More Americans fell into poverty during the pandemic, and new data shows that low wage workers are struggling to bounce back

America poverty
More Americans slipped below the poverty line in 2020 than the year before.

  • In 2020, poverty increased across the US and took an especial toll on low-wage workers.
  • Social scientist Elena Delavega says those affected are still struggling to bounce back.
  • Without stimulus relief and unemployment benefits, Delavega says the poverty rate could have risen much higher.
  • See more stories on Insider’s business page.

Poverty in the US increased in 2020 as the coronavirus pandemic hammered the economy and unemployment soared. Those at the bottom of the economic ladder were hit hardest, new figures confirm, suggesting that the recession may have widened the gap between the rich and the poor.

The share of Americans living below the poverty line – pegged at US$26,695 for a family of four – increased by about 1 percentage point to 11.4% from 10.5% a year earlier, the US Census Bureau announced on Sept. 14, 2021.

This metric includes wages and other sources of income, such as Social Security payments and, quite significantly in 2020, unemployment benefits. Without the massive boost in unemployment benefits that flowed to millions of jobless Americans for more than a year, the poverty rate would surely have climbed much higher.

As a social scientist who researches poverty, I’m concerned about the severe income loss some Americans experienced and signs that the nation’s extreme income inequality only got worse in 2020.

Low-income workers hit hardest

Those at the bottom of the economic scale, hit much harder by the coronavirus recession, are finding it harder to bounce back, according to additional data the Census Bureau released. It’s what has been termed a K-shaped recovery.

Consider what happened with typical household income, which decreased by 2.9% in inflation-adjusted terms to $67,521 in 2020, from $69,560 in 2019.

At the same time, full-time year-round workers saw their real median earnings increase 6.9% from 2019 levels – indicating that losses were borne primarily by part-time workers and people who aren’t employed throughout the whole year.

What’s more, the share of aggregate income – the sum of all incomes generated in the whole country – for the lowest-income households declined by 3.4%, while it increased by 0.7% among the highest-income households.

In another sign that low-income workers were hit the hardest in 2020, 53% of all jobs lost were held by workers earning less than $34,000 per year.

It’s unclear whether these inequality-exacerbating trends are continuing in 2021 or will be sustained in the years to come. But in June 2021, employment for low-wage workers had fallen by 21% from January 2020 levels, while employment for high-income workers had gained 9.6%.

Some success for stimulus and relief measures

The impact of the stimulus and supports is much more apparent in the Supplemental Poverty Measure rate, which takes into account additional sources of income, such as tax credits and other government benefits.

Without the series of relief and stimulus packages implemented between March 2020 and the end of the year, the supplemental poverty rate would have reached 12.7%, the Census said. Instead, it stood at only 9.1%, 2.6 percentile points lower than what it otherwise would have been.

Elena Delavega, associate professor of social work, University of Memphis

The Conversation
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3 ways to fix the economy for essential workers, according to a leading labor activist

A grocery store worker bends down to pick up food items to stock shelves.
A grocery store worker bends down to pick up food items to stock shelves.

  • Essential workers around the world are calling for a more equitable recovery.
  • That includes higher wages, better working conditions, and more protections.
  • Insider spoke to leading activist Ai-jen Poo about the importance of an equal recovery.
  • See more stories on Insider’s business page.

When life began to shut down due to the spread of the coronavirus, some workers turned bedrooms into offices and adapted to Zoom calls from home.

But many essential workers were disproportionately impacted by the pandemic, whether they lost jobs in private homes, or were forced onto the frontlines for low pay. As the world looks towards recovery, essential workers and activists are demanding a different type of economy. One of those activists is Ai-jen Poo, the co-founder and executive director of the National Domestic Workers Alliance.

Domestic workers include housekeepers, nannies, and home care workers. In the US, 2.2 million people normally work in private homes, according to research from the left-leaning Economic Policy Institute. Almost 92% of those workers are women, and over half of them are Black, Hispanic, or Asian American Pacific Islander.

A report from the UN’s International Labour Organization found that domestic workers were disproportionately impacted by the pandemic, with working hours falling by 50% in 13 countries.

