“The most important investment you can make is in yourself.”
– Warren Buffett
The 2020 Covid-19 pandemic has caused drastic effects on almost every aspect of our lives. It has revealed our weaknesses as well as our strengths. Like past pandemics, this global health outbreak will be over in some distant future. However, the post pandemic economy will be different in many fundamental ways as virtually nothing has been immune to significant changes. The pandemic affected international trade, the labor market, the technology sector, and fiscal and monetary policies, among others.
At the global level, Covid-19 has resulted in mass production shut-downs and supply chain disruptions due to port closures around the globe. Many workers lost their jobs, and there is no assurance that there will be able to return to their old jobs once the pandemic is over. The large cut in foreign trade was exasperated by falling demand for both consumption and investment goods, resulting in a smaller world economy. According to the World Trade Organization (WTO), global trade volumes are projected to decline between 13% to 32%. The World Bank has projected that the global economy is expected to contract by 5.2% in 2020. Over a longer time horizon, the deep recessions triggered by the outbreak are expected to leave lasting scars through lower investment and erosion of human capital through lost jobs and education.
Technology will be the strongest bet. This sector has been immune to the effects of Covid-19, thanks to the increased connectivity needs of people working and socializing with one another from home using digital media. The technological expansion and innovation will continue in the post-Covid era. The demand for skilled workers and engineers will keep rising to new highs. Universities/colleges will offer more synchronous/asynchronous courses as professors and instructors are becoming more comfortable teaching online. This, in turn, benefits the technology sector. Technology job postings will continue its impressive growth, which ultimately increases labor productivity. These gains will be broadly shared in the long run. However, this may not be the case in the short-run. We will see more video meetings in every conference room. As a result, business travels will become a thing of the past. This will have a lasting effect on the airline industry’s bottom line, causing a smaller industry. In the post-Covid era, one would expect to see many empty office buildings, which will soon become apartment buildings, as it becomes a norm to work at home and hold virtual business meetings for years to come.
E-commerce is a big beneficiary of this pandemic and will continue its expansion at the expense of brick and mortar malls. More and more companies will switch to an online business model.
Many low-paid workers who are primarily in the service industry are getting battered. These are women and minorities. The pandemic eroded the gig economy. Gig workers’ earnings have plummeted, and many face health issues because they must continue interacting with others to make ends meet. Workers who lost their jobs will have to struggle to get them back. There will be an acceleration of automation, which will make it even more difficult for these workers to find jobs in the post-pandemic economy.
Perhaps the most adverse effect of the pandemic (in addition to lives lost to Covid) is the widening income disparity between the haves and have nots. Skilled workers will enjoy higher incomes due to increased demand for their services, and low-income workers will see their paychecks shrinking. If we do not get a good grip on this pandemic soon, this bleak outlook is subject to great uncertainty and significant downside risks.
“Education is the most powerful weapon you use to change the world.”
– Nelson Mandela