Virtual Symposium

Robert B. Menschel Economics Symposium

Monday and Tuesday, March 15–16, 2021

The 2021 Robert B. Menschel Economics Symposium discusses how behavioral economics can help explain decision-making during a pandemic. The full agenda is available here.

The Robert B. Menschel Economics Symposium, presented by the Maurice R. Greenberg Center for Geoeconomic Studies, is made possible through the generous support of Robert B. Menschel.

Keynote Session: A Conversation With Richard H. Thaler
Richard Thaler discussed how the coronavirus pandemic has altered human behavior and economic choices, as well as how behavioral economics can inform public health policy to incentivize people to socially distance, wear masks, and accept a vaccine.
Session Two: Economic Behavior in a Pandemic
Panelists will discuss how the pandemic has altered consumer decision-making and economic behavior, how these trends affect the U.S. and global economies, and how policymakers can use behavioral economics to address these shifts.

BABCOCK-LUMISH:  Welcome everyone to today's Council on Foreign Relations virtual Robert B. Menschel Economics Symposium session: Economic Behavior in a Pandemic with Ravi Dhar, Wendy Edelberg, and Fiona Greig. I am Terry Babcock-Lumish executive secretary of the Harry S. Truman Scholarship Foundation, and I'll be presiding over today's discussion. This symposium presented by the Maurice R. Greenberg Center for Geoeconomic Studies is made possible by the generous support of Robert B. Menschel.

Ravi, let's go ahead and begin with you. This last year we have all witnessed consumers reacting in ways some might consider curious, we could certainly argue whether they're rational or irrational, from hoarding toilet paper and Lysol wipes, this thing that they won't order Corona beer. But let's go ahead and break it down given your work, I thought it was particularly vivid to learn from you that 75 percent, that's amazing, 75 percent of consumers have tried a new store, brand, or different way of shopping during the pandemic. Could you perhaps kick us off by providing a snapshot of the ways in which consumer behaviors and choices have changed? Dovetailing on Professor Thaler's keynote yesterday, we have a remarkable panel assembled to discuss how the pandemic has altered consumer decision-making and economic behavior, how these trends affect the U.S. and global economy, and ultimately, how behavioral economics can help us understand these shifts. Our psychologist Ravi Dhar is the George Rogers Clark professor of management and marketing and directs Yale's Center for Customer Insights. A widely respected macroeconomist, Wendy Edelberg, is joining us from Brookings' Hamilton Project. She previously served as the CBO's chief economist. And Fiona Greig is the managing director and copresident of the JPMorgan Chase Institute. As we want to make sure we're understanding this past year's economic shifts from global to the very local, I particularly appreciate that Fiona comes to us with a local government experience of having served as Philadelphia's deputy budget director.

DHAR:  Yes, thank you Terry. When you look at behavior changes, you can look at what I call the "four Ws," if you like. The first "W" could be what are they buying? You mentioned toilet paper and beer. Some of it is not particularly insightful here, right? No one had much reason to travel, go to theaters, or sports, obviously, not much of that ticket sales are happening. So that's one "W" you can get into. And if you look at it in a nuanced way, like apparel was down, but if you look at sleepwear, or pajamas, or casual stuff that went up massively, but stuff you wear when you go out for parties went down dramatically. So that's one "W" that people look at—what are people buying? The second I think we'll get into a little later, which is who is doing the buying, given that income inequality. Who's actually doing the buying if you start looking at more granular things?

I actually want to start with the third "W" which is, where is this behavior happening? So if you look at the two big points we measure, is the point of purchase and point of consumption. So not surprisingly, if you look at point of purchase, there has been a big flight to digital. If you look at e-commerce, a lot of benefit has gone to the big retailers, big stores that had an e-commerce capability, the small retailers, small stores did not have it. But there's also something interesting here when I looked at the data. If you look at something like McDonald's or quick service restaurants, most of the buying happened in drive-throughs, not at home. Why was that the case? I think people already used drive-throughs, they were familiar with it, you drive there in your car and you felt safe. So drive-through sales were as high as 90 percent and at-home sales were around 5-to-10 percent for this quick service restaurant, which surprised me compared to many other places where a lot of the delivery was happening at home. Even when you break it down by curbside versus home delivery, curbside went up quite a bit. It's almost as if people wanted to get the hell out of home somewhere and pick up their groceries. So that's about the point of purchase. 