Ai-jen Poo
Ai-jen Poo.

Poo has been at the forefront of the domestic labor movement, and was awarded a MacArthur grant in 2014. She spoke with Insider about what domestic workers need for an equitable recovery ahead of a three-day summit called “Essential for Recovery,” where international workers and activists alike – including Poo – will present a framework for recovery.

There are three themes that essential workers around the world are calling for in an equitable recovery.

Unite a disperse workforce for collective bargaining

Domestic workers are far more likely to be part of the informal economy – meaning that they don’t have the legal protections or benefits of a full-time job. A recent report from the ILO finds that, worldwide, eight out of 10 domestic workers are informally employed; according to the EPI report, one in five domestic workers in the US get health insurance through their jobs.

“The vast majority of domestic workers lost their jobs and income at the beginning of the pandemic; 82% of domestic workers didn’t have a single paid sick day going into the pandemic, and there was no job security,” Poo told Insider. “People lost their jobs and income overnight, and ever since then it’s been a struggle of just a set of impossible choices.”

Domestic workers are also excluded from the National Labor Relations Act, which gives workers the right to create unions or other collective actions, the EPI report notes.

For domestic workers, Poo said that change means “ensuring that workers have a voice in their workplace, where they are connected to unions or organizations where they can break out of the isolation of this work and work collectively to raise wages.”

Making sure workplaces are safe and healthy

“That’s everything from ensuring that people have clean water and sanitation to PPE,” Poo said.

A survey of 636 primarily Asian and Latinx essential workers in California from Asian Americans Advancing Justice – Asian Law Caucus and UC Berkeley found that just 12% of domestic and home healthcare workers regularly got N-95 respirators.

On a basic safety level, that means ensuring vulnerable workers receive PPE; the group is also calling for resources and protections to guard against sexual harassment and violence, from paid leave to flexible work arrangements for survivors.

Ensuring social protections like childcare, healthcare, and education

“If we are serious about creating economic mobility and economic security for the global workforce, we’re going to have to really think about what kind of social protections can enable that,” Poo said. She said that lack of caregiving infrastructure and universal paid sick time “are some of the most powerful drivers of inequality that nobody talks about.”

The ILO report found that half of the world’s population doesn’t have access to social protections like healthcare, stable income, childcare, or retirement plans – and posited that the onslaught of the pandemic has created a moment where it’s possible to change that.

“I think the pandemic really revealed just how interdependent we are in our economy and otherwise – nothing like a public health crisis to remind us that as societies, we are fundamentally interconnected and interdependent,” Poo said. “And if there is a set of workers who are unprotected and highly insecure, it creates a downward gravitational pull where more and more of us will be at risk.”

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The August jobs report shows the pandemic is keeping workers home – not enhanced unemployment benefits

an unemployed worker holds a sign that says  I Am angry as hell Fix Unemployment Now,'
Odirus Charles holds a sign that reads, ‘ I Am angry as hell Fix Unemployment Now,’ as he joins others in a protest on May 22, 2020 in Miami Beach, Florida.

  • The August jobs report showed dismal job growth, marking a bump in America’s economic recovery.
  • The low number of jobs added shows that the pandemic is still strangling the economy.
  • It also counters the narrative that enhanced benefits were keeping workers at home.
  • See more stories on Insider’s business page.

The number of jobs added in August came in dismally below economists’ expectations, showing yet another bump in the road for America’s economic recovery.

August’s data also shows that the pandemic’s newest surge – and not enhanced unemployment benefits – is responsible for workers staying home.

America added just 235,000 nonfarm payrolls last month, according to the Bureau of Labor Statistic’s monthly report. Economists were anticipating an addition of 733,000 payrolls, Insider’s Ben Winck reports. It’s a huge slowdown from the 1.1 million jobs added in July.

In August, 5.6 million people said that they were unable to work due to the pandemic. That’s an increase from July, where 5.2 million cited the pandemic as keeping them from work. And 1.5 million people said that the pandemic prevented them from looking for work – a number that did not drop from July.

That shows the ongoing pandemic, and especially the rise of the more-contagious Delta variant, is still heavily weighing on the jobs market.

