, it is very expensive. But if you are a trader, if you introduce 10 cash points, it is not very expensive.

Write to Lauren Weber at [email protected]

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