You can also look at point of consumption—where is it happening? Not surprisingly, since you couldn't go to work, you couldn't go to restaurants, most of the consumption was happening at home. So no TGIF, no eating breakfast on the fly. So if you look at places like McDonald's they found that breakfast sales went down because people were not having breakfast on the fly or a coffee on the fly. Whereas lunch and dinner sales actually went up for these places, but even more than places like McDonald's, it went up for pizza. Why? Because pizza can be shared with the family, you can buy for the whole family and McDonald's had to really scramble to make this family size kind of meals because they were not setup traditionally to do that.

So when you start looking very granularly, you start seeing winners and losers. Winners in e-commerce were really the large, familiar brands with supply chain sufficient inventory, who actually were doing pretty bad before the COVID hit like Campbell's, Kellogg's, the Bud Lights because people wanted to try the niche brands. But once it moved online rapidly, the small niche brands did not really have the inventory, the supply chain, or the direct-to-consumer model that they could benefit with. So it's very fascinating that when you start looking at it very granularly you start noticing these differences. Even in telemedicine, for example, what you find is telemedicine started taking off only when the consumer saw a benefit in it. When I talked to the companies before the COVID crisis and they were telling me, "Ravi, help me do behavior change. Help me drive people to telemedicine." And at that time the consumer's reaction or the patient's reaction was, "Why should I do this? This benefits you. It lowers your cost. It doesn't give me any benefits." So ironically, some of these same things prior to the pandemic, people thought, "There's no reason for me to change my behavior, all the benefit and the cost savings goes to the HMO." But suddenly telemedicine became very popular post-COVID, because people saw the benefit of these things. So if I look at the third "W," where is this all happening? I think that's where a lot of exciting stuff is happening, the point of purchase and point of consumption.

BABCOCK-LUMISH:  Fascinating. I just want to follow-up very briefly because behavioral insights help us understand how people respond when they don't feel that they have control over risk and really we know that emotional response then is amplified. Can you just give us a little bit more texture here? Because I think you're nibbling at it and we know you have some real insight into how we have managed risk or manage, perhaps, our feeling as if we're managing.

DHAR:  Right, so I think there are two issues here, one is the beliefs. What do people believe about, you know, what is my belief about e-commerce or what are you telling me to purchase? In general, consumers believe that you want me to change my behavior so that it benefits you. So when I talked to the banking industry and banking industry was driving people to use e-commerce, or financial instruments, you know, financial services. Payments company, let's call them, one of the two big ones, they were trying to drive people to contactless or digital wallets and most people who think, "Nah, you know, it works pretty well, that card does pretty well. Why do I need contactless, right?" And similarly, when they found, when you try to change behaviors, people have a reaction that "I'm losing control and you're doing it for your benefit." And when the pandemic hit suddenly the benefit of contactless was pretty obvious to the consumer, "I don't want to touch somebody. I don't want my card to be touched by somebody else." And suddenly there was this big opportunity and if you look at what happened in the payment businesses, a lot of the people who are providing that digital services went up dramatically. So I think more generally not only consumers have more control, but the field, the attribution that they make for the change in behavior is for their own benefit. I suppose to the benefit of the seller here and that's really what drove some of the changes.

BABCOCK-LUMISH:  Makes solid sense, for sure. Fiona, let's get you in here. You and your colleagues have had an extraordinary window into household spending and savings behavior this last year. So could you help us understand from your own findings on the direct effects of the pandemic, as well as those resulting labor market disruptions?

GREIG:  Yeah, certainly. Well, one of the things that we all know about this pandemic is that it has disproportionately impacted low-income families in terms of where the job losses occurred, disproportionately among Black and Hispanic families, workers, women. And at the same time we've seen one of the largest fiscal expansions our country has ever seen, right? Enormous packages, now three of them, that not only put tons of cash in the hands of families in the form of stimulus payments but also expanded unemployment insurance to historic levels. Actually 7 percent of total income in July came from unemployment insurance alone, when never before had that budged above 2 percent, even in prior recessions. And a couple of things have been remarkable as we kind of trace the impacts of both the job losses and the fiscal supports through the economy. The first is that actually labor income fell the most for low-income families, but total income was up and that's because unemployment insurance with those $600 supplements and then $300 supplements more than replaced pre-job loss earnings for most workers. And so with that additional support, we actually saw that spending recovered most quickly for low-income families, precisely the families who had been experiencing job loss. Those are the families for whom we observed spending increasing the most. And what was remarkable is that their spending was increasing above their own baseline, at a time when the spending of the employed had dropped dramatically. Right, we saw spending dropped by 30, 40 percentage points and yet, the spending of people who had lost their job and received unemployment insurance had been boosted by 10-or-so percent above their own baseline. So in many ways, it's the spending of jobless workers who were fueling our economy.