Notably, August’s jobs report likely captures our fullest picture yet of the impact that ending enhanced unemployment benefits had on workers. At least 25 states opted out of federal benefits early after similarly weak jobs reports this spring, with governors pointing to beefed-up benefits as the reason that people weren’t returning.

The stated goal for ending benefits was simple: To get people back to work.

“Alabama is giving the federal government our 30-day notice that it’s time to get back to work,” Gov. Kay Ivey said in a press release announcing that federal benefits would end June 19.

Benefits in those states all came to an end by mid-July; August’s report is based on the state of the labor market from August 8 to 14. The weak job growth numbers coming after the end of expanded benefits in half the states suggest that those cuts aren’t causing a surge in hiring, or at least not enough of a surge to overcome the Delta slowdown.

Research has found that states that ended benefits early lost $2 billion in consumer spending, which likely didn’t help the situation either.

Leisure and hospitality, a primarily in-person and low-wage industry that was hit particularly hard by the pandemic and shutdowns last year, had previously been leading the way in recovery. The sector added nearly 400,000 jobs in July, but in August, employment in leisure and hospitality was unchanged, adding a net zero jobs during the month – and food services and drinking places shed 42,000 jobs.

With enhanced benefits ending, those plentiful low-wage service jobs that some unemployed workers were being nudged towards – and where anecdotal labor shortages abounded – were stalling out. At the same time, more people were out of work due to the pandemic.

“Delta seems to be the overwhelming factor affecting the labor market right now,” Daniel Zhao, a senior economist at Glassdoor, told Insider. “It’s entirely possible that the withdrawal of enhanced unemployment benefits led to a small increase in payrolls, but it’s just being completely overwhelmed by Delta.”

The dismal August numbers come as all federal unemployment benefits are set to end on Monday. The left-leaning Century Foundation estimates 7.5 million workers will lose benefits completely, and researchers project that benefits ending could lead to an $8 billion drop in spending. Research has also found ending benefits early had little effect on employment.

Some advocates and politicians have argued it’s too early to end the benefits, but the Biden administration has already affirmed they’ll come to a close on Monday. The administration did say that states could step in to continue to provide benefits with American Rescue Plan funds. So far, none of them are.

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Bank of America projects the Fed will taper asset purchases in November, ahead of earlier projections of 2022

Jerome Powell
  • The Federal Reserve is likely to start reducing asset purchases in November, said Bank of America on Thursday.
  • BofA sees the Fed cutting down US bond buys by $10 billion to $70 billion in November.
  • The Fed’s decision on tapering will be highly dependent on economic data with COVID-19 infections on the rise.
  • See more stories on Insider’s business page.

The Federal Reserve is likely to begin reducing its purchases of Treasury bonds and mortgage-backed securities in November, Bank of America said Thursday, changing its outlook on the end of stimulus efforts spurred by the coronavirus pandemic.

The investment bank shifted its view to November from January 2022 following the release of minutes from the Fed’s July meeting on Wednesday. The minutes suggested most members of the Federal Open Market Committee see the central bank on course this year to start reducing the emergency asset purchases put in place to help the world’s largest economy weather the COVID crisis.

“September seems too early to start a taper since the minutes signaled FOMC agreement on providing ‘advance notice’ before making changes to balance sheet policy and may be too early to get a proper read on employment data since delta variant concerns emerged,” said BofA in a note led by rates strategist Mark Cabana.

December seems unlikely considering the timing of when the Fed should announce its schedule of monthly purchases of US Treasuries and mortgage-backed securities.

“If the Fed indeed wants to start reducing purchases this year, November then seems the most likely timing,” said BofA.

The central bank has been buying $80 billion worth of Treasury securities and $40 billion in mortgage-backed securities, or MBS, every month since June 2020 to help the world’s largest economy recover from the coronavirus crisis that pushed it into a deep but short recession.

The Fed will likely reduce Treasury bonds buys to $70 billion in November and to $60 billion in January 2022 followed by gradual decreases until purchases hit zero in September 2022, the bank said.

MBS purchases are likely to go down to $35 billion in November and to $30 billion in January 2022 before also gradually stepping down to zero in September of next year.

