Occupational Licensing, Zoning, And Other Regulations Will Delay Recovery From COVID-19
The economy has taken a big hit from COVID-19. Since social distancing and government mandated shutdowns began in March, more than 29 million people have filed for unemployment insurance. The April unemployment rate was 14.7%, more than four times larger than the February rate. New research suggests the labor market is undergoing fundamental changes, not just a temporary pause, and that the economic recovery will be slow unless we reform policies that delay the reallocation of workers and capital.
In a recent NBER working paper, economists Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis look at recent data from the Survey of Business Uncertainty (SBU) to estimate expected sales changes and job reallocations connected to COVID-19. They contend that many of the layoffs and furloughs will be permanent, even if the health threat is mitigated soon:
“Drawing on our survey evidence and historical evidence of how layoffs relate to recalls, we estimate that 42 percent of recent pandemic-induced layoffs will result in permanent job loss…Applying the 42 percent figure to the 27.9 million new claims for unemployment benefits in the six weeks ending on April 25 yields 11.6 million permanently lost jobs. This number does not include future job losses caused by the COVID-19 shock…”