And from a behavioral standpoint, it was number one noteworthy that their spending was above their own baseline. Number two, it was noteworthy that those increases were durable. Durable, in the sense that even with stimulus, with unemployment insurance, we also saw their cash balances increased quite a bit. So at year-end, cash balances were up by 30, 40 percent year-over-year. And we saw that family spending increased to an increase of jobless benefits when the $300 came out, even when their liquidity levels were high. Normally, we think that marginal propensity to consume is highest when people are most cash poor, when they are most liquidity constrained is when we would expect people to exhibit a high marginal propensity to consume. And yet we saw this high marginal propensity to consume time and time again throughout the year, even as those cash balances were increasing as a result of that generous support. We saw them very responsive to the $300 supplements in unemployment insurance, we're seeing again a high responsiveness to the January stimulus. So number one, we're seeing people be very responsive to this stimulus in terms of their spending response, even when they have liquidity.

The second thing that we've seen is that one of the big concerns with very generous jobless benefits is that you might incur moral hazard. You might see that people would be deterred from working or they might stay unemployed for longer if unemployment benefits are generous in both level and duration. And yet, what we observed is very little impact of the supplemental benefits on work. So when we measured people going back to work by virtue of exits out of unemployment insurance, we saw that, actually, if you just focus on the people who received those $600 supplements, UI supplements, more than half of them exited before those supplements expired. They expired at the end of July and, in fact, more than half of those jobless workers had already gone back to work. So they weren't waiting for those generous benefits to expire, they went back to work before that. And we only saw a very, very temporary increase in returning to work when those jobless benefits and then when that $600 supplement expired. So that suggests that either people obviously prefer to work, than cash in hand. Working generates experience, it generates less risk, obviously, than even a generous jobless benefit. But it may also imply that the costs associated with searching for a job during a pandemic were very high. It's hard to network on Zoom, it's hard to do coffee chats, it's hard to do all the normal things that go along with a job search. So those are a couple of the key trends, is just this big boost in spending to low-income workers by virtue of this fiscal support, very little impact on job search that we might have otherwise been worried about. And I think as we look into 2021, we saw already cash balances were quite elevated again they were going into the end of 2020. Of course, with the January stimulus, they're going to be elevated again. Tax time puts another big boost into people's cash balances. And yet it does seem like probably the thing that's going to make people come out and spend even more, aside from this cash which does seem to stimulate people's spending, is the vaccines. So those are a few reflections, Terry.

BABCOCK-LUMISH: Which are fantastic, Fiona. Thank you so much. We're definitely going to explore this some more. But Wendy, I want to come to you next because your and your colleagues' work on the pandemic induced changes to our economy. It's just particularly relevant here as we consider these tectonic shifts. And Fiona spoke to some of this, as has Ravi, in terms of consumption, but also in our workplaces, where we're working, how we're working, the stark realities of how Americans have experienced this last year's pandemic in a very different way. So let me just begin with the very basic question of how is this recession been different?

EDELBERG: Oh, I mean, how has it not been different? But one of the critical ways that has been different relating to what we've all been talking about, is the different kinds of spending that have been most affected. So, what's remarkable is that putting aside the increases in or the maintaining of spending at takeout restaurants, that I think Ravi focused on a little bit, much of the spending increases that we've seen since the beginning of the pandemic have actually come in the form of durables, which is extraordinarily unusual for a recession. Usually, what we see during times when the whole economy is in recession, or for particular household when they're experiencing financial stress, is that they postpone the big-ticket purchases. You can make the refrigerator work for a little bit longer, or if you're going to buy a replacement car, you're going to buy a cheaper replacement car and buy a used car because you're worried about your family's finances. And then on the flip side what we see about those same durables purchases is that when the economy is coming out of recession and where we look for with spending booms is particularly for a surge in spending on durables. Well, everything is flipped now in the current recession. Where we're seeing remarkable increases in spending is exactly on durables. Durables as a share of GDP is right now over 8 percent, it's been over 8 percent through the entire second half, on average, of 2020. That's actually the highest that it's been since 2007. So we've seen just remarkable strength in durable spending. 

Okay, so where have we seen weakness in spending? Perhaps this won't surprise anybody that it has been in services, and particularly in services that require face-to-face interaction. So here's some numbers that I have on my screen. So recreation services is down 30 percent since pre-pandemic, transportation is down 25 percent, food services so people eating inside restaurants primarily that's down 20 percent. And what might be a little bit more surprising for folks is that healthcare services are down 5 percent, that's a lot less, but that category is actually quite large and comprises a very large share of household spending. So we have basically, as a society, postponed just about any kind of health care expenditure, or health care service, that we can possibly postpone. So those are exactly the places where we are looking for strength and spending over the next year as we come out of the pandemic, and as people spend the money that they've saved over the past year.