But any decision on tapering will be highly conditional on the flow of economic figures, said the rates strategists and economists.

“With the recent rise in COVID cases, the Fed will be monitoring the incoming data closely to make sure that the economy continues to make ‘substantial further progress’ towards its dual mandate (especially on employment) before announcing any changes to its asset purchase program.”

That means even more scrutiny on upcoming US nonfarm payrolls reports. The bank sees a risk of a disappointing jobs report for August in part because of concerning signs among small businesses and potential weakening in the service sector because of the highly transmissible Delta variant of coronavirus. The US jobs report is due in early September.

BofA said the Fed completing asset tapering by the end of the third quarter would give the central bank flexibility to raise interest rates by end of 2022 if they see that as an appropriate move. Policy makers last year cut interest rates to a target of 0% to 0.25% to reduce borrowing costs.

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More and more job openings are requiring you to get the COVID-19 vaccine

Vaccine
A man holds his vaccination reminder card after having received his first shot at a pop-up vaccination site next to Maximo Gomez Park, also known as Domino Park, Monday, May 3, 2021, in the Little Havana neighborhood of Miami

  • A new analysis from Indeed Hiring Lab found that more job postings are mandating COVID-19 vaccinations.
  • That’s likely due in part to more companies mandating vaccines amid the Delta variant surge.
  • Vaccine mandates across entire sectors could encourage hesitant workers to get the shot by making it harder to switch jobs
  • See more stories on Insider’s business page.

As the Delta variant continues to surge across the US, jobseekers may need to add something else to their resume: COVID-19 vaccination.

That’s according to a new analysis by economist AnnElizabeth Konkel for Indeed Hiring Lab, who delved into the job site’s postings in the week leading up to August 7.

The share of postings per million that explicitly required a COVID-19 vaccine increased by 34% from the month before, and the share of postings that require vaccinations (but not explicitly a COVID-19 jab) went up 90%.

And jobs in industries that historically haven’t required vaccinations are increasingly requiring that prospective employees are inoculated.

For instance, in February, only 33.3 jobs per million in education required vaccination, but in July, 2,166 did – a rate 65 times higher. The biggest increase was in software development, with the share of jobs requiring vaccination skyrocketing by over 10,000% from February to July.

Even so, that’s still a very small share of total job openings on Indeed, making up just about one in a thousand, according to the report.

The rise of the more-infectious Delta variant has increasingly prompted employers to enact vaccine mandates, with federal and state agencies, alongside private businesses, requiring that their employees get the shot.

March polling by workplace technology firm Envoy found that most American workers wouldn’t come back to the office unless there was a vaccine mandate, especially those in more white-collar industries like technology. And CNBC reports that over a dozen large corporations are requiring that at least some, if not all, of their workers be vaccinated.

But, as Insider’s Aki Ito reports, the current hot labor market may actually be dissuading companies from requiring their employees to get vaccinated, since it’s easier than ever for them to just leave and take a role where vaccines aren’t mandated.

Importantly, that’s more prevalent for blue-collar workers; one example is Walmart mandating vaccinations for corporate workers, but not those working in stores or warehouses.

Ito’s analysis comes amid yet another month of near-record-high quits, with millions of workers (especially blue-collar ones) leaving their jobs – marking a record-high percentage of job separations coming from quits.

As Ito argues, that only shows the need for mandates: Creating industry and sectorwide norms will only encourage more workers to get the vaccine – and reduce the number of jobs they can flee to that don’t require it.

Read the original article on Business Insider

Billionaires’ wealth gains during the pandemic could easily pay for the whole world to get vaccinated

covid vaccine
A medical assistant administers a COVID-19 vaccine dose to a woman at a clinic in Los Angeles on March 25, 2021.

  • A one-time 99% tax on the pandemic-era gains for the world’s billionaires could pay for vaccines for everyone, according to a new report.
  • The rest of the money collected could give every unemployed worker in the world $20,000.
  • One-off wealth taxes have been suggested as one potential solution for boosting economic recovery and addressing inequality.
  • See more stories on Insider’s business page.

