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During 2021’s first quarter, U.S. economic output returned to 99.5 percent of its level at the end of 2019.
At the same time, American workers put in 4.5 percent fewer hours, according to The Wall Street Journal.
In other words, the shutdown forced companies to automate or streamline processes, operations, and product lines, allowing businesses to achieve pre-crisis results with permanently fewer workers.
For example, defense and aerospace company Raytheon laid off 21,000 workers at the beginning of last year’s shutdown when air travel crashed and airlines canceled orders for new planes.
The crisis sped the company’s plans to automate and digitize various aspects of the business, Raytheon said in January 2021, announcing that it would no longer need most, or perhaps all, of the 4,500 contract workers it let go 10 months earlier.
“We have over 500 automation and upgrade projects we plan to deploy over the next three to five years,” vice-president Paolo Dal Cin said in comments quoted by the WSJ.
The projects include connecting an additional 20,000 devices into the company’s digital network so data can be collected and routed automatically – a job formerly handled largely by contract workers.
The shutdown also was “truly an opportunity to redefine the hotel operating model,” according to Host hotel chain CEO James Risoleo.
Guests will now need to opt in to certain housekeeping services instead of receiving them automatically, he said.
Hilton will clean rooms less frequently for guests on extended stays but did not comment on how many fewer maids the change will require.
The chain also has restructured its food and beverage operations to allow a permanent 30-percent reduction in that department’s workforce.
The company’s hotels “will be higher-margin and require less labor” than before the 2020 crash, CEO Christopher Nassetta explained in February comments cited by the WSJ.
Restaurant chains such as Applebee’s and Dave & Buster’s are handing guests digital tablets to use to order and pay, cutting down on the number of servers needed.
The U.S. tax code encourages investments in automation, the WSJ noted.
Businesses pay about $.25 in taxes for every $1 paid to workers but only about $.05 in taxes for each dollar invested on machines because companies can deduct the cost of capital investments, MIT economist Daron Acemoglu told the WSJ.
“If you’re a retailer, if you introduce 10 checkout kiosks, that’s not very expensive,” he said.
TREND FORECAST: Today the American Hotel & Lodging Association reported that the hotel industry’s road to recovery will be long and uneven:
- More than one in five direct hotel operations jobs lost during the pandemic—nearly 500,000 in total—will not have returned by the end of the year
- Hotel occupancy is projected to drop ten percentage points from 2019 levels
- Hotel room revenue will be down $44 billion this year compared to 2019
- States and localities will have lost more than $20 billion in unrealized tax revenues from hotels over the past two years
An extremely important element of their findings is that urban markets have been disproportionately impacted. Thus, this re-confirms our forecast for a deep commercial real estate slump in major urban cities as more people work from home, business travel declines and the fear of new virus strains and government demands for COVID passports limits tourism and travel.
Indeed, with under 50 percent of the people fully jabbed—even if the number rose to 60 percent—a sizable portion of society will be travel, tourism, concert, theater and night-club banned, which will negatively impact the hospitality and commercial real estate sectors.