So with the Biden package in hand, with having enacted the $1.9 trillion package, my projection is that the economy is poised to rise about 8 percent over the course of 2021. That is a remarkably fast pace of growth and actually will get GDP above where we would have expected it to be pre-pandemic at the end of 2021. And we will continue to see pretty remarkable strength in the economy through the end of 2021 and through early 2022. So again, I think much of that is going to come in the form of spending on services which will probably create all sorts of difficult composition effects, as restaurants manage the incredible increase in demand that they face, as healthcare providers manage the incredible surge in demand that they face. So we will probably see some inflation spikes in some categories and some bottlenecks there. 

And then thinking then longer term, how do we expect the composition of our economy to change post-pandemic? Well, so many of the things that we've been talking about today, like so many of the technological changes that Ravi was talking about, we're not going to forget those technological changes. We're not going to forget how to have virtual conferences, just like the ones we're having right now. And as a result, we're going to see pretty remarkable changes, I think, in the way we do business. So we're going to see fewer people commuting into downtown business districts to do face-to-face interaction during the course of a business day. That's going to have important and disruptive changes on the people who work in the service sectors that provide services to those folks who worked in downtown business districts. We're going to see changes in how grocery stores operate, we're going to see changes in the way healthcare services are offered. And I do worry that we don't have the policies in place right now, to make those transitions less painful. They're going to be painful. People are going to return to what appears to be a very strong labor market, but there won't be jobs that fit their skill set from before the pandemic. That's going to be painful, it's going to be disruptive, but there's a lot that policy can do to try to mitigate that pain.

BABCOCK-LUMISH: And I think we want to speak to the potential cushioning effects and how we navigate that. Before we do that, though, I think we just need to explore this a little bit further because certainly long before 2020 we've been concerned about increasing inequities and we've seen this throughout our economy. These then have been expedited, exacerbated particularly for minorities during COVID. We've seen widespread bankruptcies potentially changing our economic landscape, acceleration in automation, productions, and labor force participation. We've seen this amongst older people, younger people, working moms. So, let's go ahead Wendy and explore this because I think this might be where we need to kind of give ourselves a little bit more texture as we think about potential cushions

EDELBERG: You know as you've been saying and as I think most of the listeners know, we came into this recession with extraordinary wealth inequality. That inequality is starkest and probably most structural when we think about racial inequities in wealth and who came into this recession with home equity, with financial wealth, and who didn't. And what that means if you don't have wealth whether through liquid financial wealth, or equity in your home, you have far fewer resources to fall back on when times are difficult, you have far less of a cushion. It's one of the reasons why I am extraordinarily gratified by the large steps that policymakers took at the beginning of the pandemic and just recently. Because we know that the COVID-19 recession was particularly affecting the families that we knew had very few resources to fall back on. So I'm immensely gratified that we got them financial resources, through checks, through unemployment insurance. And yet we still know that way too many people fell through the cracks. We know that these inequities continued to create financial instability all through the course of 2020. The numbers on food insecurity were continually alarming. We still see food insecurity among children at twice the levels that we saw pre-pandemic. It's very frustrating. The package that was just passed, the $1.9 trillion dollars, goes a long way to alleviate child poverty, it's going to cut child poverty in half. Again, quite gratifying, but it's not going to create systemic change going forward. We need to make sure that households come into recessions, because there will be recessions in the future, we need to make sure that households come into recessions with more financial stability, and we need to make sure that the safety net is better able to reach those families without ad hoc changes by policymakers.

BABCOCK-LUMISH: Fiona, do you want to get on this one, too?

GREIG: Well, yeah, a couple of comments to build on Wendy's great points. So first of all, take unemployment insurance, for example, one of the big expansions of that program came through the creation of the Pandemic Unemployment Assistance program, which extended eligibility to people who were otherwise self-employed, or had limited work histories who before COVID wouldn't have been eligible for unemployment insurance. And so a big policy question that's looming now that program has been extended until September is going to be, well, what's going to happen with this PUA program? And unemployment insurance reform more broadly. Should we think about adapting our social safety net systems and policies like that to the workforce of the future? I think a lot of people, just as Wendy was talking about dislocation sector to sector, I think there's also likely to have been some dislocation between sort of being a W-2 worker to being a contingent or self-employed worker through the pandemic. Only expanding the universe of people for whom something like the PUA program, the unemployment insurance program for self-employed is ever more important. So that's one example. Another example, I would say is throughout this pandemic two of the groups that we actually compared were renters versus mortgage holders. Mortgage holders, one of the things the CARES Act did was to provide forbearance and to give people who own homes another release valve if they needed or another source of financial relief if they were unable to make that payment. Renters, in contrast, not until the second and third rounds of the programs of the relief packages, did they have some kind of additional relief like that. Rental relief was very patchwork and there was some eviction cancellations and things like that, but it was a very patchwork of support for people who are renters. And so that's just the kind of a different kind of segmentation of the population with which we can think about these inequities.