Billionaires around the world added around $5.5 trillion to their wealth during the pandemic – and a 99% tax on those gains could help vaccinate the world.

That’s according to a new report from Oxfam, the Fight Inequality Alliance, and the left-leaning Institute for Policy Studies and Patriotic Millionaires.

The analysis looks at the impact of a potential one-time tax on pandemic-era billionaire gains, using Forbes real-time data to track net worths. The report finds that the world’s 2,690 billionaires added staggering amounts to their fortunes, with their cumulative wealth growing more since March 2020 than in the previous 15 years.

That adds up to a cumulative net worth of $13.5 trillion, which marks a $5.5 trillion, or almost 69%, increase since the pandemic first hit, when they held $8 trillion.

“Billionaire wealth is not earned. Billionaires are profiting from working people’s hard graft and pain. It’s their money ‘earned’ by your sweat ―and it’s high time that sweat began to pay off,” Njoki Njehu, Pan Africa Coordinator of the Fight Inequality Alliance, said in a statement.

Per the report, such a 99% one-off tax would bring in $5.4 trillion, with the billionaires still holding onto $55 billion in pandemic-era gains.

The authors calculate the cost of vaccination at $7 per dose, meaning that vaccinating the entire world would come in at a price tag of $70 billion total, a relatively tiny fraction of the trillions in wealth gained by those billionaires.

Currently, according to Our World In Data, only 1.2% of people in low-income countries have gotten at least one vaccine dose. Nature reports that it will take until 2023 for the poorest countries to get vaccinated at current expected rates.

The report proposes that rest of the money raised by a wealth tax go to unemployed workers. The International Labour Organization found in a report that 220 million people are unemployed worldwide. According to the analysis, it would cost $4.4 trillion to give them all $20,000, well within the amount of money left over after global vaccination.

Wealth taxes have arisen as one solution for combating pandemic inequality

Levying taxes on society’s wealthiest members has been suggested as one potential method to address pandemic inequality – and it’s garnered support from more mainstream bodies and countries.

In April, the International Monetary Fund backed taxes on the wealthy and corporations as one option to help pandemic economic recovery. Argentina took it one step further, enacting its own one-time wealth tax on the top 0.8% of its population. The money from that tax – which brought in $2.4 billion – will go towards housing, public health, and other pandemic-impacted sectors.

“This is the time for a bold and meaningful strike at these inequalities,” Chuck Collins, the director of the program on inequality and the common good at the Institute for Policy Studies, told Insider. “You can’t get a more extreme example of the harms of billionaire wealth excess versus the plight of ordinary people than what we’re seeing right now. And people know that. So, I think bold measures – bold wealth taxes – to reverse inequality would have wide public support.”

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Most Americans believe today’s children will be poorer than their parents, Pew finds

Gen Z
  • The economy might finally be rebounding from the pandemic, but not for everyone.
  • A new Pew Research Center survey found that respondents think kids will be worse off than their parents.
  • Younger workers have already been hit by at least one recession and a pandemic.
  • See more stories on Insider’s business page.

The economy might be picking up, and people are growing a tad more optimistic, but many still think economic wounds will have a long-lasting impact.

A new Pew Research Center survey found that across 17 publics including the US a majority of respondents think kids will be financially worse off than their parents. Across everyone surveyed, a median of 64% were pessimistic about childrens’ financial futures.

That number was higher for US respondents, with 68% saying they think that kids will be financially worse off. However, respondents in France and Japan were even more concerned, with 77% of respondents in both countries saying that they think kids will be financially worse off.

Another generational wealth gap

As Insider’s Hillary Hoffower previously reported, there’s already a wealth gap between boomers and millennials. The older generation has benefited from everything from low interest rates to investments in companies that bolster pollution – a problem that will exacerbate the climate crisis and its strain on the younger generation.

That’s on top of the Great Recession already leaving millennials behind when it comes to wealth accumulation; as Insider’s Hillary Hoffower reported, the Federal Reserve Bank of St. Louis found that millennials earned 34% less than they would have had there been no recession.

