As the economy braces for the ongoing effects of COVID-19, President Joyce P. Jacobsen shares her analysis of the responses from the government and regulators, the impact on workers and potential long-term implications of the virus.
An expert on labor economics and the economics of gender, Jacobsen is the author of scores of journal articles and book chapters exploring sex segregation, migration and the effects of labor force intermittency on women’s earnings, among other topics, as well as the economics of wine and other collectibles. Her books include The Economics of Gender, Queer Economics: A Reader (co-edited with Adam Zeller) and Labor Markets and Employment Relationships (with Gilbert L. Skillman).
Jacobsen earned her Ph.D. from Stanford University and M.Sc. from the London School of Economics, and graduated from Harvard University, magna cum laude, with her A.B. in economics as a member of Phi Beta Kappa. She began her academic career in 1988 as an assistant professor at Rhodes College before joining the Wesleyan University faculty in 1993. She earned full professor at Wesleyan in 2000 and was awarded an endowed chair as Andrews Professor of Economics in 2003.
With the stock market on a downturn and concerns over a potential recession rising, how effective do you expect the measures from the Fed and Congress to be to ease economic uncertainty? Are there additional steps we might expect?
The Fed has been doing the right things, trying to keep credit channels open so that firms can borrow at low cost to keep their cash flow moving and so that there are no runs on banks. Congress has been more challenged to come up with the level of deficit/Keynesian spending that is called for in a situation like this to try to reduce hardship while the closedowns are still in effect and to get the economy back up and rolling quickly once lockdowns are loosened. Much as in World War II, now is the time to run deficits (though unfortunately we had already been running them) to get through the crisis and continue to stimulate the economy so as to try to get a quick upturn. We need other countries, such as our European trading partners, to do the same, given our global links, but it looks like they are also planning large stimulus and support packages.
Schools are closed. Older and infirm people are at high risk. There are fears of COVID-19 patients overwhelming hospital services and staffs. How do you see the care economy faring in the face of the pandemic? Are there inherent strengths or deficiencies of the sector — in the U.S. or elsewhere — that indicate how workers and those they care for will come through the outbreak?
The care economy has reverted back to an older state, now that many schools are closed and children are at home. Similarly, those taking care of elderly or infirm relatives at home are more on their own now. Some feminists have already raised concerns about unequal burdens of childcare in the home falling on women, particularly if men are more likely to be in jobs considered essential and thus still working. This is hopefully a short-run challenge and one that will not strain the paid and unpaid care economies permanently, even as it has also raised legitimate concerns about how care is managed and compensated.
What parallels do you see between the present state of the economy and the 2008 financial crisis or the post-9/11 economy? Are there lessons from the recent past that citizens should consider to understand what ripple effects the pandemic will have and how to get a jump on recovery?
This is a black swan event: no one saw this coming and we don’t have a good model for how the economy will react when it ends. If the general closedown is relatively short, say under two months, then the economy should be able to get back up and running pretty quickly, so long as the Fed can keep credit channels flowing. Moves such as suspending mortgage payments and other debt payments are helpful, as well as targeted support to certain firms and general support to consumers, particularly low-income families. The recent past is less of a model than the farther-back past. There are a number of things that make this less problematic than, say war recovery: it doesn’t look like the virus causes long-term health effects for those who recover from it, and workers in general should be able to return to work quickly so long as their jobs are there. We don’t have to retool a lot of people for new jobs; they just return to their current jobs. The 1918 pandemic went on for quite awhile but was not as bad an event from a macroeconomic standpoint as World War II or the Great Depression. One friend of mine had an interesting insight: now that our economy is more service oriented than manufacturing oriented, it may actually be easier to get it back up and running. The fact that the economy was in such good shape before this happened (low unemployment in particular) means that this crisis isn’t piling onto an already weak system.