BABCOCK-LUMISH:  You know, it's also easy for us to have this conversation as we're talking about the national stimulus package, as if the American economy is a monolith. And obviously, we've seen tremendously different experiences with and responses to the pandemic state by state. So Ravi, I'm going to come to you next because one need only look at New York and California versus Florida and Texas, as I think many of us are seeing people excited to emerge for spring break, whether that's a good idea or not, we could certainly debate. But I'd love to know from your colleagues and your research, what you anticipate for how we see ourselves emerging from a consumer standpoint, as we look to the latter half of 2021 into 2022.

DHAR:  I was on mute. I'm not sure if behavioral science has as much to offer as if you think about some proverbs. I think it was Bertrand Russell who said about proverbs they kind of hedge them, they seem like wise words, but they have one for each side. So if you look at the pandemic one way to think about this is out of sight out of mind. So Wendy mentioned 30, 40 percent of the stuff you're not doing today, is it going to come back with a vengeance? Many companies hope so. Which is the opposite problem, absence makes the heart grow fonder, right? So which is it, out of sight out of mind or absence makes the heart grow fonder? So one thing I do teach in behavioral economics is that often our beliefs drive our behaviors. So the reason people didn't try virtual exercising is they had the belief, "this is not going to be fun, doing exercising on a video on a Peloton looking at staring at somebody," or Zoom calls for that matter and telemedicine for that same matter. And my favorite on that is, for me, is the cruise industry. Cruise industry is interesting, half the people are like me who have never taken a cruise and have no intention of taking one. And the reaction is, "what the hell do you do on a ship like eat all day?" And the other half tell me who love it, "you have no idea how much fun it is and what you can do on a ship these days." So fundamentally, we have beliefs about these things that drives our behavior, but the behaviors also drive the belief. So during the pandemic, our behavior has changed. We tried telemedicine, we tried digital exercising, and we tried happy hours virtual ones. So some of these things will stick if we enjoyed them. Why did we go every Friday night out for a drink? It was not a rational choice, it was a habit. Like you know, it's Friday, it's the week. If you thought about it rationally, you would have done twenty other things than go out for a drink and people got into the habit of a TGIF. That habit is now broken. Does it mean it won't come back? It can come back if whatever replaced it in the meantime is not seen as satisfactory enough in the way to do that. E-commerce is not exactly going away. I know a lot of people who are seventy-five, eighty-year-old who had never shopped online. They were forced to do it and now they say, "This is pretty good. Doesn't mean I won't go to the store; I just won't go as frequently as I used to before."

So fundamentally, I think Wendy is right, some of these things will come back. The predictions on this are going to be very hard because asking consumers will give you the wrong answers because consumers don't really know what they will end up doing. You're better off looking at other countries where the markets have opened up, like China. What's happened, even now, China's been open for a while many of the cities. What seems to be coming back? What's not coming back? The U.S. is obviously not the same as China, but you learn about habits that get disrupted and then which of them are likely to stick and which ones are going to return is going to be a really fascinating journey. And it's going to happen at a relatively granular level, not at a very high level. I'll give you a simple example of granularity, if you look at chewing gum sales, they dropped dramatically initially because one of the reasons people chew gum is when they go out on certain occasions for breath, right? Nobody was going out so that it was a big drop in sales. On the other hand, candy sales went up. You're sitting at home and having chocolate, you're stressed or whatever, any excuse, you can find to have a chocolate works, so chocolate sales went up. But as soon as people started gaming, the video games, suddenly the gum sales started coming back because people like to chew gum and focus. So fundamentally the reasons that were driving the consumption potentially also changed. And then it became how does a company assign their product to the specific new behaviors that people are engaging in? So to me, the big question for companies is are you monitoring the behavior change at a relatively granular level? To then sort of understand from a bottom-up process, what the macro-level consumption implication will be because all of these seem like relatively small things happening, but they add up to a big change in how people are consuming and buying products.

BABCOCK-LUMISH:  Indeed, and I feel very seen right now by the chocolate consumption discussion. So thank you for that. Let's go ahead and open this up. At this time, I'd like to invite our members to join the conversation with their questions. I'm also going to remind everyone that this meeting is indeed on the record, and the operator is going to remind you how to join the question queue.