Plus, the past year has brought yet another recession. This time, younger workers were again pummeled. According to a report from the International Labour Organization, workers ages 15-24 saw employment losses of 8.7%; among adults, employment loss was broadly 3.7%. That report warned that Gen Z, which has dealt with education cut short by the pandemic and a recession during their entry to workforce, was at risk of becoming a “lost generation.”

As Insider’s Hillary Hoffower reported, Gen Z was the most unemployed generation in the wake of pandemic’s economic devastation. However, some hope may be on the horizon: Gen Z will still take over the economy in a decade, Hoffower reported, despite the pandemic potentially making them lose out on $10 trillion in earnings.

On the whole, a median 52% of respondents in the Pew survey – and 71% in the US – still think that the current economic situation is bad. In New Zealand and Australia, respondents were more optimistic, with over 70% of respondents in both answering that the economic situation is good.

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Clothing sales are spiking even higher than 2019 levels – in part because roughly a quarter of consumers are a new size post-quarantine

People shopping
Clothes shopping is up 35% compared to 2019 levels.

  • Spending on clothes is skyrocketing past pre-pandemic levels.
  • According to Bank of America research, clothes-buying is up 35% compared to 2019.
  • The increase is due in part to pandemic-related weight-fluctuations, according to Levi’s CEO.
  • See more stories on Insider’s business page.

Spending on clothes is skyrocketing, fueled by a desire to get dressed up again – and pandemic-related weight changes.

After taking a nosedive in the early months of the pandemic, spending on clothing is topping even pre-pandemic levels: It’s up 35% compared to two years ago, according to Bank of America research.

“People are looking to get out and about again,” Fokke de Jong, Suitsupply’s founder and CEO told Insider earlier this year following the company’s ad campaign promoting a raunchy “new normal.” “Parallels to the Roaring 20s are being drawn on a regular basis.”

Some retailers started to see a shift in purchasing behavior back in February. Urban Outfitters CEO Richard Hayne said during the company’s fourth-quarter earnings call in March that the company saw a shift away from “casual, at-home, comfortable” clothes and toward items like dresses – what he called “‘going-out’-type apparel.”

Sonia Syngal, the CEO of Gap, said earlier this year that the company is very optimistic about a return to dressing to impress, forecasting what she called a “peacocking effect” that will happen as people emerge from the pandemic.

Read more: 19 of the most promising retail startups of 2021, according to top VCs

But it’s more than just a long-dormant desire to look good that’s fueling the surge in clothes shopping.

According to a February poll conducted by The Harris Poll on behalf of the American Psychological Association, 61% of US adults experienced undesired weight fluctuations during the pandemic, with 42% reporting they gained more weight than they’d anticipated.

Those who gained weight added an average of 29 pounds during the pandemic, the survey found.

Levi’s CEO Chip Bergh said in an interview with the Associated Press earlier this month that he’s seen the pandemic-era looser fits “taking hold.” Bergh said that weight fluctuations during pandemic lockdowns mean some people aren’t fitting into their clothes like they used to – in fact, Bergh estimated that more than 25% of consumers are now a new size.

“The number of people who are in a new size is pretty staggering,” he said. “Some people gained weight during the pandemic, and many people lost weight. But both on the men’s side of the business and women’s side.”

Read the original article on Business Insider

How entrepreneurs can bolster their company and emerge from the pandemic as new market leaders

IBM women in leadership
Prepared leaders can make decisions by seeing market opportunities that are invisible to the untrained eye.

  • Tough economic times are opportunities for leaders to evaluate their company’s trajectory and reach.
  • To survive market uncertainty, leverage your unique advantages and stay competitive.
  • Start with a flexible framework, allow room for failure, and keep your leadership team in sync.
  • See more stories on Insider’s business page.

No one ever said it was going to be all smooth sailing. We’ve all been in a boat that’s gotten a little rocky, and some of us have even experienced a full-on capsize. In my experience of weathering the storm, there are one of two things that happen to your company: You either go out of business or you stay in business. If you are leading a team, you need to figure out which of those two positions your company is headed towards. Chances are, it won’t be difficult as a lot has already happened and shaken out in the marketplace. That’s good news for entrepreneurs, and even better news for leaders. The companies that weren’t strong enough to survive have already failed. And while we mourn their loss, we also have to recognize that it’s leveled the playing field. This is also a good time to take stock of where competitors have landed and where you currently rank in the pack.