STAFF: (Gives queuing instructions.) 

We'll take the first question from Peter Gourevitch.

Q: Hi, thank you for these fabulous comments. My question is, how do you target? You were talking about general macro things and there are pockets in the country that are regions, I think, or types of people that are severely impacted and I wonder what ideas you might have? Regions that are in trouble or types of people? What ideas do you all have for how we target? Everything is macro, how do we micro? How do we get granular, as Ravi Dhar says, or the others of you say, what are your suggestions?

DHAR: Well, I can start, and others can jump in. So as far as it depends on who's doing the targeting, the government versus let's talk about companies. Companies have been targeting all the time, so it's very easy for them to know at the zip-code level or at the level of demographics, families, what income with Facebook and Google, so that different drivers of targeting are not that hard to access. The question is, are you targeting on the right variables that's going to drive impact for whatever it is that you're trying to do? Whether it's delivering message on the vaccine. Let's say hypothetically, you have data showing that low-income, underrepresented minorities are unlikely to show up for taking the vaccine. Let's call it hypothetical, though there might be some truth in that. Then the question becomes for the government, how do I systematically reach out to them? And we know all the people are on smartphones or on social media and so there are ways to do that. The question really, for my mind, which I'm not aware of, is if the government is really set up to do this micro-targeting? We know our two political parties are, they do a pretty good job of micro-targeting, but I don't have good understanding of what the government does in this area. Companies certainly do targeting a lot.

GREIG: Two other thoughts. One of the things that we didn't touch on was the extraordinary toll on parents. And if you just take the labor force participation rate of men and women depending on whether they're parents or not. Labor force participation of female parents had a double dip. Initially, everybody fell out of the labor force in April but then mothers disproportionately fell out of the labor force, again, double dip, in September, when schools opened back up. And so some of the genius, I would say, of the latest round of the $1.9 trillion relief package is to expand a lot of the relief to parents through child tax credits and the stimulus checks themselves, making them a multiplier of the number of people in the family regardless of child or adult. Because we know that this country has been far behind other OECD countries, in terms of general family supports, and has a long way to catch up, but certainly in the pandemic that has been felt. So that's one.

I think some of the income targeting, generally, given just the disproportionate impacts of job loss and dislocation in the labor market for low wage jobs, low-income sectors, that's a very feasible and helpful targeting mechanism. But there's also been quite disparate impacts across geographies and if you just look at state tax revenues it fell dramatically in places like Alaska, Florida, Texas, Hawaii, and North Dakota, And it was basically either is your economy entirely reliant on tourism or the oil and gas industry. Like that was sort of the two unifying theories I can come up with to try and figure out like which states really suffered the most. So, obviously, there are certain sectors that have been dramatically impacted, travel and leisure in particular.

EDELBERG: And I think we'll have to do more with targeting going forward on targeting workforce development. So like my expectation is that the business travel sector, does not come back to where it was pre-pandemic. I suspect that business travel is permanently changed. I think that there will be a number of sectors that face those sorts of changes. And I think that we will need policy to do a lot more with targeting which skills are valuable, which workers need more training, and which people are so negatively affected by the disruptions in the labor market, the persistent disruptions in the labor market going forward, that they need long-term fiscal support to weather that. So I think policymakers are going to have to very carefully target who, over the next several years, sees persistent negative effects from the pandemic.

BABCOCK-LUMISH: Thanks, Wendy. I think I want to continue on this theme a little bit because we know policymakers and the private sector alike are really focused on pushing the economy back to its full potential and cushioning those most harmed. As we've touched kind of on the wave tops of experiences for working moms and we do sit in Women's History Month of March, we know full well that the adverse effects that we've had after tremendous gains are very vivid and very real. And so I would just love to hear from anyone on the panel, what are some of the best practices maybe we can learn from what's worked throughout Europe that actually could be applicable within the U.S.? Or perhaps there are other ideas too.

EDELBERG: I am by no means an expert on Europe, and I have actually been a little taken aback at despite how incredibly frustrated I am with how things have gone in the United States, that on many fronts we are doing a better job at keeping the virus under control, and distributing the vaccine, and doing as much economic activity as we're doing, in some cases safely. How we've done all of those things in many ways better than what we've seen in Europe, but we can learn a lot from the way Europe values its safety net. And that many of the countries in Europe, particularly Western Europe, have a stronger safety net and had to make fewer ad hoc changes to make sure that people were supported, families were supported, young parents were supported than we've seen in the U.S. So for sure in terms of structural changes going forward, I think that there's a lot we can learn. It is mind-boggling that we do not have federally supported paid leave, that we do not have federally supported childcare in this country, or beyond the childcare tax credit with all of its regressive features. We saw a lot of good changes that move along these lines and in the package that was just passed but of course they are all temporary. So yes, I do think that there's a lot we can learn in terms of supporting people across the income distribution, and supporting families, and getting a stronger safety net. There's a lot we can learn from Europe.

GREIG:  Just one other thought. So much of what Zoom life has done is obviously expose our backgrounds to our workplaces and our colleagues and we've sort of been forced to bring our whole selves to work, our dogs, our kids, everything. And so if we think of the long trajectory of closing the women's wealth gap, closing the income gap, closing the participation gap, some of the places where it's been hardest to close those gaps has been at the top. We still see a larger unexplained gap in male to female earnings ratios at the top of the income distribution than elsewhere. And part of that can be due to so-called greedy jobs. Jobs for which a household can't have two of them because one is greedy and consumes more than its fair share. And so I sort of wonder in the context of employer norms, I think employers have become more cognizant of the mental health, the cognitive loads of our jobs, the things that we are juggling at the same time through the course of the pandemic. I hope that those sort of "ahas" become embedded in our firm ways of working and norms. One thing I'm watching out for and sort of urging my firm, my employer to kind of think about is, as we return to work eventually it may take a new form. As Ravi says, we may never unlearn how to work from home and of course, our firms will never unlearn how just how productive we can be when we are working from home and so sure enough, many of them are downsizing their real estate footprints and trying to take advantage of this in a medium, longer term way. Maybe that's good for women and more inclusive workforces because now... I was a consultant in a prior life like it became untenable to do that and have kids. So maybe the fact that some of that business travel won't come back will be good. And at the same time, I do worry about who's going to be going into the office? And who's not? Who's going to exercise the option to not? And is it going to be people who have care responsibilities, people who live on the outer perimeter of the city, who have a longer commute? And so are we going to end up with certain people, women, people of color, more likely to take advantage of virtual and others more likely to be in person? And are we going to kind of reinforce some of the inequities that our workforces have been trying to kind of stamp out? It's hard to say whether the good will outweigh the potential risks, as we continue to sort of innovate and firmly adopt some of the dislocations that have taken place during the pandemic.

BABCOCK-LUMISH: Ravi, you're muted.

DHAR:  I just want to add a little bit on the technology side—that it's not going to be static, right? So whatever your Zoom experience right now, companies are already working that in the next two-to-five years, it'll be like holograms, virtual augmented reality, so it's as if you're in the office. Right now, it's not quite like being the office, for sure. So there's a lot of stuff happening in Silicon Valley right now which is trying to speed up the whole process of this virtual and what that experience will look like. I remember talking to some CEOs and they said, "You know, I used to go and fly across the continent and meet another CEO for dinner and essentially come back. You know, relationship meetings." And a lot of business travel, again, if you start looking granularly like why that happens, a big part of it is sales meetings. Some of it is just like glad-handing and showing up. The CFO has seen in the last twelve months, "Hey, my sales didn't drop that much, and my travel budget dropped by 90 percent." That CFO, he or she, is not going to give all your money back next year because the pandemic is gone, so you better get used to working with a far smaller amount. And frankly, a lot of people are saying they were tired of traveling anyway, so we'll see what the equilibrium here is. And maybe if your competitors are traveling and you're not then you're forced to travel anyway, defensively as opposed to offensively. So there's a lot of fascinating stuff. The role of technology that's going to change how the budgeting will happen given that the CFO has now gotten used to saving all this money. I mean, travel is a big part of most Fortune 500 companies profit and loss and suddenly they saved a lot of money here and I don't think that it's about to be given back to all the divisions next year.

BABCOCK-LUMISH: We have time for a few more questions.

STAFF:  (Gives queuing instructions.)

We'll take the next question from Chris Tuttle. Chris, please accept the unmute now button. It looks like we're having some difficulty with that line.

We will take the next question from Paul Sheard.

Q: Thank you very much. Paul Sheard, Harvard Kennedy School. I'd like to come back to the central business districts and how they're going to change. I'm living in a big city like Manhattan at the moment. How radically transformed do you see central business districts? What's going to happen to all of this real estate, this high-rise real estate, as companies do downsize their real estate footprints, which was, of course, something they were trying to do even before COVID.