The difference between those who survive and those who thrive

The companies that will win are those who learn how to leverage market uncertainty for their unique competitive advantages and leapfrog their competition with a period of rapid growth. On the surface, this sounds like a brilliant strategy, but there are thousands of ways it can fail if not executed well. A bad bet could take a company down, just as quickly as a good bet could pull it to the front of the line. This is where we’ll see a second round of companies fail, which will set the stage for the winners to double down once again and secure their seats at the top.

Competition is about to get fierce as companies start to position themselves for market dominance. We can expect market sectors to start to shake up and shake out over the next two to three years as the full market impact of the pandemic unfolds.

At the same time, the potential gains are big. With market sectors in flux, the potential to take on the market leader spot has never been greater. This is the kind of opportunity that only comes around once in a lifetime, so I recommend paying attention to your industry competition, closely. Technology is accelerating faster than Corporate America can adopt it, creating a fertile ground for start-up and mid-sized companies to innovate their way into the top seat. However, all bets are not created equal and entrepreneurs need to understand how to weigh bets and when to push the accelerator.

Creating a framework for success

Framework is important. It should be flexible and allow for rapid failure. The best way to win is to fail faster and in smaller chunks. It should also empower winners to make their way to the top faster. Oftentimes, winners lose because they can’t even see they are there. The framework must prevent that from happening, and should allow for rapid experimentation. We never know which idea is a winner until it has a chance to win. So often our strategies are mired in complexity and complicated execution plans. That isn’t going to fly if you want to take the top seat. Instead, you’ll need a space for ideas to be planted, to grow and to reproduce. In execution, this often looks like an idea lab with a budget and a team who knows how to get stuff done at the helm.

So how can leaders understand the chessboard so they can call checkmate on their competition? They have to settle into discomfort. Prepared leaders will be able to make clear-headed decisions while seeing market opportunities that are invisible to the untrained eye. And they will be prepared to move even when it isn’t comfortable to do so.

The road to the top is rather arduous and requires massive levels of organizational flexibility that can’t be taught overnight. The leadership team must be in sync and know how to make the right decisions that are right for the business and its people, even if they are tough or risky. Employees need to feel appreciated, valued for their contributions, and celebrated every step of the way. Customers also need to feel satisfied and delighted by their entire experience. That’s a tall order for a company of any size, but especially challenging for industry behemoths. That’s why it’s a market ripe for the market leaders to fail and the market innovators to succeed.

Taking advantage of future innovation gaps

These are evolutionary times. We’ve never seen a combination of events with such a broad brush of impact. Every industry is primed for rapid transformation and realignment as the full market impact of 2020 continues to unfold. Technology is accelerating faster than it can be adopted by industry leaders, which is opening the door for innovation gaps. These gaps create an opening for new startups to come through and disrupt entire markets.

There’s no telling what innovations will pop up and be the next market leader, but this market is ready. We’ll get excited about the innovation, and before you know it, it will become the new norm. This won’t be the first time we’ve seen industry leaders fail and get overtaken by an unnamed competitor and it won’t be the last. As markets have it, there’s always a play that can win. Will it be yours?

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The pandemic could accelerate job automation – here’s how the change would impact cities, the labor force, and inequality

automation
According to the World Economic Forum, nearly 40% of US jobs are at risk for automation.

  • Hyejin Youn is an assistant professor of management and organizations at Northwestern University.
  • She says the pandemic may speed up job automation and widen gaps in wages, skills, and social capital.
  • This could lead to the downfall of many US cities, but Youn hopes it will instead spur innovation.
  • See more stories on Insider’s business page.

For more than a year now, many of us have worked from home, pets on laps, children babbling just offscreen. The experience has been a revealing one. Some of us have learned to embrace the flexible hours, the five-step commute, and the relative dearth of pointless meetings; others have felt disengaged and burned out by the challenges of collaborating on Zoom.

But the pandemic has also exposed a more significant split in the labor market, one that has experts worried as they speculate on the long-term impacts of the crisis.