EDELBERG: So my intuition is that the changes won't be obvious to the naked eye. And the reason that's my intuition is that working in a central business district, or having your company in a central business district, has always been an extraordinarily expensive proposition and, as a result, companies have for decades, for centuries have figured out ways of efficiently working outside of a central business district in order to save that money. And yet obviously, central business districts still work, people still find that working together in big groups and those network effects are still very valuable. So my guess is that we will largely go back to wanting to be within some close proximity to each other. I mean, there's a reason that real estate around the White House is actually increasingly expensive, literally, as you get closer and closer, the feet. I'm being inarticulate. Like the blocks that you get closer to the White House, the real estate becomes more expensive. Proximity matters and proximity is always going to matter. But what I want to caution in terms of thinking about the consequences of this is that changes don't have to be visible to the naked eye to have extraordinarily disruptive consequences for labor markets. So central business districts only have to be 5 percent smaller than they would have been otherwise, in order for that to have really disruptive effects on labor markets and businesses that serve those districts. So, that that's my intuition. Obviously, it could be wrong in either direction, but that's my guess.

BABCOCK-LUMISH:  Thanks, Paul. And I think we're going to have a lot of economic geographers considering these agglomeration questions too. Let's take our next question.

STAFF: We'll take the next question from Lilia Ramirez.

Q: Yes, this is Lilia Ramirez. I was wondering if you have analyzed the impact of the pandemic on entertainment, whether it be the movie theaters, or the theater districts in major cities because obviously they were impacted. But I wonder if there's going to be a new paradigm on how people either go to the theater or see movies?

BABCOCK-LUMISH: It's a great question, Lilia. I think we saw about seventy-five million for the NEA and other venues, so I don't know. Ravi do you want to take this one?

DHAR: Yeah, I mean I can start. I think entertainment is such a broad category, so if you separate out the movies from theater and other things in places like New York City. I think a lot of these are tourist dependent, setting aside the movie piece. And I think the leisure travel is going to come back, it's already coming back at a much faster rate than business travel is. The problem for airlines is leisure travel pays for the gas, business travel pays for the profit. People who sit in the front seats versus back of the plane, which is where most leisure travelers sit. So fundamentally, even if it bounces back to, let's say, 80 percent, it is not going to be very profitable for the airline industry, unless business travel bounces back. So going back to the entertainment industry. I think tourism dependent, I'm actually optimistic that tourism is going to come back relatively fast. When people travel for tourism, leisure reasons, as opposed to business reasons. That's going to comeback. The movie industry, on the other hand. I think the streaming, and this has been going on before the pandemic, the increase in the amount of Netflix and watching movies on streaming and alternative platforms has been increasing. And that's rapidly changed even more so in the pandemic. It has changed the business models for the studios. How they launch movies simultaneously potentially releasing on the platforms both in the movie theaters. So that is certainly going to have an impact on the movie industry which I would treat separately for what it means for Broadway or the museums. Because I think that is very much dependent on both tourists and solid, small but loyal groups, and I think those will be fundamentally more secure. But the movie industry is going to be much more volatile.

BABCOCK-LUMISH: Thanks, Ravi. How about this, we have a few minutes left. Let's go ahead and do a quick maybe round robin before we wrap. We know COVID has just changed our routines, our decisions, our behaviors in so many ways that's been across geographies, across demographics at unprecedented speeds. So some of these changes will outlast the pandemic, some we will be happy to dispatch in a brighter, more vaccinated future. So how about this, let me ask each of our panelists to offer the most helpful or meaningful or hopeful change you hope will sustain. So if you can name one thing that you hope we will keep after we are at herd immunity, what would it be?

EDELBERG: Telehealth! —(Laughs.)

GREIG: —Telehealth! Yes!

DHAR: You know, I would say spending time with the people you're close to. It's something that got reinforced and when the pandemic started people said, "Hey, the divorce rates have gone up a little bit," but fundamentally, you find that people enjoy spending time with the people they're close to and they've been doing a lot of that. Partly they were forced to do that but on the positive side, I think it's increased people's overall wellbeing and happiness.

BABCOCK-LUMISH: Anything else you want to add? We got telehealth, we've got meaningful time with one another. I certainly enjoyed spending this time with all of you. Anything else for the good of the order?

GREIG: Less business travel.

BABCOCK-LUMISH: I'll second that emotion for sure. All right, well, an hour goes quickly. Thank you so much, everyone for joining today's virtual meeting. Thank you to Ravi, Wendy, and Fiona. The video and transcript of both this session as well as the Robert B. Menschel symposium, the full symposium, including yesterday's discussion with Richard Thaler and Eduardo Porter will be posted to CFR's website. With that, thank you so much everyone. Stay well. This concludes today's program.


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