“What we now see very clearly is that some jobs can be done from home, and others simply cannot,” said Hyejin Youn, an assistant professor of management and organizations at the Kellogg School. “Distinguishing between these types of work can help us track inequities in the labor market across cities.”

So far, the trends are worrisome. Those who can log on from home have been largely unaffected, whereas those whose jobs require a physical presence have either been laid off or faced with the choice of protecting their health or guaranteeing their next paycheck. And as companies look to cut costs, more and more jobs are now under threat of automation, which Youn fears may widen the gap between cities that flourished pre-pandemic and those that were already struggling.

“There’s always the hope that a crisis like this will spur innovation,” Youn said, “and nobody knows precisely what the long-term outcomes will be. But the concern is that rather than shaking things up, the pandemic might simply reinforce the system we already have.”

From “optimization” to automation

One consequence of remote work is that companies might accelerate the pace of automation, in part because they’ve had a chance to monitor more workers online and assess which tasks – or entire jobs – a machine might do more quickly.

With nearly 40% of US jobs at risk of automation, according to the World Economic Forum, the performance data from 2020 might have significant implications. When an employee’s every click, step, or delivery stop is recorded in digital form, a company can learn to optimize that work – and perhaps codify human routines into processes that are better suited to machines.

Using digital information, companies can identify and optimize certain task routines by finding better ways of arranging the tasks within the routine, micromanaging human workers, and developing machines to take on the tasks.

“This is the uncomfortable truth,” Youn said. “Recording an employee’s work is preparing for the day when you replace them with a machine. And this will lead to further gaps in wages, skills, and social capital.”

And while there will still be some tasks that are not codifiable – especially ones that require tacit knowledge or empathy and hospitality – certain jobs are sure to be streamlined and passed on to less-skilled laborers or organized into routines that can be handled by machines.

“Technology has always increased inequity,” Youn said. “Now we just have the means to make it happen even faster.”

The impact on cities

If these trends do accelerate, the effect on America’s urban landscape could be devastating. Youn has previously studied the ways in which automation affects US cities unequally, and she worries that this disparity will only worsen as businesses adapt to post-pandemic life.

“Cities might segregate further,” she said. It’s likely that wealthy, productive hubs like Silicon Valley will return to something resembling business-as-usual, given how valuable in-person collaboration can be for the kinds of breakthroughs on which tech thrives. On the other hand, the outlook for a small or medium city might be even more bleak than in 2019.

The impact of this geographic rift is hard to measure, Youn said, but it likely doesn’t bode well for the effort to solve the nation’s social and political polarization.

“It might make the echo-chamber problem worse, with certain kinds of high-skilled workers hermetically sealed from everyone else,” she said. Mountain View might come to seem even further away from Baltimore. And the prospect of remote-work patterns extending beyond 2020 is threatening to exacerbate the winner-take-all economy.

“It’s a well-known phenomenon in economics that social mobility increases after certain kinds of crisis, like war,” Youn said. “But this crisis appears to be different. It’s pushing us in the opposite direction.”

Reactive innovation

One source of hope is that the pandemic might spur new innovation. It’s certainly been a time when people and businesses have had occasion to reconsider their purpose and goals.

But Youn said we should distinguish between two kinds of innovation. The first is endogenous innovation, or change that evolves from within a business, society, or ecosystem. The second is reactive – change in response to external events.

“The pandemic is clearly a major event that will force some kind of innovation,” she said. “But this doesn’t mean we will innovate in the direction we aspire to as a nation or society. It’s less endogenous, more reactive.”

And some of this reactive innovation – including the many creative ways companies learn to digitize jobs – might have negative long-term effects. In fact, the focus on maximizing efficiency may actually limit endogenous innovation: in particular, optimizing technologies to execute processes leaves little room to come up with the kinds of breakthrough ideas that reshape industries.

For companies that have the luxury of focusing past their immediate survival on long-term innovation, Youn advised bringing employees back to the office whenever feasible. Because in her view, the early work of endogenous innovation cannot be done remotely, at least not very well.

“When it comes to arriving at ideas that are not well defined, thinking far into the future, that’s tough over Zoom.”

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